The Act has simplified the basis for determining when a statutory audit is required for unincorporated charities. It will also increase the statutory threshold beyond which all charities are required to subject their accounts to a professional audit. In future the test will simply be an income and asset test on the current year. It will no longer be a test of income or expenditure in the current or previous two years.
There are similar although not identical thresholds for charitable companies.
An unincorporated charity’s accounts will have to be professionally audited if the charity has:
Below this threshold an independent examination may be performed instead of an audit. An independent examination is not required if the charity’s income is below £10,000. Where the charity’s income is above £250,000, the independent examiner must have an appropriate accountancy qualification.
Charitable companies will be required to have their accounts professionally audited where:
These changes have already been introduced. They take effect for accounting periods commencing on or after 27 February 2007.
The Office of the Third Sector has indicated its intention to withdraw the requirement for charitable companies, with income between £90,000 and the statutory threshold, to provide an accountant’s report in order to avoid an audit. Instead the intention is to require such companies to have an independent examination. Further legislation will be brought forward in 2007 to this effect.