“Part 64 - Estates, Trusts and Charities General 64.1 … 1. Claims Relating to the Administration of Estates and Trusts Scope of this Section This Section of this Part applies to claims – (a) for the court to determine any question arising in – (i) the administration of the estate of a deceased person; or (ii) the execution of a trust; (b) for an order for the administration of the estate of a deceased person, or the execution of a trust, to be carried out under the direction of the court (‘an administration order’); (c) under theVariation of Trusts Act 1958 ; or (d) undersection 48 of the Administration of Justice Act 1985 . …Practice Direction 64A This Practice Direction supplementsCPR Part 64 1. Claims relating to the administration of estates and trusts Examples of claims under rule 64.2(a) 64APD.1 The following are examples of the types of claims which may be made under rule 64.2(a) — (1) a claim for the determination of any of the following questions— (a) any question as to who is included in any class of persons having— General Scope of this Section This Section of this Part applies to claims –Practice Direction 64A This Practice Direction supplementsCPR Part 64 trusts Examples of claims under rule 64.2(a) (i). a claim against the estate of a deceased person; (ii) a beneficial interest in the estate of such a person; or (iii) a beneficial interest in any property subject to a trust; (b) any question as to the rights or interests of any person claiming— (i). to be a creditor of the estate of a deceased person; (ii) to be entitled under a will or on the intestacy of a deceased person; or (iii) to be beneficially entitled under a trust; (2) a claim for any of the following remedies— (a) an order requiring a trustee— (i). to provide and, if necessary, verify accounts; (ii) to pay into court money which he holds in that capacity; or (iii) to do or not to do any particular act; (b) an order approving any sale, purchase, compromise or other transaction by a trustee (whether administrative or dispositive); or (c) an order directing any act to be done which the court could order to be done if the estate or trust in question were being administered or executed under the direction of the court”
“22. It seems clear from the recent correspondence from GLE at pages 84 to 92 of Exhibit JW1, which includes their latest accounts detailing a sum of£181,078 owed to the Charities, that GLE does acknowledge at the very least that there is a need for an accounting and financial reconciliation between GLE and the Trustees. As I understand it, this must mean that GLE accepts that a sum representing (arrears of) the Charitable Contributions is owed to the Charities, but there is clearly a substantial difference between the sum which the Charities consider is owing and that which the GLE considers to be due. This alone makes it clear how important it is that GLE and the GLMC now hand over the Charities’ documents and records. 23. Unfortunately, the paucity of records means we have been unable to undertake a reconciliation of the Charitable Contributions owed – as well as the other matters to which I have referred in this witness statement. We are not even in a position to assess whether GLE’s position on the contributions is correct. GLE holds all the cards. In particular, as Mr Crossley has noted, we have been denied access to the bookkeeping software package known as “Sage” which should contain full details of all financial transactions between GLE (and other parts of the RAOB organisation) and the Charities, and record the charitable contributions coming in and the expenditure. We appear to have been denied it precisely because GLE has mixed the Charities’ records with those of other entities, which is what has caused many of the problems and just highlights why we need full access to the Sage system as well as provision of the other documents and records. The mixing of data cannot be a reason to deny the Charities’ access to trust documents recording its own transactions, especially when the other entities involved do have access to the information. Similarly, the excuse in the1st July 2021 letter that Sage belongs to GLE does not hold water when GLE used Sage to maintain the Charities’ records when GLE was in control of the Charities and their assets. 24. The problems caused by this lack of information should be obvious. Just as one example, albeit a very important one, prior to our appointment as Trustees, the Charities were being audited by the same accountants who acted, and still act, for GLE, namely Watson Buckle of York House, Cottingley Business Park, Bingley. Shortly after our appointment, we approved a set of accounts (for the 2018 financial year) prepared by Watson Buckle and presented to us without caveat or comment, without fully realising, or being properly advised, as to exactly what the accounts showed. In fact, those accounts showed the investment scheme monies referred to above as loans made to the Charities, which seems to be clearly wrong – and in respect of which Watson Buckle have not been able to provide any satisfactory explanation, let alone any loan documentation. We appointed new auditors, Bray and Co of Wetherby, and it will be necessary for them (and us) to get to the bottom of this issue and correct or clarify the accounts as part of this process – for which we need access to the records. 25. We now have a situation where the last set of accounts (for the 2018 financial year) filed for the Charities contains inaccuracies, and thus needs to be restated. We are also long overdue for filing accounts for the 2019 financial year, and the 2020 financial year accounts are also due. Fortunately the Charity Commission, which is aware of the general situation, has been exceptionally accommodating to date, but it is clear from their email of7th May 2021 (see page 76 of JW1) that they are losing patience and the issue of the accounts must now be resolved as a matter of urgency. However, I am advised by our auditors that they cannot finalise the accounts, or the audits, for the years to which I have referred without access to the full extent of the accounting records for all of the Charities. In particular, this job would be made a great deal easier by access to the information pertaining to the Charities which is contained on Sage, and I am advised by the accountants that the limited access that has been offered by GLE to date, which offer is repeated in the 1st July letter, is simply not sufficient for the purpose. I also understand that the “packs” offered in the 1st July letter again appear to be only the packs that have been offered previously, and provided in respect of the JCF in 2020 and very recently in respect of the WM. Those packs have, I understand, been redacted as explained by Mr Crossley, and are not adequate for the purpose. The letter also makes clear that the pack for CTF, which is in fact the charity with the largest assets and where the largest number of issues arise, will not be ready until August 2021.”
