Matters of Material Significance

Today, the Charity Commission published their findings on auditors’ reporting of matters of material significance.

Members working in the sector will know that auditors are obliged to report matters of material significance to the respective charity regulator.

The regulator needs the confidence of charities to operate effectively, and charities need the trust of the communities they serve, as well as their donors and the wider public. Therefore, our profession plays an instrumental part in the success of charities and the integrity of its regulation.

Updating the Rules

In May 2017, the list of reportable matters was updated, and in November, the FRC issued a revised version of Practice Note 11: The audit of charities in the United Kingdom.

Both of these documents extended the list of reportable matters to include modified or qualified audit reports, emphasis of matter paragraph, and modifications relating to material uncertainty regarding going concern.

The Commission has now found that between May and October 2017, 114 charities submitted accounts that should have been accompanied by reports, but received only 28. There is understandable concern over such a low level of reporting, particularly following the Public Accounts Committee investigation into the collapse of Kids Company.

I’ve no doubt that the vast majority of audits are being carried out to the highest professional standards. I know that our members’ work is highly valued by many charities, helping them to cut through some of the complexity often present in annual reports and financial statements. It is also worth noting that trustees have an ongoing duty to raise any concerns with the Commission – auditors may only spot issues at the point when the audit is carried out.

Nevertheless, it is vital that all members auditing registered charities are fully aware of these extensions to their reporting duties, and ensure they are fully complying with them.

ICAEW Support

Our Charity and Voluntary Sector Community offers regular updates on charity audit, accounting and taxation, including via events and webinars. I urge all members to engage with this Community to ensure they are up to date with the latest regulations.

ICAEW works closely with the Charity Commission and will continue to do so, in the interests of the charity sector and the public.