Following the collapse of Kids Company, new rules were drafted which recommended improved guidance for auditors on reporting to regulators. Key among the changes was an extension to the list of reportable matters to cover modified opinions, such as emphasis of matter paragraphs or material uncertainty relating to going concern.
These new rules were implemented on 1st May 2017, so if your charity’s latest accounts include a modified opinion in its audit report (or in its Independent Examiner’s report, you are a smaller charity) then Charity Commission will be notified because it is now a statutory requirement.
This means that Charity Commission will be alerted to the fact that your auditors have not issued a completely clean audit report and this may precipitate a response from them.
As a trustee of the charity, you are ultimately responsible for its governance and financial affairs. Therefore, if you are ever faced with this situation, we would strongly recommend that you liaise closely with your auditors to fully understand what has given rise to their modified opinion. Just as importantly, you also need to know what steps you, as a trustee, should take to ensure the position is rectified.
For all charities, there ought to be a clear channel of communication between the auditors and the trustees. If there isn’t, how will you ever discover if there’s a problem? If there is, you will hopefully be able to do something about it, before it’s too late.
We are acutely aware how potentially sensitive this issue is for trustees of charities and, should you ever wish to discuss your particular situation in confidence with someone, please feel free to give Ian Lloyd, one of our charity specialists, a call on 01925 761600 and he will gladly assist you.