“27. I therefore ask the court to make the order sought in these proceedings, or some other appropriate order, so that the Trustees can (i) restate the accounts for the 2018 financial year; (ii) file audited accounts for the subsequent financial years; and (iii) investigate the financial irregularities outlined in this Witness Statement as a matter of urgency. The Charities simply cannot afford to wait any longer for GLE and/or the GLMC to decide to co-operate properly regarding the accounts, and there is little or no indication that waiting any longer will achieve the required result. Hopefully that will not be the case with regard to the additional records offered by the 1st July letter, but only time will tell.”
“7. In order to prepare or audit a set of accounts, we would ordinarily require access to both the prime records and the bookkeeping records. 8. Accurate bookkeeping records enable us to prepare a set of accounts efficiently. In the process of preparing the accounts we would typically carry out a series of analytical procedures designed to uncover and highlight any obvious errors. These might include agreeing figures included in the bookkeeping records to the prime records, comparing figures with similar figures from previous periods or other organisations, calculating and comparing percentages or ratios, such as gross profit margins. The prime records are used to carry out some of these procedures, and also to correct any errors in the bookkeeping records that are identified by these procedures. An audit is essentially a testing exercise designed to uncover any errors in the accounts once prepared. A proper audit cannot be carried out without access to both the prime and the bookkeeping records, as a full audit requires some testing of one against the other. 9. Although we would ideally have access to both prime records and bookkeeping records, it would still be possible to prepare accounts with just one or the other: (a) Given the prime records, but no bookkeeping records, it would simply be a case of preparing the bookkeeping records from scratch. This would take longer but would result in an accurate and reliable set of accounts, which could then be audited. (b) Given bookkeeping records, but no prime records, a set of accounts could be easily extracted. However, we would not be able to undertake any of the usual analytical procedures. Although this would reduce the reliability of the final accounts, so long as the individual reading the accounts was aware of this constraint on our work, it would not stop the accounts from being prepared. It would however mean that an audit could not be carried out.”
“25. We are not just instructed to prepare accounts. We are also instructed to audit them, an essential exercise for the Charities, who need to ensure that the accounts are not merely a cosmetic exercise. Carrying out an audit is far more onerous than preparing a set of accounts. 26. In carrying out an audit, the auditor must undertake whatever procedures they deem necessary to obtain ‘reasonable assurance’ that the accounts are free from ‘material misstatement’, which could be caused by errors or fraud. 27. The exact procedures undertaken as part of an audit will be determined with reference to the auditor’s judgement of the risk that such ‘misstatements’ exist. In this case, the apparent mixing of information on Sage and the refusal to provide access to those bookkeeping records, together with the failure to offer complete prime records, increases the risk that any accounts may contain inaccuracies, which would mean that I would want to carry out more stringent tests than in a very low risk case. The auditor then designs appropriate procedures to test the accuracy of statements made in the accounts and gain sufficient assurance that this risk is reduced to an acceptable level. It should be noted that the scope of an audit extends beyond the basic financial information that people generally concentrate on, to include accounting policies, judgements and estimates used when preparing the accounts, statements made in the Trustees’ Report, and notes included within the accounts. 28. In order to assess the risk that a misstatement might arise, the auditor first needs to understand the systems that are in place relating to the finances of the organisation; for example, who is responsible for doing what, how do they do it, and who checks what they have done. None of this is clear in respect of the Charities for the period while the GLE/GLMC/Mr Taylor had control of the finances and the records. If there are areas where one individual alone exercises significant control over the organisation’s finances, this might indicate a higher risk of error or fraud. In such cases more assurance would be required, and tests might focus on specific transactions in that area. I simply do not know whether that applies and if so to which transactions. 29. If there are controls in place to reduce the risk of error or fraud, such as transactions needing to be approved by two parties, then perhaps the risk of a misstatement is reduced. In this case detailed testing of transactions may not be required to the same extent. However, in such cases it would be necessary to test that those controls were indeed being implemented before relying on them for assurance. Again, I have no idea if there were such controls, or if they were being implemented. 30. It is clear that, to understand and test the systems and controls within an organisation accurately, wide access beyond the prime and bookkeeping records is required. This is also the case when reviewing statements made in the Trustees’ Report and any notes to the accounts, for which access to meeting minutes and correspondence may be required. 31. Given the wide scope of an audit, it is impossible to give a comprehensive list of the information required, as the list can vary significantly from one audit to the next – and can change dependent on what is discovered in the prime and bookkeeping records. However, it is certain that both the prime records and the bookkeeping records would be required as a bare minimum, and it is fair to say that, provided an auditor can demonstrate how the information might be linked to the accounts, they should have access to all of the organisation’s records. 