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Audit & Review requirements for Charities

//Audit & Review requirements for Charities

Audit & Review requirements for Charities

Audit & Review requirements for Charities:

If you are running a charity or an organisation meant not for profit, you may be required to have the financial reports audited or reviewed as per ACNC regulations. From 2014 onwards, all large charities must have their Accounts audited while Medium charities have the option of Audit or review.

A Medium charity, if required by a funding agreement or is in receipt of a written notice from ACNC commissioner where such notice asks to have the financial statements to be audited, must have get the financial statements Audited instead of a Review.

Audit or Review – What to choose

A Review as compared to an Audit is generally cheaper, takes less time and it is easier to find a Reviewer than an Auditor especially in remote areas. But Review does not give a high level of assurance as it does not go into a deep examination and meticulous scrutiny of financial reports.

An Audit on the other hand is more known for a high level of assurance and high level of examination of records and evidences. However, as stated earlier an Audit may cost more and more time consuming as opposed to a Review, and sometimes Auditors are hard to find in far flung areas or in regional parts.

A decision about what to choose shall ultimately lie on the nature, size of the charity. The price and geographical location are the other important factors.

 WHAT IS REVIEW?

A review is conducted by a reviewer. The reviewer states whether there is, or is not anything that has come to their attention that causes them to believe the financial report does not meet the requirements of the ACNC Act (in all material aspects).

A review also states whether your charity:

  • provided all information, explanation and assistance needed to conduct the review
  • kept good financial records so a financial report could be prepared and reviewed
  • kept other records as required under the ACNC Act.

Who can do a review?

Reviews can be done by:

  • a registered company auditor
  • an audit firm
  • an authorised audit company
  • a current member of a relevant professional body (such as a member of the CPA Australia – CPAA, Institute of Chartered Accountants Australia – ICAA or Institute of Public Accountants – IPA).

 Reviewer’s report

A reviewer’s report must:

  • state whether anything has come to their attention that causes them to believe your charity’s financial report does not meet the requirements of the ACNC Act. If the reviewer believes the report does not meet the Act, they must:
    • explain why
    • where possible, quantify the effect of this on your charity’s financial report or if it is not possible to quantify to explain why
  • describe any material defect or irregularity in the financial report
  • state any problems in the assistance they received from the charity when conducting the review, or any issues with the records kept by the charity as identified above, and
  • include any statements or disclosures required by the auditing standards.

The reviewer’s report generally also includes the following:

  • a title stating that it is an independent review report, and who it is addressed to, for example, the members of the charity
  • an introduction covering the basics of the engagement and what has been reviewed
  • a section outlining the governing body’s responsibility for the financial report
  • a section outlining the reviewer’s responsibilities
  • a conclusion of the review
  • if it applies, a section outlining reporting responsibilities to other government agencies
  • the date of the report, and
  • the reviewer’s signature and address.

 Reviewer’s independence declaration

A Reviewer must issue a signed written declaration of your charity’s financial report stating that to the best of the reviewer’s knowledge and belief that:

  • there have been no contraventions of any applicable code of professional conduct in respect of the review, or
  • the only contraventions of any applicable code of professional conduct in respect of the review are those explained in the declaration.

WHAT IS AN AUDIT?

An audit of your charity’s financial report provides an auditor’s opinion as to whether the report:

  • has been prepared correctly under the ACNC Act
  • represents a true and fair view of the charity’s financial position (its net wealth) and performance (how it has gone)
  • meets all applicable Australian Accounting Standards.

An audit aims to identify material misstatements in the financial report, including those resulting from fraud. The auditor will also obtain sufficient and appropriate evidence to evaluate whether your charity:

  • provided all information, explanation and assistance needed to conduct the audit
  • kept good financial records so a financial report could be prepared and audited, and
  • kept other records as required under the ACNC Act.

Who can do an Audit?

Audits can only be done by:

  • a registered company auditor
  • an audit firm
  • an authorised audit company.

Auditor’s report

An auditor’s report must:

  • state whether in the auditor’s opinion your charity’s financial report has been prepared correctly under the ACNC Act. If the auditor believes that your charity’s financial report does not meet the requirements of the ACNC Act, they must:
    • explain why
    • where possible, quantify the effect of this on your charity’s financial report or if it is not possible to quantify to explain why.
  • describe any material defect or irregularity in the financial report
  • state any problems in the assistance they received from the charity when conducting the audit, or any issues with the records kept by the charity as identified above, and
  • include any statements or disclosures required by the auditing standards.

The auditor’s report generally includes the following:

  • a title stating that it is an independent audit report, and who it is addressed to – for example, the members of the charity
  • an introduction covering the basics of the engagement and what has been audited
  • a section outlining the governing body’s responsibility for the financial report
  • a section outlining the auditor’s responsibilities
  • the auditor’s opinion of the audit
  • if applicable, a section outlining other reporting responsibilities to other government agencies
  • the date of report, and
  • the auditor’s signature and address.

Auditor’s independence declaration

Your charity must get a signed written declaration from your auditor that states that to the best of the auditor’s knowledge and belief that:

  • there has been no contraventions of any applicable code of professional conduct in respect of the audit, or
  • the only contraventions of any applicable code of professional conduct in respect of the audit are those detailed in the declaration.

 

 

By | 2016-10-12T23:45:46+00:00 February 17th, 2016|Categories: Assurance|Tags: , |0 Comments

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