Independent examination of charity accounts: How does it work?

An independent examination is a type of external financial review of a charity’s accounts. It provides trustees, beneficiaries, funders and other stakeholders with reassurance that an independent examiner has reviewed the charity’s financial records and accounts.  This process helps demonstrate financial transparency and accountability while strengthening confidence in the charity’s financial reporting. 

But what does an independent examination involve, and why are they important? Find out how charity independent examinations work, from eligibility criteria to key steps, and how your charity organisation will benefit from an independent examination by experienced charity accounting professionals. 

What is a charity independent examination?

An independent examination of charity accounts is an external review of a charity’s annual accounts carried out by an independent examiner. The examiner reviews the charity’s financial records and accounts to identify anything that suggests they may not have been prepared correctly or in accordance with the relevant accounting requirements. For trustees, an independent examination provides valuable reassurance that the charity’s financial reporting is accurate and that any issues identified are addressed.

What does an independent examination of charity accounts check?

In an independent examination of charity accounts, the examiner will review:

• The charity’s annual accounts and Trustees’ Annual Report
• Accounting records and cash books
• Bank statements and reconciliations
• Income and expenditure records
• Allocation of restricted funds
• Assets and liabilities

The examiner will also review how funds have been recorded and reported to establish whether the accounts are compliant with charity law and accounting requirements. A charity accounts review is designed to identify any potential errors or omissions in a charity’s annual reports. These can include: 

• Inadequate accounting records: Failure to keep proper day-to-day books, receipts, or invoices matching the financial statements and adequate financial records.
• Bank reconciliation errors: Discrepancies between bank statements and the charity’s cash book or ledger balances and a check on whether the accounts agree with the underlying accounting records..
• Unrecorded income or expenses: Missing paperwork or cash transactions that were not properly logged in the financial reports and whether they require further clarifications.
• Non-compliance with rules: Accounts failing to follow statutory requirements and correct accounting practices for charity compliance 
• Mismatched reports: Inconsistencies between the trustees’ or management annual report and the actual financial figures and whether any matters require further investigation or reporting.
• Expenditure outside objectives: Spending money on activities that fall outside the stated purpose of the charity.

Who can carry out an independent examination of charity accounts?

An independent examiner must not be involved in the preparation or management of a charity’s financial records. This would compromise their ability to complete an unbiased examination. 

The qualifications and experience required to carry out an independent examination depend on the charity’s annual income, the complexity of its financial affairs and size, and the applicable regulatory requirements.: 

• Charities with an annual income of £40,000 or less:  An independent examination is generally not required, unless the charity’s governing document or a funding agreement specifies otherwise. The previous threshold for accounting years ended before 30 September 2026 was £25,000. 
• Charities with an income over £40,000 and up to £500,000: (with effect for accounting years ended on 30 September 2026 or after – previous threshold was £250,000): An independent examination is generally required unless an audit is necessary. The examiner does not need a formal accountancy qualification, if the charity prepares simple receipts and payments accounts. The baseline rule: Trustees must choose an independent person who has the practical experience and sufficient accounting skills needed, and an understanding of charity reporting requirements, to do a competent job. 
• Charities with annual income over £500,000: The examiner must be a member of a specific professional accountancy body recognised under the Charities Act 2011, such as the Institute of Chartered Accountants in England and Wales (ICAEW) or the Association of Chartered Certified Accountants (ACCA), or be a full member of the Association of Charity Independent Examiners (ACIE). The previous qualification threshold was £250,000. 

Important: These revised thresholds apply to charities in England and Wales for financial years ending on or after 30 September 2026. Charities with annual income exceeding £1.5 million, or income exceeding £500,000 and gross assets exceeding £5 million, generally require a statutory audit rather than an independent examination. Other audit requirements may also apply. 

For additional guidance contact our charities and not for profit specialists today. You may also find this Charity Commission’s updated accounting thresholds article useful, for additional information.

Charity independent examination steps

The independent examination process is broken down into three stages: 

1. Preparation and appointment

Before the examination begins, the trustees and independent examiner need to establish the scope of the work, as well as ensuring the examiner is eligible and independent.

• Eligibility checking: The trustees should establish whether the charity meets the relevant criteria for an independent examination rather than an audit or other form of external scrutiny. 
• Verify independence: The examiner must be appropriately independent from the charity. This means considering potential conflicts of interest, personal relationships with trustees and any involvement in managing the charity’s finances.
• Engagement letter: The charity and examiner should agree the services to be provided, fees, responsibilities, scope and timetable in an engagement letter.
• Gather financial records: Trustees and the charity’s finance team should prepare the financial records and supporting documentation required for the examination. This may include the annual accounts, Trustees’ Annual Report, accounting records, cash books, bank statements, invoices and supporting documentation. The examiner may also request minutes of trustee meetings and relevant correspondence to gain a clearer understanding of financial decisions, significant transactions and matters affecting the charity’s accounts. 