32. Where an auditor is not provided with access to the information they deem necessary to obtain ‘reasonable assurance’ that the accounts are free from ‘material misstatement’, they will not be able to sign off a ‘clean’ audit report. Where the issue in question is restricted to one area of the accounts, and the auditor is satisfied with the other areas of the accounts, it may be possible to produce an audit report that draws attention to the specific issue or highlights a limitation on the audit’s scope. However, where the issue(s) are too wide ranging, it is likely that no positive audit report can be signed. The issues may be wide-ranging in respect of the Charities, or they may be narrow, but I cannot even begin to assess the situation on present information. 33. As a sample, I attach a copy of an audit report prepared by Watson Buckle on the CTF accounts for the 2018 financial year at pages 45 to 47 of Exhibit JC1. I have to say, based on the information available to me, I could not sign off an audit report in that form for any of the Charities. I simply do not have the information available to say that, in my view, the financial statements give a true and fair view of the state of the Charities’ affairs. If Watson Buckle did have the necessary information to provide that sign off, I cannot understand why the GLE will not allow me or the Charities to see that information, or provide it in respect of the 2019 financial year. Audit of the Charities 34. In the case of the Charities, we have little if any information regarding the systems that were in place during the years in question, namely 2019 and 2020 and as noted earlier, we have very limited access to any prime or bookkeeping records. This means we are not in a position to carry out the initial stage of assessing the risk associated with the audit, which is necessary before the audit procedures can be designed. It is these procedures that would then determine what other information is required. 35. I am concerned that it is now more than 18 months since we first requested the relevant information from Watson Buckle, and the GLE/GLMC in the form of Mr Taylor, yet they have still not provided the full information required for an audit. It seems clear from the correspondence that the GLE/GLMC have not authorised either Mr Taylor or Watson Buckle to provide the information that they do have, and what has been promised by Mr Taylor rarely materialises. The continued delay is of great concern because the Charities are now very late in filing their accounts for the 2019 financial year (and accounts for the 2020 financial year are also due), although I understand that the Charity Commission is aware of the circumstances and has been relatively sympathetic thus far, although they are now losing patience. I also understand that the Charity Commission is also expecting to receive a restatement of the Charities’ accounts for the 2018 financial year once Brays have been able to review the full extent of the data. Again, this is very late. This really cannot wait any longer to be resolved amicably, especially since there appears to be no real will on the part of the GLE/GLMC to assist to the degree necessary.”
“39. Despite all of this, as can be seen from the correspondence, the stance of the RAOB GLE has always been that the Charities can have access to information needed to produce their accounts. However, they were not prepared to agree to giving the Charities complete and unfettered access to the entire SAGE system because it includes all of the information about the finances of the RAOB GLE as well as confidential information about its staff and their remuneration. Moreover, the demand for unfettered access would have involved access being given without limit as to time, allowing records to be examined for years for which the Charities already have audited accounts. 40. The RAOB GLE has no desire to spend the funds of its members on litigation of this kind and it has never denied the right of the Charities to information to prepare its accounts. For those reasons, it offers on an open basis to provide an electronic copy of a report from the SAGE system covering all financial transactions from1 April 2018 to31 March 2019 , but, with any confidential information relating to its staff deleted and on the basis that: 40.1 the copy Is only to be produced to Mr Crossley and the trustees of the Charities who will use the information provided for the purpose of preparation of accounts only; 40.2 the recipients of the information agree and undertake to the Court that they cannot disclose to any third party any of the data contained in the copy relating to the affairs of the RAOB GLE. 41. In addition, the RAOB GLE have no objection (as offered before) to Mr Crossley having direct access to the SAGE system in order to complete his audit (including being able to run, for himself, the report referred to in paragraph 40 above) and, as is already offered in the audit packs, any supporting documentation will be provided on request. Mr Taylor is also willing to answer any further relevant queries which Mr Crossley may have. 42. The opening trial balance as at1 April 2018 has already been provided to Mr Crossley by Watson & Buckle. 43. The report from the SAGE system being offered is the same as those Watson & Buckle were provided with when they were engaged to prepare accounts for and audit all of the four entities. Also, it will be noted that a copy of SAGE was what the Charities' solicitor had stated was required until June 2021, albeit they demanded unfettered access. Therefore, it is clear that such a report is sufficient for the purposes of the audit. 44. It is currently unclear why it is claimed that the Charities need information from after1 April 2019 when they set up their own system. If this can be explained, then the offer above would extend to the year to March 2020 and 2021. However, there can be no basis for re-opening the 2018 accounts which Mr Walsh and the other trustees approved and signed. The inclusion of the loans in those accounts was perfectly plain.”
