Questions from the EG Au9 Webinar

Please recap the assurance requirements for registered charities with operating expenditure under $500K.

Do I have to be a qualified auditor to audit or review a registered charity’s (whose operating expenditure is under $500K) Performance report?

Not necessarily. Registered Charities with total operating expenditure of less than $500,000 are not required by law to have an audit or review. However, they may be required by their rules (e.g. trust deed, constitution, or charter) or as a condition of receiving a grant to have their financial statements audited or reviewed. These rules or external assurance requirements may or may not stipulate who can perform the engagement. If the rules or assurance requirements are silent as to who can perform the engagement, then anyone is able to perform the work.

Also please confirm XRB financial reporting standards still apply in the under threshold levels?

All registered charities will need to prepare financial statements in line with the appropriate XRB financial reporting standard that applies based on the size of the entity.

So, registered charities with operating expenditure under $500K will report using either the tier 3 or tier 4 standard, depending on which one is applicable.

If the smaller registered charity opts for an audit or a review (i.e. is under the $500K threshold) does the statement of service performance have to be audited?

Again it depends. The demand for assurance is not established by law below this level, rather the assurance is demanded for another reason – either members still demand it, funders demand it etc.

The request for assurance by the charity will determine what is within the scope of the audit or review. This may be an audit of one element of the performance report, for example over the bank balance, or assurance as to whether grant monies have been spent in accordance with the specifications of the grantor. Under the $500K threshold, the demand for assurance will establish whether the whole performance report, including the statement of service performance needs to be covered or just one aspect of it.

If a registered charity is required to have an audit or a review (I.e. in the $500k - $1million operating expenditure bracket) does the review have to cover the statement of service performance?

Yes. There is a statutory requirement for the charity to have its performance report reviewed, and this includes all elements of the performance report, including the statement of service performance.

If an entity falls in the category 500k to 1m and can choose between an audit and a review - can they also decide if the SSP are included if they choose an audit?

No. As above – there is a statutory requirement for the charity in this bracket to have its performance report audited or reviewed. All elements of the performance report (i.e. the financials, the entity information and the Statement of service performance) are subject to those statutory assurance requirements.

Is there any requirement for comparatives with prior year?

Paragraph A17 of the tier 3 standard requires that comparative information be prepared. There are transitional provisions which allow exemptions, including in the first year of preparation.

Do we need to consider comparatives in SOSP, this year?

The transitional provisions in Appendix B of the accounting standard provide an exemption for the preparation of comparative information in the first year.

Where can we find the illustrations stated in slide 25?

The decision tree is found on page 4 of EG Au9.

I note that the OAG include the audit of SSPs as part of the audit, rather than as a separate ISAE 3000 engagement.

The OAG’s auditing standards have been amended such that all references to financial statements are taken to include the statement of service performance. Therefore auditors that follow the OAGs standards do not need to apply ISAE (NZ) 3000 (Revised) as this information is covered by the OAG’s auditing standards.

The report illustration in the appendix of the EG appears to be a complete report just on performance. Is it the intention that the auditor/reviewer will deliver two separate reports; one on the financials and one on the SSP?

No. The Performance Report comprises the traditional financial statement elements, together with the entity information and the statement of service performance. The illustrations at the back cover all three elements of the performance report in one report, so the illustrations are not meant to imply that the auditor/reviewer would provide two separate reports. The guidance stresses the importance of a concurrent approach and the report illustrated is one report over all aspects included in the performance report.

Do clients have to have target outputs to measure against actual?

No. The outputs reported will be selected by the entity. There is no requirement to report target information against actual but an entity may choose to do so.