Independent examination vs. statutory audit
An independent examination and an audit are both methods of carrying out an external review of a charity’s accounts by an independent party, but they are not the same.
For charities, demonstrating financial transparency and accountability is vital, especially to donors and stakeholders. Unlike businesses that report to shareholders, charities rely on public trust and donations, making regular financial scrutiny essential.
These checks must be carried out by an independent party, with the level of review (i. e. an independent examination or statutory audit) usually determined by the charity’s income.
Thresholds for charities in England and Wales
As discussed here, until 30 September 2026, an independent examination is required if annual income is over £25,000 but below £1 million or below £250,000 if assets exceed £3.26 million.
From 1 October 2026, an independent examination is required if annual income is over £40,000.
What are the differences?
Independent examination | Statutory audit
Purpose | Provides limited assurance that accounts are properly prepared and comply with the Charities Act | Provides reasonable assurance that accounts give a true and fair view and tests internal controls |
|---|---|---|
Scope | Light-touch review of accounting records and specific checks | In-depth testing of financial systems, controls, and risk areas |
Cost & time | Less expensive and quicker | More costly and time-consuming due to detailed procedures determined by the auditing regulations |
Who can perform it | Must be independent and for income over £250,000 (£500,000 from 1 October 2026), must be a member of a recognised accountancy body | Must be a registered auditor or audit firm and ideally with charity sector expertise |
Reporting outcome | Examiner confirms no evidence of material misstatement or breach of law | Auditor gives a formal opinion on whether accounts are true and fair |
Usefulness to stakeholders | Sufficient for basic assurance and compliance | Stronger credibility with funders, donors, and regulators |
Governance insight | Limited feedback on systems and controls | Detailed insights and recommendations on financial controls and governance |
Flexibility | Suitable for smaller charities or those with simpler finances | Often required by funders or governing documents even if thresholds aren’t met |
We’re here to help
Independent examinations are ideal for smaller charities seeking compliance with minimal cost and complexity. Whereas statutory audits are necessary for larger charities or those wanting deeper assurance, especially when attracting major donors or managing complex finances.
If you would like to learn more about how we can help with independent examinations and statutory audits, please get in touch with a member of our specialist team or speak to your usual Azets adviser.