“Schedule 1 16.1 The first category of documents sought is ‘Basic Bookkeeping records’. In relation to the CTF, I consider that all of the various items listed under this category, where applicable, are contained with the audit pack that I have seen. The audit pack contains a detailed list of all transactions which have also been categorised. It also contains a detailed list of the income and outgoings. Mr Taylor has prepared and included schedules of debtors and creditors which therefore provides details of the money owed by the CTF and the money owed to the CTF along with any commitments entered into which are not yet due for settlement. Based on my own understanding of the operation of the CTF, the category of gift aid returns would not be applicable as the charity is, I believe, not registered for ‘Gift Aid’. 16.2 The next category of documents is ‘Basic Prime Records’. In relation to this, the trustees of the Charities should have the bank statements, cheque book stubs and paying in books as they relate to their accounts which they were managing at this time. If they have not got all of the required information, I would expect that they could request this from their bank. The only loans that featured on the 2018 accounts for the CTF were in relation to the Minor Lodge and Provincial Grand Lodge Investment Scheme (“the Investment Scheme”) Loans and all of the information relating to that is in the audit pack. The Charities should also have their own payroll records. Again, in relation to purchase invoices, the Charities should have these as they were managing their own financial affairs at this time. In relation to the other information listed here, such as hire purchase agreements, I appreciate that if applicable, Brays would need the information. However, based on my understanding of the situation and based on the 2018 accounts for the Charities and the accounts prepared in prior years, they will not all be applicable. 16.3 In relation to the documents listed within ‘Other records’, the founding document for the CTF is the Trust Deed which the trustees have a copy of. Details of any specific donations or legacies in relation to the CTF were included within the audit pack prepared by Mr Taylor and I assume that the same will be the case for the WMF and the JCF. With regards to funds which have constraints on their use, restricted funds were recorded on the last set of accounts and the details in relation to the CTF were included within the audit pack prepared by Mr Taylor. Again, I would assume that Mr Taylor has done the same in the relation to the audit packs for the WMF and JCF. In relation to transactions with related parties, these were recorded on the 2018 accounts and Mr Taylor has also provided the required information within the audit pack for the CTF. Schedule 2 16.4 In schedule 2, Mr Crossley states that, for audit work, ‘Full Bookkeeping records’: “A full copy of the bookkeeping records, including SAGE data, supporting spreadsheets, cashbooks, etc.” are required. It is my understanding that Mr Taylor has provided full spreadsheets from SAGE from the relevant period and offered access to SAGE at the RAOB’s office. Brays do not need all of this documentation delivered to them; all of it simply needs to be available so that they can check what transactions they need to once they have come up with their test parameters. 16.5 Schedule 2 then refers to ‘Full Prime Records’. As stated above, I would have thought that the trustees of the Charities would have these given that they were managing the financial affairs of the Charities for the year ending 2019. I am however aware that Mr Taylor has offered access to Brays to the RAOB’s offices to check these documents. Additionally, as stated above, Brays do not need all of these delivered to them; just to check the sample transactions highlighted by their audit tests. With regards to documents to prove ownership of any material assets owned by the charities, again, I would expect that these would be held or obtainable by the trustees for the Charities. Within this section, Mr Crossley also refers to the need to gain access to another organisation’s financial records. In my experience, you would never get or expect access to another organisation’s financial records as part of the exercise to prepare and audit accounts. Instead, you might just want to see evidence to back up the nature of the transaction. 16.6 The final section of documents is headed ‘Other records’. I would have thought that the Charities’ trustees would have all this information listed here as they were dealing with these matters throughout the year ended31 March 2019 .”
“20. Either within the claim or by correspondence prior to and in connection with it, Brays has requested the following information and records to date for each of the Charities: 20.1 A backup copy of SAGE: 20.1.1 Brays has requested a backup copy of the SAGE accounting system containing all bookkeeping records held in SAGE for all prior years to31 March 2019 . That backup copy contains records going back approximately six years for both the RAOB GLE and the Charities. 20.1.2 Whilst this may first appear to simply be a request for the same information as was previously given to Watson Buckle for their audit, when such information was given to Watson Buckle, it was done at a time when Watson Buckle were expected to act for RAOB GLE and the Charities in preparing accounts for the year ended31 March 2019 . When it became clear, at a late stage, that the trustees of the Charities wished to change auditors to Brays, Brays then requested a copy of the SAGE accounting system. As this contains not only the accounting records of the Charities but also a far larger volume of accounting transactions related to RAOB GLE for all years from April 2013 up to that year ending31 March 2019 ; giving Brays a copy is, in my opinion, excessive and moreover, not essential for Brays to carry their role as auditors. There are sufficient alternative means of extracting a listing of the transactions related to the charities for the year to be audited. I explain this further, and provide details of what has been provided and offered in relation to SAGE, below. 20.2 The prime accounting records: 20.2.1 The prime accounting records include all documents addressed to or from the relevant charity, purchase invoices, bank statements, paying-in-slips, income records, etc. In short, all charity-related documentation. For the audit of the year to31 March 2019 this will cover all documents that relate to transactions in that year and possibly also any documents relating to the prior year which ended on31 March 2018 . 