What Is the Importance of Charity Audit?

There are charities in the country that have a gross income of almost £1 million. These charities offer a huge helping hand for the people affected by any catastrophe or are the victim of the wrath of god. It is noticeable that these charities work on the funds accumulated by the donation that is being done by different people on different occasion. There are people in the world who donates a huge amount to these institutions in the name of humanity and with the motive of serving people. Well, the charitable institute that has a gross income of £250,000 and summed assets greater than £3.6 million shall be audited once in a year. This is a mandatory process that is performed to ensure that the charity is working under the rule and regulations established by charity commission and other legislations. This practice also ensures the healthy working of charity's financial practices.

Before we try to find out the importance of a charity audit, let us first try to know that what does the charity and fundraising audit means? Well, according to the Charity Commission, an audit "is the scrutiny of accounts by a registered auditor who, as an audit professional, will apply auditing standards issued by the Auditing Practices Board. There is a person called auditor who inspects and checks the working and the practices of the institution, it is compulsory for the auditor to be registered with a supervisory body in accordance with the Companies Act 2006.

A panel that has been set up by Financial Reporting Council or FRC is known as Auditing Practices Board or ABP. This board offers the guidance and sets standards for the auditors in the UK. There are two prime objectives set up by ABP, which is mandatory for every auditor to follow, and they are:

•   To ensure with satisfactory results that, the financial statements are clean and have no hand in any sort of material misstatement, caused by fraud or error. This empowers the auditor to reveal any opinion on the status of financial statements. This also ensures that every statement is prepared as per the framework applicable by ABP.

•   The finding which an auditor makes must be reported to International Standards of Auditing, also known as ISA.

So, this was all about Audit related to charity. Now let’s try to know, what is the importance of doing Charity Auditing?

1. Commencing an audit on your charitable institution assures you that your charity is in a good financial condition.

2. It gives you the tenability that your charitable institute requires keeping the investors, stakeholders and donors happy.

3. It identifies area in your financial accounting, before they become problematic for your institution and tightens it up.

4. The process of audit acts as a catalyst for your charity to comply with the standards set up by relevant legislatures.

5. Auditing helps you to work on the prime cause for which the charity was started.

The above reasons prove the importance auditing of a charity.