Accounting and reporting

CFG has submitted a response to the Financial Reporting Council’s invitation to comment on the exposure draft of Practice Note 11: The Audit of charities in the United Kingdom (PN 11)

This exposure draft for PN 11 has been produced due to changes to the legislative and regulatory framework and developments in account and audit framework, including the new Charities SORP FRS 102. Our response draws from the experience and knowledge of the auditors and accountants in CFG’s Technical Accounting Forum.

Our recommendations are summarised below, or you can view the full consultation response.

  • We are aware that the FRC has conducted an impact assessment for the proposed revised PN 11 and have identified no additional costs resulting from the revised guidance, we are concerned that this impact assessment has neglected to assess charities whose income puts them close to the audit threshold.
  • It is essential the FRC strikes an appropriate balance between the levels of knowledge, skills and experience of different types of auditors that charities will use across the UK.
  • We urge the FRC to ensure that the guidance does not paint all charities as high risk organisations and to be careful that the guidance giving in the exposure draft of PN 11 does not result in inconsistent application by inexperienced auditors.
  • We believe that any revisions to PN 11, or guidance issued by the FRC, should ensure that the relationship between auditors and charities is not damaged. The relationship between auditors and charities is different to that seen in the for-profit world. Auditors and accountants are a key part of collaborative relationships that charities use to ensure they are meeting their financial statutory requirements, while trying to achieve their charitable aims.
  • It also important that this guidance is not seen as the only communication with auditors, and that the FRC works with the Charity Commission, CFG and other interested bodies to ensure appropriate guidance and support is available for auditors.
  • We believe it is essential that that charities voices are listened to when issuing guidance for auditors. The FRC should be careful that there is no undue stress or burden placed on either the charities or the auditors as the result of the changes in the PN 11 exposure draft.
  • We commend the FRC for reducing the considerable length of the 2012 PN 11 and removing duplicating information. It is essential that any guidance provided for charity auditors is appropriate in length; giving auditors the knowledge they need to know while refraining from overburdening them, potentially passing this cost onto charities.

For more information on this response please contact Andrew O'Brien, Policy and Public Affairs Office, on 0207 871 5477 or email Andrew.O'

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