20.2.2 Specific prime accounting records which have been identified and requested by Brays have been copied and sent across to them. The prime accounting records for each of Charities remain at the offices of RAOB GLE and it has been confirmed to Brays that they are open to inspection and copying by Brays at any time. As these paper records cover at least a seven-year period to March 2019 they are voluminous, being estimated at 6 pallets. They were offered to the Charities’ trustees for collection over a year ago, subject to an agreement to pay our reasonable costs in segregating, collating, and boxing these records. No reply in connection with this offer has yet been received 20.3 Information from Watson Buckle: 20.3.1 Information from the previous auditors, Watson Buckle, asking for certain information, including accounting schedules together with any relevant entries from SAGE. 20.3.2 I am aware that Brays have written to Watson Buckle to request this information, but I am not aware what Watson Buckle has provided to them. The RAOB GLE has no objection to Watson Buckle releasing any such information held to Brays. 20.4 The charity audit packs: 20.4.1 This request was initially made by Brays on the assumption that full audit packs had already been prepared for each of RAOB GLE and the Charities for Watson Buckle to prepare accounts for each entity and then audit those accounts for the year ended31 March 2019 . 20.4.2 That assumption was incorrect; just one combined audit pack had been prepared for Watson Buckle to use in connection with their audit. The supporting schedules in that pack contained many schedules with both RAOB GLE and Charity information. At the time of the initial Brays request the RAOB GLE information for that year was not intended to be shared because the combined audit pack contained information to which Brays were (and still are) not entitled. 20.4.3 My proposed solution was to create three separate Charity audit packs using the initial combined pack and splitting the transactions and information contained therein. This was done for the WMF and provided to Brays in February 2020 but work on the other two packs was suspended because initial feedback from Mr Walsh was that this approach was not acceptable. A copy of the audit pack for the WMF can be seen at pages 1 to 14. However, Brays requested the outstanding audit packs in February 2021 and the pack for JCF was sent in May 2021 and the (larger) final pack for the CTF in March 2022. Copies of the audit packs for the JCF and the CTF can be seen at pages 15 to 40 and 41 to 174 respectively. All three charity audit packs could have been provided a lot sooner had Mr Walsh not rejected this approach. The time taken to create these packs has been lengthy as it was done in addition to my normal duties at RAOB GLE and all packs and supporting details have been provided at no charge. 20.4.4 To confirm, these audit packs consist of a complete and balanced trial balance including all nominal accounts, a complete list of transactions which make up each of the nominal account balances for the entire year and supporting documentation (where held by the RAOB GLE) for all balance sheet items and selected income and expense items. I have confirmed to Brays that access to supporting papers is and would be available when they visit to carry out the actual audit visit (as is typically the case). 20.4.5 As offered in Louise Dodds’ witness statement dated29 July 2021 , on21 March 2022 along with the CTF audit pack, a copy of a report from the SAGE system, in Excel spreadsheet format, covering all financial transactions (including those relating to the Administration Fund) from1 April 2018 to31 March 2019 was sent to Mr Crossley. As, to date, we have received no agreement or undertaking that it will be used for the purposes of the preparation of accounts only and not be disclosed to any third party, I requested that it was not released to the Charities’ trustees. A copy of my email of 21 March attaching the CTF audit pack and spreadsheet can be seen at page 175. 20.4.6 Brays have been offered the opportunity to run the same extraction report from SAGE that was used to create the transaction list provided to Watson Buckle in their combined audit pack. Brays could therefore devise audit tests to check that the Charity transactions presented in each Charity pack are complete by reference to the combined transaction list. 20.4.7 We have also offered to Brays a report of all transactions recorded in SAGE including those relating to the Administration Fund covering the two-year period from1 April 2017 to31 March 2019 . This offer has been made subject to an undertaking that the report provided will be used only for the purpose of the charity audits for the year to31 March 2019 . No such undertaking has however yet been received. 20.5 Further documentation and information: 20.5.1 Brays has commenced work on the JCF audit and a visit to the RAOB GLE was made on26 April 2022 by Jamie Dowse-Holmes for background information and more details in relation to the JCF transactions. Following that visit a list of 16 classes of further documentation and information, some of which was general and the rest specific to the audit of the JCF charity was requested from the RAOB GLE. 20.5.2 The majority of the information and documentation requested has been provided in so far as they are relevant to the audit process. Some items have not been provided, such as a draft report prepared by KPMG some years ago but we are aware that the Charities’ Trustees are already in possession of this as it has been enclosed with previous correspondence sent to Clarion. All of these requests have been answered and I am not aware of any outstanding information requests in relation to the JCF. A schedule of the list of information requested and the information provided in response can be seen at pages 176 to 177 and 178 to 269 respectively. 20.5.3 With regard to the WMF, on26 August 2022 , Mr Dowse-Holmes wrote on behalf of Brays requesting similar supplementary information to that requested in respect of the JCF audit. Brays were not specific over exactly what information was being requested, but because the WMA and the JCF are similar charities, a response was prepared from the RAOB GLE giving similar information as that received for the JCF. The response was sent on7 October 2022 together with a request to let us know when any further audit visits were planned. To date, I have received no response to this from Brays. Copies of my emails exchanged with Mr Dowse-Holmes between August 2022 and7 October 2022 can be seen at pages 270 to 272. Copies of the documentation provided with my email of7 October 2022 can be seen at pages 274 to 300. 20.5.4 In relation to the CTF, I suspect that supplementary information may well be asked for in respect of Brays audit for the CTF but because the charity is so different from the JCF and WMF, I am unable to guess what additional questions might be asked so I am waiting until Brays actually start their audit of the CTF so that they can let me know what further questions, if any, need answering.”
