Posted 9 months ago
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Wondering how to audit service performance information?

  • Auditing

Misha Pieters

Misha Pieters of the XRB Assurance Standards team has put together this useful digest to highlight what you need to keep in mind when auditing service performance information.


Reporting service performance information (SPI) is well established across the New Zealand public sector, but the requirement to report information about why an entity exists, what it hopes to achieve and what it has done towards its objectives is new, particularly for registered charities.

Tier 3 and Tier 4 charities have been required to do this since April 2015.  Users have welcomed this change, as it provides more relevant and meaningful information.  Tier 1 and Tier 2 charities will be required to report SPI for the first time for financial reporting periods beginning on or after 1 January 2021, but of course can elect to do so before then.

The NZAuASB has just approved a new standard, New Zealand Auditing Standard (NZ AS) 1 The Audit of Service Performance Information.

You will need to apply NZ AS 1 if you’re engaged to audit general purpose financial statements that include SPI from 2021.  This start date aligns it with the effective date of PBE FRS 48 Service Performance Reporting.  Early adoption is permitted—especially if you have already been engaged to audit SPI.

NZ AS 1 adopts a two-step approach. 

As auditors, Step 1 requires you to evaluate the “suitability of the service performance criteria”,  i.e., evaluate whether the information selected to be reported on and the performance measures or descriptions used to evaluate that performance are relevant, complete, reliable, neutral and understandable.  These may not necessarily be the same as the measures that are easiest to measure nor result from cherry picking measures or descriptions that tell only the good news stories.

NZ AS 1 also makes it clear that it is the responsibility of those charged with governance to select what information to report on and if and how to measure or describe that performance. 

However, this flexibility elevates the risk of preparer bias.

In order to enhance the credibility of the SPI, as an auditor, you have a role to play to evaluate whether the reported information meets the requirements in the relevant accounting standard and whether the entity has used suitable criteria.

It is important to raise any concerns you, as auditor, may have as early as possible about what information the entity has selected to report on or how to measure that performance, to enable your clients to make changes.

If you consider that the criteria are suitable, then you would continue to Step 2—perform procedures on the reported information to test whether there is a material misstatement in the information. 

NZ AS 1 provides some guidance to assist you to develop materiality levels and factors, given that performance measures may not have the same unit of account and may be qualitative instead of quantitative.

To help further, NZ AS 1 provides you with illustrative examples of what an auditor’s report will look like when auditing a general purpose financial report that includes SPI.

The NZAuASB’s next project will be to look to develop a review engagement standard for when you are engaged to review a financial report that includes SPI.

In the meantime, you could refer to EG Au9 Guidance on the Audit or Review of the Performance Report of Tier 3 Not-For-Profit Public Benefit Entities.

Also, watch out for guidance from the NZASB to assist those who are about to prepare SPI for the first time, especially those tier 2 charities. 

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