Charity Audit vs Independent Examination: A guide for trustees

For charity trustees, ensuring appropriate financial scrutiny is a core governance responsibility. Perhaps now more than ever, with the audit thresholds soon set to increase, trustees are asking whether their accounts should be subject to a statutory audit or an independent examination. While both provide assurance over a charity’s financial statements, they differ significantly in scope, cost, and level of scrutiny. Choosing the right option requires careful consideration of legal requirements, risk, stakeholder expectations, and the charity’s size and complexity.

Here we outline the key considerations to help trustees make an informed decision.

Are you legally required to have an audit?

Following a government review, new financial thresholds will come into force for accounting periods ending on or after 30 September 2026.

Under the new rules in England and Wales:

• A statutory audit will be required where a charity’s gross income exceeds £1.5 million (previously £1 million), or
• where gross income exceeds £500,000 and total assets exceed £5 million (previously £250,000 income and £3.26 million assets).
• The threshold at which accounts must be subject to an independent examination will rise from £25,000 to £40,000.

In addition to statutory thresholds, trustees must still consider the charity’s governing document, which may require an audit regardless of size.

Once trustees have determined the legal requirements, charities not legally required to undertake a full statutory audit are faced with the question of whether they should still obtain one. There are a number of important considerations when making this decision.

Size, complexity and risk profile

Beyond legal thresholds, trustees should consider the nature and complexity of the charity’s activities.

An independent examination provides a review of accounts to ensure they are consistent with the underlying records and prepared in line with charity accounting requirements. However, it does not involve a full risk assessment of the potential for misstatements, or detailed testing of transactions and internal financial controls.

Charities that receive significant amounts of public money, hold restricted or complex funds, operate trading subsidiaries, or deliver complex services may benefit from the higher level of assurance that an independent examination provides.

Trustee assurance and governance confidence

Trustees are ultimately responsible for safeguarding charitable funds. The level of assurance they seek should reflect their governance needs.

An audit offers a stronger degree of comfort that:

• Financial statements present a true and fair view
• Systems and processes are appropriate
• Risks such as fraud or material misstatement within financial statements are appropriately addressed

For charities with newer trustees, recent restructuring, or rapid growth, an audit can reinforce confidence and support better governance. In contrast, a well-established charity with simple income streams and experienced oversight may find that an independent examination is proportionate and sufficient.

Stakeholder expectations

Charities rely on the goodwill of their stakeholders and stakeholder confidence matters. Their expectations should be carefully considered to ascertain whether stakeholders will be satisfied with an independent examination or would expect the charity to receive an audit.

Key stakeholders may include:

• Funders and grant-making bodies
• Donors, members and partners
• Banks and lenders
• Regulators

This can be particularly important for charities seeking significant grant funding or entering into contractual arrangements.

Cost versus value

Cost is often a key factor, especially for smaller charities.

An independent examination is typically significantly cheaper than an audit and being less intrusive, takes up less of your staff’s time.

Trustees should evaluate not just the cost, but the value gained from the process. If the audit process meets the expectations of key stakeholders, identifies control weaknesses, improves financial processes, or strengthens reporting, it may offer value to the charity that outweighs the additional expense.

If there are no strong reasons to choose an audit over an independent examination, trustees may decide that the cost saved by not choosing an audit is of greater benefit to the charity.

Flexibility and future planning

A charity anticipating growth, restructuring or likely to exceed the thresholds in upcoming year ends may choose to adopt an audit earlier than legally required to avoid disruption later or in anticipation of stakeholder expectations.

Trustees should review their requirements annually to ensure they are always acting in the charity’s interests.

Key takeaway

There is no one-size-fits-all answer to the audit versus independent examination decision. Trustees must balance statutory obligations, organisational risk, stakeholder expectations, and cost considerations.

Ultimately, the right choice is the one that provides adequate assurance, supports strong governance, and remains proportionate to the charity’s circumstances.

With extensive experience supporting charities of different sizes and structures, our team would be happy to discuss your accountancy, audit, independent examination or taxation requirements and help you identify the most appropriate approach for your organisation. Get in touch with our charity and not for profit team on 01903 234094.