Independent Examination (IE) is an alternative to a statutory audit for smaller charities - a legally acceptable form of external scrutiny of their end of year accounts. The definitions of ‘smaller’ vary in different parts of the UK (see below).
Which charities are eligible for Independent Examination?
In England and Wales
Charities with (a) annual income not exceeding £1,000,000; and (b) gross assets not exceeding £3,260,000, must have an independent examination (unless an audit is required for some other reason).
Note: Charities with an income not exceeding £25,000 are not required by law to have an Independent Examination, but may elect to do so.
Charities with (a) annual income of less than £500,000; and (b) gross assets not exceeding £3,260,000 must have an Independent Examination (unless an audit is required for some other reason).
In Northern Ireland
At present the regulations in Northern Ireland only apply once charities have registered with the Charity Commission Northern Ireland.
For accounting periods beginning on or after 1st January 2016, charities with an annual income of less than £500,000 must have an independent Examination, unless an audit is required by the governing document, another enactment, a funder, or for any other reason.
An audit can only be conducted by a registered auditor or audit firm. The other major differences lie in the level of scrutiny and the nature of the report:
An IE is less work than an audit for all concerned, therefore, it should be cheaper, allowing charities to spend more time/money on good causes rather than on scrutiny. (NB: An eligible charity can opt for an audit rather than an IE - but its Trustees should be able to justify that choice, particularly bearing in mind the extra expense incurred.)