FINANCE NEWS: Commission to tighten auditing

MATHEW LITTLE

Auditors of voluntary organisations are to come under pressure to report any wrongdoing to the Charity Commission, Third Sector has learned.

Revised guidance, issued by the Auditing Practices Board but heavily influenced by the Commission, is expected at the end of the month. It instructs auditors that in matters suggesting dishonesty, misuse of a charity's funds or a "serious breach of the charity's trusts

there is "the highest presumption

to report this to the Commission.

The previous guidance, published in 1996, merely stipulated that these matters were "likely to be reportable".

The 2002 guidance note doubles the space given to the issue of whistleblowing and adds a six-page appendix in which detailed examples of matters about which auditors should inform the Commission are included.

The guidance also makes it clear that the failure by auditors to adhere to their statutory duty to report serious malpractice - such as the misappropriation of organisation funds uncovered during the normal course of their work - will result in them being reported to the relevant professional bodies, such as the Institute of Chartered Accountants.

Third Sector understands that the Commission decided that instructions on whistleblowing for auditing needed to be strengthened after its own investigations repeatedly highlighted examples of malpractice that auditors had not reported.

Ray Jones, policy accountant at the Commission, said: "Our experience of whistleblowing has been a little disappointing. The reports received have not always focused on the important issues. Clearer guidance for auditors was needed on what type of matters were reportable as well as the procedures involved in making a report to the Commission."

"The Commission has pushed the issue harder this time,

said charities management consultant Adrian Randall. "So it isn't just the Commission saying this but the Auditing Practices Board."

Randall backed the new tough line. "I'm a great believer in openness,

he said. "There is always a dilemma for auditors in that they are reporting on their clients. But the bad should be 'outed' early rather than all charities being tarred with the same brush."

The revised guidance also highlights to auditors the importance of examining grants and donations to overseas entities, and controls over organisations used to raise funds or manage investments.

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