Independent Examination

All charities are required by charity legislation to have their accounts externally scrutinized either by Independent Examination or Audit. 

In Scotland this requirement is part of the Charities and Trustee Investment (Scotland) Act 2005 (the Act) and the Charities Accounts (Scotland) Regulations 2006 as amended in 2010 (the Regulations) both of which are regulated by the Office of the Scottish Charity Register (OSCR). The level or type of external scrutiny will depend principally on your charity’s income and constitution.

Which Charities must have an Independent Examination of their accounts?

Charities must have an Independent Examination of their annual accounts if all of the following apply:-

  • the constitution (or other governing document) that does not specify a requirement for an audit

  • their gross annual income is less than £500,000

  • they have gross assets of less than £3.26 million

  • the Charity Trustees or the charity's members have not requested or specified an audit

The independent examiner must be someone the Charity Trustees believe has the required skills and experience to carry out an independent examination competently. In addition, the Independent Examination of the annual accounts must be carried out by someone with specific qualifications.

Role of the Independent Examiner

An independent examiner will review the accounting records kept by the charity and the accounts prepared by your charity to consider whether or not:

  • accounting records have been kept in accordance with the Act and the Regulations

  • the accounts are in accordance the accounting records

  • the accounts comply with the Act and the Regulations.

They will also consider whether:

  • anything needs to be brought to the attentions of readers of the accounts to enable them to understand the accounts of the charity

  • there has been material expenditure or actions not in accordance with the purposes of the charity

  • the Trustees Annual Report is consistent with the financial statements.

They then make a report to the Trustees of the charity covering their findings regarding the above matters.  This report is then attached to the accounts and forms part of the statutory accounts required under charity law.

The independent examiner has a legal duty to report to OSCR any matter regarding the charity of material significance as well as any other matters (not necessarily of material significance) relevant to OSCR carrying out its regulatory functions.

Information regarding the rights and duties of independent examiners is available on the OSCR website.

Choosing an Independent Examiner

The Independent Examiner should always be a person who the Charity Trustees believe to have the required skills, ability and practical experience to competently examine the accounts. The person chosen by the charity will be required to understand charity accounting, and the requirements of the Act and Regulations.

The Charity Trustees should ensure that the Independent Examiner is:

  • independent of the management and administration of the charity

  • eligible under the terms of the Regulations

  • eligible to act as an independent examiner under their own professional body's rules and regulations

  • Someone who has the required skills, ability and experience to competently examine the accounts of their particular charity.

While OSCR has set out the following suggestions for persons that may be suitable for  Independent Examiners, it is the duty of the Charity Trustees to ensure that the person they appoint as their Independent Examiner has the required skills and experience to competently carry out the examination of their particular charity.  

Persons that may be appropriate Independent Examiners:

  • full or associate members of the Association of Charity Independent Examiners

  • qualified accountants currently in employment

  • retired accountants

  • bank managers

  • other people familiar with financial matters

Independent Examiners with specific qualifications

Independent Examination of your accounts is required to be carried out by an Independent Examiner with specific qualifications if your charity prepares fully accrued accounts.

In this case, the Independent Examiner must be one of the following:

  • a member of one of ten professional accounting bodies listed in the Regulations or

  • a full member of the Association of Charity Independent Examiners (ACIE) or

  • the Auditor General for Scotland  or

  • a person appointed by the Accounts Commission for Scotland