The trustees will usually be able to choose an independent examination instead of an audit if your charity’s gross income is:

• more than £25,000, but not more than £1 million, provided that
• if its gross income is more than £250,000, its gross assets (fixed assets plus current assets) are £3.26 million or less

The trustees have a legal duty under the Charities Act 2011 to appoint ‘an independent person who is reasonably believed by the trustees to have the requisite ability and practical experience to carry out a competent examination of the accounts’.

‘An independent person’

The examiner must be independent of the charity. Independence means that the examiner must not be influenced, or could not be perceived to be influenced, by their relationships with the charity and its trustees. Therefore, the examiner cannot be a trustee of the charity. Independence is not the same as having no connection with the charity. An examiner can be a supporter of the charity, provided that they do not have a close relationship with the charity or its trustees and they are not involved in the day to day administration of the charity. Examples of situations that would call an examiner’s independence into question are where they:

• are an employee of the charity or its book-keeper
• serve on a sub-committee overseeing the charity’s finances
• are a major donor to, or beneficiary of, the charity
• have a significant financial or commercial relationship with the charity or its trustees
• have a close relationship with the trustees or any other related parties. Direction 2 of Independent examination of charity accounts: examiners (CC32) provides guidance on the persons classed as related parties

If the trustees are unsure whether their proposed examiner is independent, they should ask the examiner to explain in writing why they consider that they meet the independence criteria. The trustees should then consider whether they are satisfied with the explanations given.

The trustees must respect the examiner’s independence and must not act in a way that might undermine it. Accordingly, the trustees must not state or imply that awarding the work is conditional on the examiner agreeing to:

• provide personal payments or benefits to the trustees, or provide donations of money, benefits in kind or services to the charity (other than the conduct of the independent examination itself), or
• accept particular accounting policies or accounting treatments

The Commission views such behaviour as unethical. It may also constitute an offence under the Bribery Act 2010 (see Law on bribery), or of a breach of duty or other misconduct or mismanagement in the administration of your charity. For a trustee who is a member of a professional body it may also be a breach of their professional body’s ethical standards.

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