Independent Examination vs Audit: What's the Difference for UK Charities?

On the surface, an independent examination and a statutory audit can seem almost interchangeable — both involve an external professional reviewing your charity's accounts, both produce a formal report, and both satisfy legal requirements under the Charities Act 2011. But beneath that surface, they are fundamentally different exercises, with different purposes, different processes, different costs, and very different implications for your trustees.

Understanding the distinction properly matters — not just for compliance, but for governance. Choosing the right level of scrutiny for your charity is one of the most practical decisions a trustee can make.

An independent examination asks: do these accounts look consistent with the records? A statutory audit asks: are these accounts genuinely true and fair - and can we prove it? Those are two very different questions.‍

The Nature of the Assurance Each One Provides

This is the most important difference, and it's worth spending time on. The type of assurance each process provides shapes everything else — what the examiner or auditor does, how long it takes, who can do it, and what the resulting report actually means.

Independent examination: negative assurance

An independent examiner provides what is known in accountancy as negative assurance. Their report states that, based on their review, nothing has come to their attention to suggest the accounts are materially wrong or have not been properly prepared. The key phrase is nothing has come to their attention — the examiner is not expressing a positive opinion. They are saying they found no cause for concern, not that the accounts are definitively correct.

This is a deliberately limited scope. The examiner is not required to verify every transaction, test internal controls, or independently corroborate the figures. They review, compare, and check — and if something looks wrong, they raise it. If nothing does, they issue an unqualified report.

Statutory audit: positive assurance

An auditor operates to an entirely different standard. Their report expresses a positive opinion — that the accounts present a true and fair view of the charity's financial position and comply with all applicable accounting standards and legal requirements. Reaching that opinion requires the auditor to build a body of independent evidence from scratch, not simply review what the charity has already prepared.

The auditing standards that govern this process — set by the Financial Reporting Council (FRC) — are detailed, demanding, and non-negotiable. An auditor who cannot gather sufficient evidence to form a positive opinion must qualify their report, and in some cases must refuse to sign it at all.

What Each Process Actually Involves

The difference in assurance level translates directly into a difference in the work carried out. Here is how the two processes compare in practice.

What an independent examiner does

• Reviews the accounting records and compares them against the draft accounts
• Vouches a sample of transactions against supporting documents such as invoices, receipts, and bank statements
• Checks that bank reconciliations have been completed and agree with closing balances
• Confirms that restricted and unrestricted funds have been correctly separated
• Reviews the trustees' annual report for consistency with the financial statements
• Checks for any related party transactions that should have been disclosed
• Considers whether the accounts are consistent with their general knowledge of the charity
• Issues a signed report — unqualified if nothing of concern was found, qualified if something was

What a statutory auditor does

• Gains a detailed understanding of the charity's objectives, operations, and financial systems before work begins
• Assesses and documents the charity's internal financial controls
• Identifies and evaluates the key risks of material misstatement or fraud
• Independently verifies assets and liabilities, often through direct confirmation with third parties
• Tests transactions comprehensively — not just a sample, but across multiple risk-focused areas
• Reviews accounting policies for appropriateness and consistency
• Evaluates whether the going concern basis of accounting is appropriate
• Expresses a formal opinion on whether the accounts give a true and fair view

The auditor's process is not simply a bigger version of the independent examination — it is a structurally different exercise, built around independent verification rather than review.

Who Is Qualified to Carry Out Each One

The qualification requirements reflect the difference in complexity and responsibility between the two processes.

Independent examiner qualifications

For charities with gross income up to £500,000 (from October 2026 — currently £250,000), the examiner does not need to be a professionally qualified accountant. They must be independent of the charity, have a working knowledge of charity accounting and the Charities SORP, and have sufficient financial experience to carry out the work competently. In practice, many examiners are qualified accountants — but the law does not require it at this level.

For charities with income above £500,000 (from October 2026 — currently £250,000), the examiner must be a member of one of the professional accountancy bodies listed in the Charities Act 2011, such as the ICAEW, ACCA, ICAS, CIPFA, or ICAI — or hold a Fellowship of the Association of Charity Independent Examiners (ACIE).

Auditor qualifications

A statutory audit can only be carried out by a regulated auditor — a firm or individual that holds a valid audit licence issued by a recognised supervisory body. In practice this means a regulated firm of chartered accountants with specific audit registration. There is no flexibility on this point regardless of the charity's size or circumstances. An unregistered person cannot legally sign an audit report.

The Cost and Time Difference

The difference in process naturally produces a significant difference in cost — and in the time your finance team will need to invest.

An independent examination for a small or medium-sized charity typically costs between £400 and £1,500, based on figures cited in the government's 2025 consultation response. For larger charities with more complex accounts, fees may be higher, but the cost remains substantially below that of an audit at equivalent income levels.

A statutory audit is considerably more expensive. The 2024 Charity Audit Survey found that charities with income between £1 million and £2 million paid a median of close to £10,000 for their annual audit — up from around £7,600 in 2019. Beyond the direct cost, an audit also demands more time from the charity's staff: more documentation to prepare, more queries to respond to, and a more intensive on-site or remote fieldwork process.

It is worth noting that many trustees find the audit process genuinely valuable precisely because of this depth. The auditor's work often surfaces recommendations on financial controls, systems, and processes that an independent examination would not identify. For larger or more complex charities, that broader insight can be worth the additional investment.

How Each Report Is Perceived by Funders and Stakeholders

This is a practical consideration that trustees sometimes overlook. While an independent examiner's report fully satisfies the Charity Commission's requirements, not all external stakeholders view it in the same light as audited accounts.

Some grant-making bodies — particularly those awarding larger grants — specifically require audited accounts as a condition of funding. Others are unfamiliar with the independent examination process and may ask questions about it. Where your charity is actively competing for significant contracts or public sector funding, the additional credibility of audited accounts can be a material advantage.

This does not mean every charity below the audit threshold should commission a voluntary audit. For most, an independent examination is entirely appropriate and well understood. But it is a factor worth considering if your fundraising strategy involves funders who set their own scrutiny requirements.

The right choice between an independent examination and an audit is rarely just about the legal threshold - it's about the size of your charity, the complexity of your finances, the expectations of your funders, and the level of assurance your trustees need to govern with confidence.

Choosing Voluntarily to Go Further Than Required

It is always open to trustees to commission a higher level of scrutiny than the law requires. A charity with income of £300,000 that meets the independent examination threshold can still choose to have a full statutory audit — and some do, for perfectly good reasons.

Common reasons trustees opt for a voluntary audit include:

• A major funder or grant-maker requires audited accounts as a condition of the award
• The charity handles public funds, manages significant assets, or operates in a high-risk area where stronger assurance is appropriate
• Trustees want independent verification of the charity's internal controls and financial systems
• The charity is growing quickly and trustees want to establish audit-ready processes in advance of crossing the threshold
• Reputational considerations mean that audited accounts are expected by donors or beneficiaries

Equally, trustees should be aware that from 1 October 2026, the statutory audit threshold rises to £1.5 million. Charities currently required to have an audit whose income sits between £1 million and £1.5 million will have the option to move to an independent examination — though they should review their governing documents and funder agreements carefully before doing so.