Good preparation can help the examination run efficiently and make it easier to resolve any queries that arise during the process.

2. Examination

An independent examiner reviews the charity’s accounts, financial records and accounting procedures to assess whether they meet the relevant charity accounting requirements and identify any matters requiring further explanation. :

The examination typically involves: 

• Understanding the charity: The examiner will need to understand the charity’s activities, organisational structure, governing documents and accounting systems. This provides context for reviewing the financial information and comparing the accounts with underlying accounting records, cash books and supporting documentation.
• Reviewing the accounts: The examiner checks the format and content of the accounts and whether they have been prepared in line with the relevant charity accounting and reporting requirements. Depending on the charity’s size and circumstances, this may involve accounts prepared on a receipts/payments or accruals basis.
• Reviewing of internal processes: The examiner considers the charity’s financial procedures and internal controls, including how income and expenditure are authorised, recorded and monitored. This may involve reviewing the separation of duties, payment approval procedures and oversight of financial transactions to identify potential weaknesses or areas requiring clarification. 
• Assessing financial risk: The examiner considers significant financial risks that could affect the charity’s accounts or financial position. These may include funding uncertainties, cash flow pressures, rising operating costs, economic instability or overseas activities affected by conflict or war. The examiner considers whether these risks raise concerns about the financial information presented or require further explanation or disclosure. 
• Identify unusual transactions or inconsistencies: The examiner will review inconsistencies, significant anomalies, unexpected variations or unusual transactions to establish whether they are reasonable and supported by appropriate explanations or whether they require further explanation.

During the examination stage, the examiner may ask a charity’s trustees or those responsible for the charity’s finances to clarify particular transactions, explain financial procedures or provide further supporting documentation.

Unlike a statutory audit, an independent examination does not involve the same level of detailed testing or provide the same level of assurance. The examiner considers financial procedures and potential risks where relevant to the examination of the charity’s accounts. 

3. Reporting

Once the examination is complete, the examiner will consider the findings and prepare their report.

• Form conclusions: The Independent Examiner’s Report will explain whether anything has come to the examiner’s attention that suggests the accounts have not been prepared in line with charity accounting requirements. 
• Raise matters with trustees: If issues or areas of concern are identified, they will be discussed with the charity’s trustees so that they can be considered and, where appropriate, addressed.
• Issue the examiner’s report: The independent examiner will complete and sign the Independent Examiner’s Report. It can then be included in the charity’s annual accounts and alongside other required reporting.

What’s the difference between an independent examination and a charity audit?

An independent examination of charity accounts and an audit are both forms of external review. However, they involve different levels of assurance and different procedures: 

1. An independent examination provides limited assurance based on the procedures carried out by the examiner. 
2. An audit involves more extensive testing and provides a higher level of assurance in the form of an audit opinion.

Do charities have to have their accounts audited?

Not every charity has to have its accounts audited. For smaller charities, an independent examination offers a thorough form of external scrutiny where an audit is not required, whilst larger charity accounts may benefit from scheduled examinations and audits. 

A charity may also choose to have an audit voluntarily to provide additional assurance to trustees, funders or other stakeholders. If you are unsure whether your charity requires an independent examination or an audit, it’s important you seek professional accounting services tailored to your charity’s unique circumstances.

What happens if an independent examiner finds an issue?

If during an independent examination of charity accounts an examiner identifies an error, inconsistency or anything requiring further clarification, they will ask the charity’s trustees for more information or supporting evidence. Some issues are simply resolved once additional information is provided, allowing the charity to correct the accounts before the report is finalised. However, if an issue does affect the independent examiner’s conclusion, this will be detailed in the final report, with the examiner advising the trustees on how best to identify and address potential problems as part of their annual reports. 

Charity independent examinations with Rayner Essex

At Rayner Essex, we provide independent examination and accounting support for charities, helping trustees meet their financial reporting responsibilities with confidence. Our qualified team can guide you through the examination process, from preparing your accounts and financial records through to the independent examiner’s report.

We understand that charity finances can involve specific accounting and reporting requirements. That’s why we take a practical approach to helping trustees understand what is required. Whether you need an independent examination or are unsure which type of external scrutiny applies to your charity, we can help you understand your responsibilities and identify the right approach for your organisation.

Get in touch with our charity and not for profit experts today to help prepare your charity’s financial accounts, by emailing us or completing the form below.