I have a non-company charity audit. There were a few related party transactions where it cannot be proved that the trustees acted in a truly independent manner, they certainly had a conflict of interest problem and there is potentially financial self-interest, this is clearly in breach of Charities Act regulations.
Other than the above, the figures themselves have been fine,. My initial thoughts were to prepare an unqualified unmodified audit report in that the figures/accounts gave a true and fair view. Disclosure of the breaches and conflict issues were to be provided in a detailed 'other matter' paragraph on the audit report that alerts readers to salient points.
A brief discussion with the Charities Commission however has suggested that they believe these conflict issues should result in a qualified audit opinion, on the basis of governance issues. Having read various practice notes and audit guidance the nearest relevant issue that I could qualify on would be breach of laws and regulations in that the breaches of the Charities Act could result in the termination of the charity.
I would very kindly welcome any thoughts on this as it's not a particular audit issue I've come across befeore and cannot find an example of a similar charity audit report.