Introduction

This helpsheet has been issued by ICAEW’s Technical Advisory Service to help ICAEW members to understand the audit requirements applicable to clubs, associations and societies and the circumstances in which such an entity may disapply such audit requirements. The helpsheet covers requirements under the Co-operative and Community Benefit Societies Act 2014, the Friendly Societies Act 1974, the Friendly Societies Act 1992 and other applicable requirements.

Members may also wish to refer to the following related helpsheet:

• Which accounting standard do I use for clubs, associations and societies?

Which audit requirements apply

In all cases care should be taken to review the club, association or society’s governing documents carefully as these may impose audit additional requirements over and above any legislative requirements that may apply.

Clubs, associations and societies not formed under specific legislation

Where clubs, associations and societies are not subject to legislation imposing audit requirements upon them, the governing documents may impose a requirement for external scrutiny. Such external scrutiny may not require an ‘auditor qualified under the Companies Act’ or a ‘Registered Auditor’ to be appointed. It may, therefore, be possible for a Chartered Accountant who is not a Registered Auditor to undertake a review of the financial statements.

Small local honorary appointments may be exempted from requiring a Practising Certificate, as stated in the ICAEW statement on engaging in public practice.

Clubs, associations and societies formed under specific legislation

Where clubs, associations and societies are formed under specific legislation, the requirements of that applicable legislation apply. The following table highlights requirements for particular types of clubs, associations and societies.

The remainder of this helpsheet addresses the legislative requirements for societies registered under the Co-operative and Community Benefit Societies Act 2014, the Friendly Societies Act 1974 and the Friendly Societies Act 1992.

Co-operative and community benefit societies

The Co-operative and Community Benefit Societies Act 2014 includes a requirement in s83 to appoint auditors. Subject to the exclusions listed below, a society registered under this Act may be able to disapply the requirement for an audit as outlined in the requirements table which follows.

Exclusions

A society will not be able to disapply the requirement to appoint an auditor if:

• The governing documents require an audit,
• The FCA has given direction to the society requiring it to appoint auditors,
• The society is a credit union,
• The society is a subsidiary itself or has a subsidiary,
• The society holds a deposit or has at any time since the end of the preceding year of account held a deposit, or
• Is registered under the register of social landlords under the Housing (Scotland) Act 2010.

Requirements

2.Figures quoted in the table are with reference to the society’s preceding year of account.

^{1. The Co-operative and Community Benefit Societies Act 2014 (Amendments to Audit Requirements) Order 2018 (SI 2018/322) increased the turnover threshold from £5.6m to £10.2m and the asset threshold from £2.8m to £5.1m with effect from 6 April 2018.}

^{2. Where a Co-operative and Community Benefit Society is a “small society”, instead of passing a resolution to disapply the audit requirement, it may instead appoint two or more persons who are not qualified auditors to audit its accounts and balance sheet for that year. A registered society is a “small society” for a year of account if:}

^{a. The total amount of its receipts and payments in respect of the preceding year of account did not exceed £5,000,
b. It had no more than 500 members at the end of that year, and
c. The total value of its assets at the end of that year did not exceed £5,000.}

^{It would not be appropriate for qualified accountants to undertake this ‘lay audit’ work.}

Resolution

The resolution in order to gain audit exemption referred to above must be passed at a general meeting at which:

• Less than 20% of the total votes cast are cast against the resolution and
• Less than 10% of the society’s members for the time being entitled under its rules to vote cast their votes against the resolution. 

Friendly societies

The Friendly Societies Act 1974 and the Friendly Societies Act 1992 include requirements in s31 and s72 respectively to appoint auditors. Subject to the exclusions listed below, a society registered under the 1974 Act may be able to disapply the requirement for an audit as outlined in the requirements table which follows. Societies registered under the 1992 Act are not able to disapply the audit requirements, however if they are exempt societies they may be able to have a ‘lay audit’ instead (see note 1 to the table).

Exclusions

 A society registered under the Friendly Societies Act 1974 will not be able to disapply the requirement to appoint an auditor if:

• The governing documents require an audit,
• The FCA or PRA has given direction to the society requiring it to appoint auditors, or
• The society holds a deposit or has at any time since the end of the preceding year of account held a deposit.

Requirements

Figures quoted in the table are with reference to the society’s preceding year of account.

^{1. Where a Friendly Society is an “exempt society”, instead of passing a resolution to disapply the audit requirement, it may instead appoint two or more persons who are not qualified auditors to audit its accounts and balance sheet for that year. A registered society is an “exempt society” for a year of account if:}

^{a. The total amount of its receipts and payments in respect of the preceding year of account did not exceed £5,000,
b. It had no more than 500 members at the end of that year, and
c. The total value of its assets at the end of that year did not exceed £5,000.}

^{It would not be appropriate for qualified accountants to undertake this ‘lay audit’ work.}

Resolution

The resolution in order to gain audit exemption referred to above must be passed at a general meeting at which:

• Less than 20% of the total votes cast are cast against the resolution and
• Less than 10% of the members of the society for the time being entitled under its rules to vote cast their votes against the resolution.

If in doubt seek advice

ICAEW members, affiliates, ICAEW students and staff in eligible firms with member firm access can discuss their specific situation with the Technical Advisory Service on +44 (0)1908 248 250 or via webchat.