The Charity Commission for England and Wales, Office of the Scottish Charity Regulator and Charity Commission for Northern Ireland have jointly issued an "enhanced" list of matters of material significance to auditors and independent examiners of charity accounts. In all three jurisdictions, auditors and independent examiners have a legal duty to report such matters to the relevant regulator.
Two new areas for reporting are included in the list. The first relates to an auditor having concerns about a charity’s accounts and issuing a modified audit opinion report or qualified independent examiners report. The second relates to situations in which the auditor has concerns that conflicts of interests or related party transactions have not been properly managed or declared.
The revised list is said to be informed by the regulators’ regulatory work, and from this it can be understood that the regulators perceive the need for charity trustees properly to declare and manage conflicts of interests and related party transactions still to require addressing.
Failure to identify and correctly manage a conflict of interests is a breach of a charity trustee’s duties, and a transaction affected by a conflict of interests could be challenged, either by the Charity Commission or other interested parties. In some cases a transaction may be capable of being invalidated, or it may even be void from the start. Charity trustees involved in the transaction may also be required to make good any loss to the charity. Guidance for charity trustees issued by the Charity Commission for England and Wales on managing conflicts of interest can be found here.
The new list of matters of material significance will apply to accounting periods beginning after 1 May 2017.