External Scrutiny

External Scrutiny of your group’s Annual Accounts usually refers to having someone independent and/or suitably qualified to look over the accounts. How detailed that level of scrutiny is will depend on your structure, charitable status, income, the type of Accounts you prepare and/or your constitution or any decision from your group’s committee or board.

If your group or organisation has charitable status (or if your group’s constitution sets out a particular requirement) at least some level of external scrutiny of your Annual Accounts is mandatory.

External Scrutiny of Charity Accounts

The format and requirements for Annual Accounts prepared by registered charities in Scotland are set out in charity legislation regulated by the Office of the Scottish Charity Register (OSCR). All charities are required to have their Annual Accounts externally scrutinized, either by:-

Independent Examination or
Audit

The appropriate type of scrutiny will depend on:-

the charity’s gross annual income
what the charity’s own governing document (or constitution) says
any Act of Parliament
any decision by the Trustees
any decision of the charity’s members

Independent Examination of charity accounts

Charitable organisations should subject their accounts to independent examination, if each of the following points apply:

the constitution (or other governing document) does not specify a requirement for an audit
their gross annual income is less than £500,000
they have gross assets of less than £3.26 million
the Charity Trustees or the charity's members have not decided an audit should be carried out

Audit of charity accounts

An audit must be carried out by your group or organisation if any of the following points apply:

the constitution requires the accounts to be audited
the charity's gross income is £500,000 or more
the charity has gross assets of £3.26 million or more
the Trustees have decided the accounts should be audited
the members specifically request an audit
any enactment of Parliament requires an audit

External Scrutiny of Accounts for Groups and Organisations without charitable status

Unincorporated organisations without registered charitable status charities are not subject to a statutory requirement for external scrutiny. However, they will have to follow the external scrutiny requirements as set out in their constitution (or governing document). In addition, some funders may require that the organisations they fund have some level of external scrutiny of their accounts.

Incoporated community groups or organisations (such as Company Ltd by Guarantee) are usually required to have an audit - unless they qualify as “small” and can take advantage of 'audit exemption'.

To qualify as “small” and be exempt from audit, an incorporated group or organisation must satisfy at least two of the following requirements:

have no more than 50 employees
have a turnover of not more than £6.5 million
have a balance sheet total of not more than £3.26 million

Even if your group is exempt from audit requirements under Company Law, you would still be required to have your annual accounts audited, if

there is a requirement in your constitution (or governing document) to do so,
your members have requested you to
the Directors make a decision to do so

Further sources of information

Office of the Scottish Charity Regulator (OSCR)