“22. An audit is an inspection of the accounts and financial statements of an organisation typically by an independent body. The main role of the auditor is to provide a report on the truth and fairness of the financial statements, such a report will form part of the published annual report of that organisation. To give a ‘true and fair’ view, financial statements must not be materially misstated and must be prepared, in all material respects, in accordance with accounting standards and legal requirements. 23. To do this an auditor will build up a detailed understanding of the business so that they can highlight and assess the key areas in the financial statements most at risk of material misstatement. Using that risk assessment, they plan their evidence gathering efforts to look for (and ideally arrange correction of) any material misstatements in the accounts and financial statements. 24. Auditors will typically seek to establish who is responsible for preparing the accounts, how the books and records are maintained, what the accounting systems are and how well they are controlled. They will do this by asking questions of staff concerned and carrying out tests on individual transactions (selected either at random or high risk in nature) to determine how reliable the underlying accounting systems are. This element of audit work generally establishes how reliable the income and expenditure totals are for the year leading up to the balance sheet date. So, for expenditure such as staff salaries an auditor might check in detail the payroll records for one month and then multiply the result by twelve to see how that compares to the total for the year. If it is significantly different, then the auditor would need to see evidence why. 25. The auditors’ approach to balance sheet items is different. Balance sheet figures exist as at the year-end date and represent assets or liabilities at that date. Here the auditor must consider each asset in the context of what is represents at the balance sheet date. So, for an asset like money in the bank, they would most likely check it against a statement from the bank. For a liability such as an amount owed to a supplier, the auditor would ask to see a statement from the supplier and may also check that the supplier was paid that amount after the year end. Such audit work on balance sheet items will be focussed on those assets that are materially significant. 26. The role of an auditor is to report on the financial statements that are presented in each year. The role of an auditor is not to investigate if the financial statements for every preceding year also showed a true and fair view. In the absence of evidence to the contrary the auditor is entitled to rely on the brought forward balances from the prior year. 27. While each set of published accounts covers one year in terms of transaction totals for income and expenditure, and one balance sheet date for assets and liabilities, it also contains comparative figures for the previous year and balance sheet date. So, there should be no reason to need access to accounting records from SAGE that go back more than two years bearing in mind that each previous year of transactions and year-end balances has already been audited by an independent firm of accountants.”
“28. A draft set of accounts can be prepared from the information provided to Brays in each of the charity audit packs that they have been given. As an exercise, this has already been done by Brays for the JCF. This is apparent from Jonathan Crossley’s Witness Statement dated5 July 2021 and can be seen at pages 28 to 44 of the exhibit JC1. 29. What is not possible merely from the audit packs provided is to “audit” those draft accounts so that an audit opinion can be formed on the truth and fairness of the information presented therein. The auditors must consider if the accounts make sense in the context of what they know about the relevant entity and ensure that the accounts show a true and fair view to its readers. 30. The audit work that Brays will undertake is to obtain such further information and explanations regarding the various figures disclosed in the accounts. For example, any bank account balance as at31 March 2019 can be reconciled against the bank statement at the same date. Similarly, any investments can be agreed to third party statements of holdings. If looking at income or expenditure totals, then selected items can be checked back to any supporting documentation to show that the transaction is correctly recorded. Charity grants provided, for example, can be checked to whatever supporting paperwork is relied upon by the trustees before agreeing to make the grant. Not all the supporting paperwork will have been provided in the audit pack because to so do would be prohibitively time-consuming and the auditor is free in any case to ask for what he or she wants to see. 31. It is essentially up to the auditors to decide what tests to carry out and if there is available evidence for them to provide an opinion. The role of RAOB GLE as the previous bookkeepers for the Charities is to provide whatever relevant supporting detail is requested and that we have access to. 32. There is the question of completeness that arises because the accounting system that is used to record all normal transactions is SAGE and that system (owned by RAOB GLE) incorporates all four entities in one trial balance. An audit test will need to be devised which ensures that all transactions recorded on SAGE that belong to a specific charity can be traced through to the list of transactions in the relevant audit pack. For this purpose, the RAOB GLE have already confirmed that access will be given to the SAGE system to Brays so that all transactions entered on SAGE and dated in the year to31 March 2019 can be downloaded and used to evidence those transactions that appear on each separate charity trial balance. 33. The Charities’ trustees will also need to decide if they are happy to sign the accounts that Brays will (in time) prepare. This means that they will probably need access to any paperwork or explanations given to Brays as part of their audit. The only thing preventing this is refusal by the Charities’ trustees to date to give the agreement and undertaking requested that they will not disclose the information to third parties and the information will only be used in connection with the preparation of the Charities’ accounts. 34. To date, Brays has received more information than Watson Buckle had initially received to prepare the accounts and conduct the audit. Based on my knowledge as a chartered accountant, Brays either has, or has access to, everything needed to prepare the accounts and conduct their audit. 35. Brays appear to be suggesting that access to the full records within SAGE going back as far as possible to any prior year, in detail, is required as part of their role as auditor. However, the auditor’s duty is to report on the transactions during the year under audit and the balance sheet assets at the year end. While it is conceivable that accounting errors arising in prior years might possibly have an impact on the current balance sheet asset or liability values, until the 2019 audit is carried out, in my opinion, the cart is being put before the horse. 36. It appears to me that Brays have accepted the assertions made by their clients that the Charities’ accounts for previous years are wrong and need to be corrected before taking the opportunity to carry out the audit for the year ended31 March 2019 . However, if the figures from SAGE can be inspected in full for both years to31 March 2018 and31 March 2019 and an audit conclusion reached that the Charities’ accounts produced show a true and fair view then, without evidence, there is no reason to suppose that the accounts in prior years were incorrect. 37. I am waiting to hear from Brays what testing they wish to undertake to check the accuracy of the records already provided. Our position has moved significantly forward from that in 2020 in that unfettered access to SAGE covering the two-year period from1 April 2017 to31 March 2019 has been offered to Mr Crossley (and his colleague from Brays) at the offices of the RAOB GLE. This has been done in order try to reach a point which balances the interests of the Charities to complete an outstanding audit against the desire to protect RAOB GLE transaction information to which the Charities are not entitled. However, this offer is contingent upon an undertaking that the Charities’ trustees will not disclose this information to third parties and that it will only be used in connection with the preparation of the Charities accounts. However, no undertaking has yet been provided. The only assumption I can draw from that is that the Charity Trustees wish to use the information for the purposes of other disputes between the RAOB GLE and the CTF and this exercise is simply a fishing expedition.”
