Independent examination of accounts

The factsheet Accounting & Audit Requirements for Group, Districts, Counties/Areas and Scottish Regions explains when a scrutiny, independent examination or audit is necessary.

Before appointing a person as scrutineer, independent examiner or auditor the Trustee Board will need to ensure that the person has the necessary skills, as outlined in LT103950, and is sufficiently 'independent'. It is easy to recognise that a leader or group executive member is not independent, but sometimes less obvious that the spouse or close relative of a leader is not sufficiently independent.

Charity Commission for England & Wales publications CC31 'Independent Examination of Charity Accounts: Trustees' Guide' and CC32 'Independent Examination of Charity Accounts: Examiners' Guide' contain detailed guidance. The following explanation is taken directly from CC32.

CC32 Section 3.3. Who is an independent person?

The short answer

An examiner must be independent of the charity whose accounts are being reviewed. Independence means that the examiner is not influenced, or perceived to be, by either close personal relationships with the trustees of the charity or by a day-to-day involvement in the administration of the charity being examined.

In more detail

For an examiner to be independent that individual should have no connection with the charity trustees which might inhibit the impartial conduct of the examination. An examiner cannot independently review his or her own work and so the person who is the charity’s book-keeper cannot be the charity’s examiner. However, this does not mean an examiner cannot be a member or supporter of the charity and often some involvement brings an added quality of personal enthusiasm and familiarity to the role of examiner.

Where a potential independent examiner is a member of the charity, for example a member of a church congregation, provided they have not been involved in the day-to-day decision-making or administration of the charity, for example by serving on a committee or sub-committee convened by the charity, and are not connected with the charity trustees, then normally they may act as an examiner, subject to their having the necessary ability, experience and qualification required. Also the right to take part or attend as a member in an annual general meeting (AGM) would not preclude the examiner from conducting an independent examination although active participation in the administration of the charity would, for example through tabling resolutions at an AGM.

Whether a connection with the charity affects independence will depend upon the particular circumstances, but the following persons will not normally be considered to be independent:

a) the charity trustees or anyone else who is closely involved in the administration of the charity;

b) a major donor to or major beneficiary of the charity; or

c) a child, parent, grandchild, grandparent, brother or sister, spouse, civil partner, business partner or employee of any person who falls within sub-paragraph (a) or (b) above.