What is Independent Examination?

Definition

Independent Examination (IE) is an alternative to a financial full audit for smaller charities - a legally acceptable form of external scrutiny of their end of year accounts. The definitions of smaller’ vary in different parts of the UK (see below).

Which charities are eligible for Independent Examination?

Definitions of ‘smaller’ charities

In England and Wales

For accounting periods beginning on or after 27 February 2007, ie financial year-ends of 26 February 2008 onwards (eg 31 March 2008), income has to be in the range of £10,000 to £500,000 per year for the year in question. For accounting periods ending on or after
1 April 2009 (eg, year-end of 30 April 2009), the lower limit at which an IE becomes a legal requirement rises from income of £10,000 to £25,000.

For account periods beginning on or before 26 February 2007, ie financial year-ends of 25 February 2008 or before (eg 31 December 2007) income and expenditure have to be in the range of £10,000 to £250,000 per year for the year for which the IE is being carried out and for the two proceeding financial years.

Click here to download a copy of our Scrutiny Thresholds paper for England and Wales

In Scotland

Independent Examination is a requirement for charities with income of up to £500,000 per year, for accounting periods which began on or after 1 April 2006 (the upper limit was £100,000 for pre-1 April 2006 accounts).

Click here to download a copy of our Scrutiny Thresholds paper for Scotland

In Northern Ireland

Charity regulation is due to be introduced in Northern Ireland during 2009, with IE being       being introduced probably for 1 April 2011 onwards for charities with annual income of up to £500,000.

Asset tests

So far, ‘smaller’ has been defined by income (and expenditure). However, the assets which a charity owns also help define whether a charity require an IE or an audit. If a charity’s assets are £2.8m or more, then:

Charitable companies

Charitable Incorporated Organisations (CIO’s) and SCIO’s in Scotland

The CIO (and SCIO) is a new legal form of charity which does not yet exist in practice. Once it does - the first possibly being registered in early 2010 - CIO’s will sit under the IE regime if they meet the eligibility criteria. Scottish CIO's (SCIO's) are not expected to be brought into being until sometime in 2010 at the very earliest.

What are the differences between Audit and Independent Examination?

As well as the difference in who can carry out an Independent Examination outlined above, the other major differences lie in the level of scrutiny and the nature of the report:

Benefits of Independent Examination?

(NB: an eligible charity can opt for an audit rather than an IE - but its Trustees should be able to justify that choice, particularly bearing in mind the extra expense incurred)

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