“4. I think the overarching issue is that GLE have, historically, exercised control over the charities as if GLE were the charity trustee. This has led to GLE being in possession of documents and other information which would, ordinarily, be in the possession of the trustees. Where the trustees of a charity might be more inclined to freely provide such information to the charity’s auditors, GLE are failing to fully co-operate now that they have lost control over who the auditors are. As auditors, we are required to exercise professional scepticism. With this in mind, one possible reason for GLE’s failure to fully co-operate is that they are covering something up. … 8. As I trust is clear to the court, our role requires us to be sceptical. Given the particular circumstance of this audit, with the suggestion of fraud having taken place, there is no limit on how sceptical we should be. 9. Finally, I want to make reference to the fact that we are independent auditors. We have not been engaged by the trustees to undertake a “fishing exercise”; we are engaged by the trustees to carry out an audit in line with internationally agreed standards, as overseen and regulated by our Institute (ICAEW). The trustees have engaged us, but they do not direct how we carry out our work. Our audit report is addressed to the trustees, but ultimately our work is for the benefit of all stakeholders in the charity, including donors, who want to ensure their donations are being put to good use, beneficiaries, who deserve to know the charity’s assets are being utilised well for their benefit, the Charity Commission, who must ensure the trustees are running the charity properly, and the general public, who want assurance that charities are acting appropriately and to advance their chosen good cause.”
“11. We have had some fruitful conversations with Andy Taylor, both in person and via email, and much of the information we have requested has been provided. I think it is important to note that we feel Andy Taylor has been as helpful as possible within the constraints set by his employers. However, there are some key omissions, and there remains the problematic condition attached to the provision of this information as follows: “the previous restriction that it (additional paperwork provided by Andy) should only be seen by Brays employees is lifted. Access can be given to the Charity Trustees to allow them to be in a position to satisfy themselves on signing the Charity accounts. Further disclosure to outside bodies such as the Charity Commission should be specifically requested but will not be unreasonably withheld.” 12. This condition is not workable for us; there is a high chance that, in the normal course of our work, this information will need to be shared with, amongst others, the Charity Commission, the Institute of Chartered Accountants in England and Wales, third parties engaged to undertake hot and cold audit file reviews, future charity auditors…etc. All of these organisations would be bound by the same levels of confidentiality as us, so this restriction is unnecessary. Furthermore, we cannot afford to risk statutory and regulatory non-compliance on GLE’s promise to act reasonably. As such, whilst this condition remains, we cannot complete our audit.” “the previous restriction that it (additional paperwork provided by Andy) should only be seen by Brays employees is lifted. Access can be given to the Charity Trustees to allow them to be in a position to satisfy themselves on signing the Charity accounts. Further disclosure to outside bodies such as the Charity Commission should be specifically requested but will not be unreasonably withheld.”
“13. We have had a response to all formal requests for information. Some information has been refused. One document is a copy of the internal audit report produced by Kay Colgrave – this was denied to us because it is not accepted as reliable by GLMC at the time and was not progressed or acted upon in any way. 14. If an internal audit was carried out, and a report was produced by someone within the finance function of the organisation(s) describing the internal procedures and highlighting potential weaknesses in these procedures, it would be extremely useful for the organisation’s auditor to have access to this report, particularly as the current Head of Finance was not in post for the full year of accounts making up the comparatives to the year we are auditing. The fact that the report was not accepted as reliable by GLMC is irrelevant – auditors are perfectly qualified to determine reliability for themselves. Unfortunately, Kay has passed away since preparing this report, so we are unable to speak to her about its contents directly. Other documents are: • A copy of a KPMG report regarding allegations of fraud – this was refused on the grounds it could be obtained from the trustees directly. • A copy of the previous auditor’s working papers which the Head of Finance has confirmed are in his possession – these were refused on the grounds that we should request them directly from the previous auditor. 15. A common audit approach is to obtain the same information from multiple sources, which helps to corroborate the information. This information was readily available and could have been provided without undue cost, so the only reasons to refuse would appear to be 1) something to hide or 2) a desire to be awkward. As auditors, we are required to exercise professional scepticism and must therefore assume this is because something is being hidden. This obviously increases the risk of the audit and therefore increases the detail of the testing needed. • Details of a police enquiry into allegations of fraud – the GLE’s response was that they have no separate details and the enquiry was requested by the CTF trustees.”
