Independent Examination vs Audit for Charities (2026 Update)

Thresholds, requirements, and key changes

A practical guide for business owners and directors

Short answer: a charity audit provides a positive opinion that the accounts give a true and fair view under UK Auditing Standards, while an independent examination is a lighter touch Charity Commission review that does not give a true and fair opinion and is carried out under the Charity Commission’s Directions (CC32).

From 2026, charities must also navigate a new Charities SORP (effective for periods starting on or after 1 January 2026) and revised scrutiny thresholds (expected to apply to years ending on or after 30 September 2026).

This guidance applies to charities registered in England and Wales. Different rules may apply to exempt charities (such as most academy trusts and universities).

1. Audit vs Independent Examination – quick comparison 

Audit: 

An audit provides a high level of assurance to trustees, funders and other stakeholders. The auditor carries out detailed work in accordance with UK Auditing Standards and gives a positive opinion on whether the accounts show a true and fair view. This involves formal risk assessment, testing of internal controls where relevant, and substantive testing of transactions and balances. Audits are typically required for larger or more complex charities, or where a charity’s governing document or funders specify that an audit is needed.

Independent Examination:

An independent examination is a more proportionate form of external scrutiny designed for smaller or less complex charities. It does not provide a true and fair opinion. Instead, the independent examiner reviews the accounting records and the accounts to identify whether there are any matters that need to be brought to the attention of trustees or reported to the regulator. Independent examinations are carried out under Charity Commission Directions (CC32) and are generally lower cost and less intrusive than audits.

Audits are designed to provide higher confidence to stakeholders; independent examinations are proportionate scrutiny for smaller or less complex charities.

2. England & Wales thresholds (2026 update) 

From late 2026, most charities in England and Wales will see higher income and asset thresholds for independent examination and audit, reducing the number of charities requiring a statutory audit. 

Important: There are two different effective dates people often confuse. SORP changes apply to periods starting on or after 1 January 2026. External scrutiny threshold changes are expected to apply to years ending on or after 30 September 2026.

From 30 September 2026, a charity will generally require an independent examination if its gross income exceeds £40,000 (previously £25,000). Where a charity’s income exceeds £500,000, the independent examiner must be professionally qualified.

A statutory audit will normally be required where a charity’s income exceeds £1.5 million in the year. An audit may also be required where income exceeds the lower income trigger set out in charity law and the charity’s total assets exceed £5 million at the year end. These thresholds replace the current £1 million income test and £3.26 million asset test.

Regardless of income or assets, a charity may still be required to have an audit if this is specified in its governing document, required by a funder, or imposed by the regulator. Equally, charities below the independent examination threshold may choose voluntarily to appoint an independent examiner or auditor to strengthen governance and stakeholder confidence

External scrutiny thresholds

Under the current rules, an independent examination is required where a charity’s income exceeds £25,000, and the examiner must be professionally qualified once income exceeds £250,000. An audit is required if income exceeds £1,000,000, or if assets exceed £3.26 million. From 30 September 2026, these thresholds will increase: an independent examination will only be required where income exceeds £40,000, the requirement for a professionally qualified independent examiner will apply only where income exceeds £500,000, and an audit will be required where income exceeds £1.5 million or where assets exceed £5.0 million.

*Asset test applies where income exceeds the lower income trigger set out in charity law. Governing documents, funders or regulators can still require an audit even if thresholds are not met.

Charities below the independent examination threshold may still choose to appoint an examiner or auditor voluntarily to support trustee oversight and stakeholder confidence.

3. What independent examiners must do (CC32) – and trustees’ duties (CC31)

Independent examiner – core responsibilities

An examiner must:

• Check eligibility for IE and independence

• Review accounting records against the accounts

• Perform analytical review and targeted testing

• Consider compliance with legal requirements and the Charities SORP (but not true & fair)

• Report matters of material significance to the regulator where required

Trustee responsibilities

Trustees remain responsible for:

• Preparing the trustees’ annual report and accounts

• Appointing an independent and suitably skilled examiner

• Providing access to records and explanations

• Reviewing, approving, and filing accounts on time

These duties apply regardless of whether the charity has an audit or an independent examination. Trustees should also document their decision making around the level of external scrutiny applied, particularly where income or assets are close to statutory thresholds.

