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Community Benefit Society - can I do the work

Community Benefit Society can I perform an "independent examination"

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I am qualified as a chartered accountant but I don't do audit work (I'm not sure if that requires extra qualification? Anyway its not work I have been asked to do or plan to do).

I have been asked to do the annual "independent examination" on a relatively new local Community Land Trust which is set up as a Community Benefit Society. They have requested an independenet examination rather than an audit (agreed by meeting). They are very small less than £10,000 of income and assets and the bookkeeping is very simple in Excel. 

Is this work I would be authorised to do and are there any pitfalls to look out for. Is a report required to Companies House or just the FCA and possibly charities commission?

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By lionofludesch
11th May 2020 09:47

The Charity Commission is your friend here. Loads of help on the site.

They supply a work programme for you to follow.

https://www.gov.uk/government/publications/independent-examination-of-ch...

At £10000 of income they don't even need an independent examination. But, as ever, check the rules of the organisation.

I have found the ACIE very helpful in the past.

https://www.acie.org.uk/

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By paulwakefield1
11th May 2020 14:22

Is it registered as a charity? Many, if not most, CBS are not.

A CBS is regulated by the FCA. Reports go to the FCA not CH.

The default positon for a CBS is that it needs an audit. However, unless the rules specifically require an audit, the requirement can be dispensed with but the CBS members have to pass this annually by resolution prior to the relevant year end - there are specific rules about the nature of the majority vote required.
If the turnover is <£5,000, assets <£5,000 and <500 members, two lay auditors can be appointed (unless the rules require a full audit).

CBS with turnover >£90k require a report from an auditor.

Below this there is no requirement for anything. All of this is subject to the rules which take precedence although they obviously cannot overrule the legal requirements.

The situation is different if it is also a registered charity.

So check on the rules, check what they have actually requested and whether they know what they are asking for before doing anything! The chances are, if they have not disapplied the requirements or there is still time before the year end to do so, they will need an audit - maybe using lay auditors (see the links above for more detail).

Useful links:
https://www.fca.org.uk/publication/finalised-guidance/fg15-12.pdf
https://www.fca.org.uk/firms/mutual-societies
https://mutuals.fca.org.uk/
https://communityshares.org.uk/resources/handbook

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By paulwakefield1
11th May 2020 14:38

Just to add. If no audit is required then you can do whatever they request other than an audit so long as you feel comfortable with it.

Not much in the way of pitfalls - compliance with rules, understanding how shares work (note transfers are usually not allowed). Tax - interest to shareholders is an allowable deduction, any interest paid to anyone (e.g. shareholders, lenders) >£250* has to be declared on a special form to HMRC within 3 months of the year end or it is not allowable for CT. *£250 is a concession, the legislation says £15 if I remember correctly.

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By paul.benny
11th May 2020 16:23

You don't need an additional qualification to carry out audits but you do need a practising certificate (PC). Pro bono work such as this is specifically exempted from the PC requirements but bear in mind that ethical standards - such as independence - still apply. If you are a member of the CBS, you probably should not remain a member and carry out the Independent Examination.

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By paulwakefield1
11th May 2020 16:53

I'm pretty sure you need to be a statutory auditor to audit a CBS. If they have not disapplied the audit requirement and are not small enough for a lay audit, it is a nuisance.

Just for the avoidance of doubt, there is no formal concept of an independent examination as such in the way there is for a charity although the >£90k turnover requirements have a similarity in principle.

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