FINANCE NEWS: Auditors giving bad advice on reserves, says finance expert

Auditors may be letting charities down by failing to give them proper advice on the level of reserves they need, according to a charity finance expert.

A Charity Commission report published last week said that nearly 70 per cent of charities with an income of more than £10,000 do not have a reserves policy.

However, Paul Palmer, professor of charity finance at South Bank University, said that charity auditors were supposed to write a management letter to trustees pointing out any financial weaknesses.

"The commission report shows that either charity trustees are ignoring the management letter or auditors are failing to advise trustees about the absence of a reserves policy," he said.

He added staff at the Centre for Charity and Trust Research were constantly encountering case studies where auditors were failing to provide management letters.

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