4. What’s changing under Charities SORP 2026 (and why it matters even if scrutiny doesn’t change)

The Charities SORP 2026 applies to accruals accounts for periods starting on or after 1 January 2026. Key changes include:

a) Three tier reporting framework

• Tier 1: Income up to £500,000

• Tier 2: Income £500,001–£15m

• Tier 3: Income over £15m

Disclosure and presentation requirements increase by tier, making reporting more proportionate. 

b) Trustees’ Annual Report – enhanced focus

Updated guidance emphasises:

• Clear linkage between narrative reporting and the financial statements

• Transparent reserves reporting and future plans

• Clear explanation of activities, achievements and impact

• For larger charities, consideration of environmental, social and governance (ESG) matters

c) Income recognition and lease accounting

The SORP incorporates FRS 102 changes effective from 2026, including:

• Clearer and more consistent income recognition guidance

• Most operating leases recognised on the balance sheet (with charity specific guidance for peppercorn and low value leases)

These changes affect how accounts are prepared, regardless of whether the charity has an audit or an independent examination.

5. External scrutiny changes – what applies and when

In summary, the new Charities SORP applies to accounting periods starting on or after 1 January 2026, while the new independent examination and audit thresholds are expected to apply to years ending on or after 30 September 2026. This distinction is critical for planning, budgeting and trustee decision‑making during the 2026 transition period. 

This split is critical for planning, budgeting and trustee decision making during the 2026 transition period.

6. Cross-border note (Scotland) 

Charities that are registered in Scotland, or that are registered in both England & Wales and Scotland, are subject to regulation by the Office of the Scottish Charity Regulator (OSCR). Scottish charity law differs in several important respects from the England & Wales regime.

In Scotland, external scrutiny requirements depend on a charity’s income and constitution, but the thresholds, terminology and reporting formats are different. For example, some Scottish charities may prepare receipts and payments accounts rather than accruals accounts, and the rules governing when an audit or independent examination is required are set by OSCR rather than the Charity Commission.

Where a charity is cross‑border registered, trustees must ensure that the accounts and external scrutiny arrangements comply with both regulatory regimes. This can affect the format of the accounts, the content of the trustees’ report and the level of external scrutiny required. In practice, this often means applying the stricter requirement where there is any overlap or ambiguity. Specialist advice is usually recommended for cross‑border charities to avoid inadvertent non‑compliance

7. FAQs 

a. Can we choose independent examination instead of audit?

Usually yes, provided income and assets are below the audit thresholds and there is no requirement for an audit in the charity’s governing document or imposed by a funder or regulator. 

b. Does an independent examination give a true and fair opinion?

No. Only an audit provides a true and fair opinion.

c. Do SORP changes affect whether we need an audit or independent examination?

No. The SORP affects how accounts are prepared and presented; statutory thresholds and legal requirements determine which level of external scrutiny applies.

8. How Halliday Styan Chartered Accountants can help

At Halliday Styan Chartered Accountants, we specialise in supporting charities of all sizes with clear, practical advice tailored to trustees’ responsibilities and regulatory requirements.

We can assist with assessing whether your charity requires an audit or independent examination under the 2026 thresholds as well as acting as independent examiners where appropriate. We also help charities with monthly bookkeeping as well as preparing and reviewing accounts under the Charities SORP 2026, including support with transition to the new requirements.

In addition, we advise trustees on governance, reserves policies and financial reporting best practice, and help charities plan ahead where income or assets are approaching key thresholds. 

If you are unsure which rules apply to your charity, or how the 2026 changes affect you, early advice can help avoid last‑minute compliance issues.