Audit red tape could hit charity funds
Increased regulation in charity audits could force firms to give up the work due to the low risk-to-reward ratio, say auditors.
Rules introduced by the Charities Commission last year mean auditors now have more duties to report to the Commission. But, auditors are concerned the rise in red tape will mean audit firms are less likely to do the work.
Gerry Acher, a senior UK partner at KPMG, said: ‘Implications for auditors on charity accounts get more onerous as charity regulation gets more developed.’
Many leading auditing firms take on charity audits more as a ‘duty to society’ than as a cash-generating exercise. Martyn Jones, audit partner at Deloitte & Touche, added: ‘It seems we’re in an era where regulators are trying to offload. The organisations that’ll miss out will be the charities.’
Another factor likely to compound the problem is the rise in the audit threshold. Many accountancy practices have not renewed their audit licences because of the fall in the number of companies needing an audit. Acher said: ‘I’m worried about the smaller charities. There will be fewer people in the marketplace and small charities will have nowhere to go to get the expertise they need.’
A Charity Commission spokesman said: ‘Proposals set out in the [Auditing Practices Board] draft clarify a charity auditors’ responsibilities‘ rather than requiring significant additional responsibilities of the auditor.’
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Commission urges charities to comply