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UK charity regulators issue guidance on stricter auditing

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Guidance aims to prevent a repeat of Kids Company

All three UK charity regulators have joined to urge auditors to be more vigilant when analysing charity finances.

A new publication Reporting of relevant matters of interest to UK charity regulators from the Charity Commission for England and Wales, the Scottish Charity Regulator (OSCR) and the Charity Commission for Northern Ireland offers financial professionals guidance on how to do so while offering pointers into what to look out for.

It is the first time the regulators have provided examples on where reporting would be helpful by auditors when reporting matters that are relevant but not a legal requirement to report.

The publication is in response to recent high profile cases, particularly the closure of London charity Kids Company, which led to criticism from the regulator that auditors had been too reticent to voice their concerns.

A “when in doubt report it” approach is advocated by the regulators and includes examples of relevant matters which may be reported including: insecure funding; donations that may indicate vulnerability to abuse; and a lack of financial oversight by the whole trustee body.

Laura Anderson, head of professional advice and intelligence at OSCR, said: “This document is a collaborative initiative between UK regulators. This joined up approach to guidance has enabled us to provide the most consistent and comprehensive insights on areas we encourage auditors to report to us, drawing on UK-wide experience across the sector.”

Nigel Davies, head of accountancy services at the Charity Commission, said: “Last year’s Public Administration and Constitutional Affairs Committee report on Kids Company noted that auditors have been too reticent when it comes to reporting matters of concern that would be of interest to the regulator.

"Through this new publication we are encouraging and enabling the profession to step up and engage with us more readily on a proactive basis.”

And Myles McKeown, head of compliance and enquiries at the Charity Commission for Northern Ireland, added: “With over 200,000 registered charities operating across the UK we as regulators cannot possibly upturn every stone, and so auditors and independent examiners have an incredibly important role to play in helping us regulate effectively.”