In England and Wales, a charity whose gross income for a financial year exceeds £40,000 must have its accounts either independently examined or audited, and for most charities the trustees can choose examination. An audit is compulsory if income exceeds £1.5 million, or exceeds £500,000 with gross assets over £5 million. These thresholds apply to financial years ending on or after 30 September 2026; earlier years use £25,000, £1 million, £250,000 and £3.26 million.

When must a charity’s accounts be examined or audited?

The rules are in sections 144 and 145 of the Charities Act 2011. The Charities Acts 1992 and 2011 (Substitution of Sums) Order 2026 (SI 2026/427) raised the thresholds from 30 September 2026, but article 5(6) says the new sums do not apply to any financial year ending before that date. The year end, not the date the accounts are prepared, decides which set applies.

Requirement Years ending before 30 September 2026 Years ending on or after 30 September 2026
Examination or audit required Income over £25,000 Income over £40,000
Examiner must hold a listed qualification Income over £250,000 Income over £500,000
Audit compulsory on income Income over £1 million Income over £1.5 million
Audit compulsory on assets Income over £250,000 and gross assets over £3.26 million Income over £500,000 and gross assets over £5 million
Non company charity may prepare receipts and payments accounts Income up to £250,000 Income up to £500,000

The asset test in section 144(1)(b) uses the aggregate value of assets before deducting liabilities, and only bites where income exceeds the accounts threshold in section 133. Below the examination threshold, charity law does not usually require any external scrutiny, although some charities, such as Parochial Church Councils, have their own rules. For simpler accounts below the receipts and payments limit, see receipts and payments accounts.

When is an audit needed even below the thresholds?

The Charity Commission’s guidance for trustees (CC31) says trustees cannot choose an independent examination where the charity’s governing document, a funder or the Commission requires an audit. Under section 146 the Commission can order an audit, including where the accounts have not been examined or audited within 10 months of the year end. A parent charity whose group income exceeds the group accounts threshold, now £1.5 million for years ending on or after 30 September 2026, must prepare and have audited group accounts.

A charitable company must also meet company law. Independent examination is only available where the company is exempt from audit under section 477 of the Companies Act 2006, and the trustees must include the audit exemption statement required by section 475 on the balance sheet. The Commission cannot approve an examination in place of an audit for a charity that is subject to audit under the Companies Act. A charitable incorporated organisation is not a company, so the non company rules apply; see charitable incorporated organisations. For the company size tests, see audit exemption for small companies.

Older governing documents sometimes ask for an “audit”. CC31 says that for a governing document dated before 1 March 1992, unless it explicitly refers to an audit by a qualified auditor or qualified accountant, the word can be read as requiring some form of independent scrutiny, so an examination may be chosen.

Who can act as an independent examiner?

Section 145(1)(a) requires an independent person who is reasonably believed by the trustees to have the requisite ability and practical experience to carry out a competent examination. Where income exceeds £500,000 (previously £250,000), section 145(3) adds that the examiner must also be a member of one of the bodies listed in section 145(4) or a Fellow of the Association of Charity Independent Examiners. The listed bodies are ICAEW, ICAS, the Institute of Chartered Accountants in Ireland, ACCA, the Association of Authorised Public Accountants, AAT, the Association of International Accountants, CIMA, the Chartered Governance Institute (listed in the Act under its former name), CIPFA, the Institute of Financial Accountants and the Certified Public Accountants Association.

CC31 explains that independence means the examiner is not, and could not be seen to be, influenced by relationships with the charity. An examiner cannot be a trustee. The Commission lists as examples that would call independence into question being an employee or the bookkeeper, sitting on a finance subcommittee, being a major donor or beneficiary, having a significant financial or commercial relationship, or having a close relationship with the trustees or other related parties. The examiner may help prepare the accounts, provided they do not maintain the accounting records or take part in day to day management.

Below the qualification threshold anyone suitably skilled can act, but the Commission recommends a member of a listed body where the charity prepares accruals accounts, because the examiner needs to understand accounting standards and the Charities SORP. Professional examiners will usually need a practising certificate or licence from their body if they charge a fee.

What does the examiner actually do?

The examiner must follow the Commission’s Directions in CC32, which are made under section 145(5)(b) and have legal force. CC32 was updated in September 2026. Direction 1 requires the examiner to check first that the charity is eligible for examination and, if it uses receipts and payments accounts, that it is eligible for those. The work then involves reviewing the accounting records, comparing the accounts with them, carrying out an analytical review, and considering unusual items and disclosures.

CC32 describes examination as a limited check, sometimes called negative assurance. Unlike an auditor, the examiner does not plan to detect material fraud or test internal controls and does not give an opinion on whether the accounts are true and fair. For how an audit differs, see how a statutory audit works.

What goes in the examiner’s report?

The content is fixed by regulation 31 of the Charities (Accounts and Reports) Regulations 2008. The report is addressed to the trustees, signed and dated, and gives the examiner’s name and address, the financial year, any relevant professional qualification and, where income is above the qualification threshold, the basis on which the examiner qualifies. The core statement is whether anything has come to the examiner’s attention giving reasonable cause to believe that, in any material respect:

  • accounting records were not kept as the law requires;
  • the accounts do not accord with those records; or
  • accruals accounts do not comply with the legal requirements and the SORP, other than the requirement to give a true and fair view.

The examiner must also say whether there is anything to which attention should be drawn for a proper understanding of the accounts, and must report material expenditure that appears not to be in line with the charity’s trusts and any failure to provide information or explanations.

When must the examiner report to the Charity Commission?

Section 156 requires an examiner who becomes aware of a matter that they have reasonable cause to believe is likely to be of material significance to the Commission’s inquiry or protective powers to make a written report to the Commission immediately. CC31 says the joint guidance of the UK charity regulators treats dishonesty and fraud, money laundering and criminal activity, and failure to manage significant conflicts of interest as items that must always be reported. Section 156(6) protects the examiner from breaching any duty of confidence by doing so.

How does this work in practice?

Illustration only. A non company charity has a year end of 31 December 2026, gross income of £420,000 and gross assets of £6 million, mostly a freehold building.

  • The year ends after 30 September 2026, so the new thresholds apply.
  • Income is below £1.5 million, and because it is below £500,000 the £5 million asset test does not apply. An independent examination is allowed unless the governing document or a funder requires an audit.
  • Income is below £500,000, so the examiner does not have to be a member of a listed body, though a qualified examiner is sensible if the charity prepares accruals accounts.

The same charity with a year end of 31 March 2026 and the same figures would have needed an audit, because its income exceeded £250,000 and its gross assets exceeded £3.26 million.

What deadlines and mistakes should trustees watch?

The examiner’s report is filed with the trustees’ annual report and accounts. CC31 says registered charities must file within 10 months of the year end, and charitable companies must also file at Companies House within nine months. Common problems include:

  • applying the new thresholds to a year that ended before 30 September 2026, or the old ones to a later year;
  • leaving branch income out of gross income, which CC32 says must be included;
  • appointing the charity’s own bookkeeper or a trustee’s relative as examiner;
  • not checking a professional examiner’s membership when income crosses the qualification threshold;
  • assuming the same rules apply in Scotland, where the Scottish Charity Regulator has its own requirements.

For how an accountant reports when simply preparing company accounts, compare the accountants’ report on unaudited accounts.

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Reviewed by Christine Anderson, Broker, Solar Protect. Last reviewed 8 October 2026. Part of Accountapedia, the Solar Protect guide to UK tax and accounting. This page is general information, not personalised advice.