Charity regulators have dropped a proposed requirement that would require auditors to report a charity for not acting on their recommendations from the final version of its guidance for professional advisers.
Last year, the Charity Commission for England and Wales, OSCR - the Scottish regulator and the Charity Commission for Northern Ireland consulted on revisions to their Guidance for auditors and independent examiners of charities.
One of the suggested revisions was an added requirement for auditors to report instances of: “evidence that, without reasonable cause, trustees have not taken action on matters identified by the auditor or examiner in their scrutiny of accounts for a previous year.”
But the guidance has not included this in its latest version, after some in the sector expressed concern the requirement could be an administrative burden and damage the relationships between auditors and charities.
The regulators also scrapped a requirement previously included, which read: “Any notification or matter reported to the trustees on resigning as independent examiner or matter that the examiner is aware of on resignation or ceasing to act that falls within the categories of the previously set out reportable matters, or for examiners the notification on ceasing to hold office or resigning from office, of those matters reported to trustees”.
It found the requirement led to auditors advising the regulator where they had ceased to hold office so has now dropped it.
The new guidance includes he regulator has introduced two more areas for reporting:
- If an auditor has concerns regarding a charity’s accounts and issues a modified audit opinion report or qualified independent examiner’s report
- Where an auditor has concerns that conflicts of interests or related party transactions have not been properly managed or declared
Nigel Davies, head of accountancy services at Charity Commission, said: “We have, as regulators, reflected on our experiences to date and it is clear that not all auditors and examiners have been reporting matters to us.
“We hope that by providing an updated list auditors and examiners may be clearer in their duties.”
Andrew O’Brien, head of policy and engagement at the Charity Finance Group head of policy and engagement, welcomed the scrapping of the requirement, which he said “will ensure that auditors and independent examiners are able to have full and frank discussions with charities and remain a trusted source of advice”.
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O’Brien warned the additional areas for reporting would be a burden for both the regulator and charities, “which seems disproportionate to the level of risk in the sector”.
“The Charity Commission needs to give more information about how it is going to use these reports and commit to reviewing this process in the near future so that we can see whether this increased burden has been worthwhile,” he said.
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