Charity auditors breached duties, says regulator

03 Jan 2019 News

The Charity Commission has referred two auditors to their professional bodies for breaching their reporting responsibilities and says it will do so without warning in future.

In May 2017 the Commission increased the number of things that auditors should notify the regulator of as “matters of material significance”.

Then in February last year, the regulator found that auditors for only 28 out of 114 charities in its sample had complied with the new requirement to proactively contact the Commission about concerns.

Now the Commission has published details of how it followed up with the charities in its sample.

The Commission said most auditors apologised for the oversight and provided the required report but auditors for 12 charities did not respond.

Of these 12, one had their practising certificate withdrawn in January 2018 while the other nine provided the report after the Commission called them.

The Commission said the other two auditors declined to file a report despite being contacted in writing and by telephone, so the regulator has taken steps to refer these cases to the auditors’ professional body for their consideration.

The Commission said: “We consider there are grounds to conclude that these two auditors are in breach of a duty to report a matter of material significance to the charity regulator as required by the Charities Act 2011 and by the International Standards on Auditing.”

Furthermore, 14 of the charities that had initially complied with the new requirement by contacting the Commission had undated auditing reports.

The Commission said the auditors for all of these charities confirmed that trustees had submitted the wrong version of their audit report to the regulator in error.

No future warnings

The Charity Commission warned that in future it will refer non-compliant auditors and independent examiners to their professional body without prior notification.

It intends to introduce an online form for auditors to complete when they report a matter of material significance.

The Commission is also continuing to develop a formal reporting framework with professional bodies to share information on trends in reporting, including those of poor practice by their members.

Nigel Davies, head of accountancy services at the Charity Commission, said: “It is so disappointing that we have had to follow up directly with so many auditors and progress two referrals to professional bodies.

“We look to work closely with the accountancy profession to increase awareness and compliance by auditors with their reporting duties. I expect to see this resulting in a more proactive approach to reporting in future.

"With our charity regulatory partners we are working with the profession to improve our guidance to provide greater clarity for auditors and independent examiners on the timing, type and amount of information required. Better quality reports will help us hold charities to account and thereby help ensure that the public can support charities with confidence”.

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