The Charity Commission has said that it is concerned charities are “being put at risk” because auditors are failing to report enough matters of material concern.
It has published the details of a new review and found that only 28 out of 114 auditors in its sample had complied with the new requirement to proactively contact the Commission about concerns.
New rules came into force in May 2017 which increased the number of things that auditors should notify the Commission of.
Of the 28 auditors that did notify the Commission only six did so within one day of signing the audit opinion and three waited more than two months.
The Commission identified those in its sample by doing a text-based search in accounts submitted to it for headings that auditors are required to use in charities' annual accounts.
Michelle Russell, director of investigations and enforcement at the Charity Commission, said: “Auditors provide vital reassurance that a charity’s accounts are true and fair and by extension in helping ensure charities are transparent and the Commission can regulate effectively.
“So it is very important that accountancy professionals understand the requirements on them in auditing charities’ accounts. This review shows that, at this time, too few auditors are complying with their statutory duty to report matters of material significance to us as soon as they identify them. This potentially puts charities at risk.”
The Commission said it is now working with the accountancy profession to improve understanding. It has been liaising with the Institute of Chartered Accountants in England and Wales (ICAEW) and ACCA, the global body for Professional Accountants.
In a statement ACCA said: “As a result of this review and its findings, we are working closely with the Commission and our members to ensure the value of audit and all reporting for the charity sector remains a top priority. It is important for anyone involved in the charity sector, especially trustees, auditors, independent examiners, internal auditors and professional bodies, to take appropriate action.”