“23. An offer has been made by Andy Taylor to provide the charities’ prime records subject to an agreement from the trustees to pay their “reasonable costs”
“24. Ultimately, with full access to the charities’ prime records and other financial and non-financial information (as detailed in previous witness statements) we do not strictly speaking need Sage to complete the work. It is important to note that some of these records and some of this information is currently being withheld as noted above. It is also important to note that full information might include what GLE considers to be GLE records. If, because of the way the records have been maintained, we need access to GLE records in order to obtain charity information, this access will, unfortunately, be required. 25. Although, subject to full provision of other information, access to the Sage data is not strictly necessary, it would certainly make the audit engagement more straight forward and less costly. GLE have offered supervised, on-site access to Sage. Whilst this is better than no access, it is not ideal; a copy of the Sage data would allow us to review transactions to our own timetable, without making an appointment and without the pressure of time limits. We would be able to work on the audit at our discretion and use Sage to quickly answer any ad-hoc, unexpected queries within 5 minutes of them arising. The current offer would involve making an appointment and waiting for a mutually convenient date and time to visit the GLE office for 5 minutes of work, which would result in increased costs and further delay. 26. Furthermore, the offer of supervised access introduces an intimidation threat to our independence. The ICAEW code of ethics identifies various threats to an auditor’s independence, one of which is intimidation. It does not matter whether intimidation is actual or perceived if it affects the work of the auditor. The code of ethics defines an intimidation threat as follows: • the threat that a professional accountant will be deterred from acting objectively because of actual or perceived pressures, including attempts to exercise undue influence over the accountant 27. It is clear that an individual auditor may feel intimidated attending the office of an apparently hostile organisation to work under their supervision. Faced with this situation, the individual may feel it necessary to cut corners or not exercise sufficient professional scepticism. If this situation can be avoided to protect the independence of the audit then it should be. It is fair to say that those representing GLE are trying to influence how our audit is carried out, and they are quite insistent that our work is undertaken on their premises. 28. The main objection from GLE is that the Sage data contains transactional information that we should not have access to. This information is only there because GLE chose to store it in the same place as the charity information. Furthermore, and as noted in previous witness statements, we may actually need access to this information in order to complete our audit because of the way charity transactions were routed through the GLE bank account. Ultimately we are required to keep such information confidential, so the GLE argument is superfluous. 29. In exercising our professional scepticism, we must ask why GLE are creating this obstacle, and one possible conclusion is that there is something to cover up.”
“Trust documents do, however, have these characteristics in common: (l) They are documents in the possession of the trustees as trustees; (2) they contain information about the trust which the beneficiaries are entitled to know; (3) the beneficiaries have a proprietary interest in the documents and, accordingly, are entitled to see them. If any parts of a document contain information which the beneficiaries are not entitled to know, I doubt whether such parts can truly be said to be integral parts of a trust document. Accordingly, any part of a document that lacked the second characteristic to which I have referred would automatically be excluded from the document in its character as a trust document.”
“45. The House of Lords [in O’Rourke v Darbishire[1920] AC 581 ] dismissed Mr O'Rourke's appeal, primarily because he had not made out even a prima facie case that the will and codicils were invalid, or that the communications had been promoting fraud. Viscount Finlay (at p 603) referred to Mr O'Rourke's reliance on a “proprietary right” and Lord Sumner (at p 617) referred to “what has been called the ‘proprietary’ ground”
“In general, information is not property at all. It is normally open to all who have eyes to read and ears to hear. The true test is to determine in what circumstances the information has been acquired. If it has been acquired in such circumstances that it would be a breach of confidence to disclose it to another then Courts of Equity will restrain the recipient from communicating it to another. In such cases such confidential information is often and for many years has been described as the property of the donor, the books of authority are full of such references; knowledge of secret processes, "know-how", confidential information as to the prospects of a company or of someone's intention or the expected results of some horse race based on stable or other confidential information. But in the end the real truth is that it is not property in any normal sense but Equity will restrain its transmission to another if in breach of some confidential relationship.”
“General 64.1 (1) This Part contains rules – (a) in Section I, about claims relating to – (i) the administration of estates of deceased persons, and (ii) trusts; and (b) in Section II, about charity proceedings. (2) In this Part and Practice Directions 64A and 64B, where appropriate, references to trustees include executors and administrators. (3) All proceedings in the High Court to which this Part applies must be brought in the Chancery Division. ICLAIMS RELATING TO THE ADMINISTRATION OF ESTATES AND TRUSTS Scope of this Section 64.2 … IICHARITY PROCEEDINGS Scope of this Section and interpretation 64.5 (1) This Section applies to charity proceedings. (2) In this Section – (a) ‘the Act’ means theCharities Act 1993 ; (b) ‘charity proceedings’ has the same meaning as insection 33(8) of the Act ; and (c) ‘the Commissioners’ means the Charity Commissioners for England and Wales”
“24. Ultimately, with full access to the charities’ prime records and other financial and non-financial information (as detailed in previous witness statements) we do not strictly speaking need Sage to complete the work … 25. Although, subject to full provision of other information, access to the Sage data is not strictly necessary, it would certainly make the audit engagement more straight forward and less costly.”
“30. It is clear that, to understand and test the systems and controls within an organisation accurately, wide access beyond the prime and bookkeeping records is required. This is also the case when reviewing statements made in the Trustees’ Report and any notes to the accounts, for which access to meeting minutes and correspondence may be required. 31. Given the wide scope of an audit, it is impossible to give a comprehensive list of the information required, as the list can vary significantly from one audit to the next – and can change dependent on what is discovered in the prime and bookkeeping records. However, it is certain that both the prime records and the bookkeeping records would be required as a bare minimum, and it is fair to say that, provided an auditor can demonstrate how the information might be linked to the accounts, they should have access to all of the organisation’s records.”