The Examiner's Twelve Directives

1. Examination and accounting thresholds
Carry out such specific procedures as are considered necessary to provide a reasonable basis on which to conclude that an examination is required under existing section 43(3) as amended by the 2006 Act and that section 43(2) (audit) does not apply to the charity, and where accounts are prepared under section 42(3), that the charity trustees may properly elect to prepare accounts under this sub-section.

2. Understanding the charity
Obtain an understanding of the charity’s constitution, organisation, accounting systems, activities and nature of its assets, liabilities, incoming resources and application of resources in order to plan the specific examination procedures appropriate to the circumstances of the charity.

3. Documentation
Record the examination procedures carried out and any matters which are important to support conclusions reached or statement provided in the examiner’s report.

4. Comparison with accounting records
Compare the accounts of the charity with the charity’s accounting records in sufficient detail to provide a reasonable basis on which to decide whether the accounts are in accordance with such accounting records.

5. Accounting records
Review the accounting records maintained in accordance with section 41 in order to provide a reasonable basis for the identification of any material failure to maintain such records.

6. Analytical procedures
Carry out analytical procedures to identify unusual items or disclosures in the accounts. Where concerns arise from these procedures, the examiner must seek explanation from the charity trustees. If, after following such procedures, the examiner has reason to believe that in any respect the accounts may be materially mis-stated then additional procedures, including verification of the asset, liability, incoming resource or application, must be carried out.

7. Form and content of accounts
Carry out such detailed procedures as the examiner considers necessary to provide a reasonable basis on which to decide whether or not the accounts prepared under section 42(1) comply with the requirements of the Regulations as to the form and content of charity accounts.

8. Accounting policies, estimates and judgements
When accounts are prepared under section 42(1), review the accounting policies adopted and consider their conformity with fundamental accounting concepts, consistency of application and their appropriateness to the activities of the charity. The examiner must also consider and review any significant estimate or judgement that has been made in preparing the accounts.

9. Events subsequent to the year end
When accounts are prepared under section 42(1), enquire of the charity trustees as to material events subsequent to the year end of the accounts examined which may require adjustments or disclosure in the accounts.

10. Trustees’ annual report
When accounts are prepared under section 42(1), compare the accounts to any financial references in the charity trustees’ annual report (if any); identifying any major inconsistencies and consider the significance such matters will have on a proper and accurate understanding of the charity’s accounts.

11. Examiner’s report
Review and assess all conclusions drawn from the evidence obtained from the examination and consider the implications on the report to be made under Regulation 8 of the 2005 Regulations. If the examiner has cause to make a positive statement on any matter arising from the provisions of Regulation 8(e) or 8(f), or to make a statement on any matter arising from the provisions of Regulation 8(g), then the examiner must ensure so far as practicable that the report so made gives a clear explanation of the matter and of its financial effects on the accounts presented.

12. Reports to the Charity Commission
Inform the Charity Commission in writing if, whilst acting in the capacity of the examiner of a charity, information or evidence is obtained which gives the examiner reasonable cause to believe that any one or more of the charity trustees has been responsible for deliberate or reckless misconduct in the administration of the charity.

Note: Directions 7-10 are not applicable to accounts prepared on a Receipts & Payments basis. However, independent examiners of receipts and payments accounts may still find the trustees’ annual report helpful in undertaking their examination and consequently it is recommended that the independent examiner consider reading the report, if it is available, when undertaking an independent examination of receipts and payments accounts.