For small charities, it is optional to submit a financial report in the Annual Information Statement, so there is no ACNC requirement for a small charity to have its financial report reviewed or audited. Show However, we encourage small charities to submit a financial report as part of the Annual Information Statement. If a small charity's governing document requires it to submit financial statements, it must do so. Medium charityMedium-sized charities can have their financial report reviewed or audited. The reviewer’s or auditor’s report must be submitted as part of the financial report in the Annual Information Statement. The audit or review must be conducted by:
A review may also be conducted by a current member of a relevant professional body (CPA, CAANZ or IPA) who is qualified to undertake a review (in line with the Corporations Act 2001). Large charityLarge charities must have their financial report audited. The auditor's report must be submitted as part of the financial report in the Annual Information Statement. The audit must be conducted by:
Note that these are the ACNC's requirements for financial reports. There may be specific requirements for financial reports from other regulators, agencies or even a charity’s own governing document. It is important to consider other requirements when preparing a charity's financial report. See our guidance for charities preparing annual financial reports. When having a financial report reviewed or audited, it is important to remember the principle of independence. A review or an audit requires the reviewer or auditor to provide the charity with a signed written independence declaration. The Accounting Professional and Ethical Standards Board issues the Code of Ethics for Professional Accountants and this covers requirements for service providers to act, and to be seen to act, with independence and integrity. The Auditing Standards ASA 210, 700, and 800 include requirements for an auditor in considering the financial reporting framework adopted by a charity at different stages throughout an audit process. The auditor’s responsibilities start as a precondition to accepting the audit engagement, and encompass:
See our guidance about General and Special Purpose Financial Statements for more information. Deciding on a review or auditYou can use this table to help you decide whether to have your charity’s financial report reviewed or audited. Remember that if your charity is a large charity, the financial report must be audited. Please note that the points below are only a guide and not intended to capture all circumstances. Your charity should make a decision based on its situation, and seek professional advice if you are unsure. ReviewAuditPositives
Negatives
Review of financial reportsDownload a reviewer’s report template. This template is designed for use by auditors and developed with the assistance of the Australian Auditing and Assurance Standards Board (AuASB). What a review includesA review of your charity’s financial report 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 evaluates whether your charity:
As part of your review, you only need to reference the Australian Charities and Not-for-profits Commission Act 2012 and the Australian Charities and Not-for-profits Commission Regulation 2013. Do not reference the Corporations Act 2001. Level of assuranceA review only provides limited assurance (comfort). The reviewer states that they do not know of anything to suggest your charity’s financial report is non-compliant. A review is a lower level of assurance than an audit. An audit is a direct opinion as to whether your charity’s financial report meets the requirements of the ACNC Act. Review processA reviewer will look at your charity’s financial statements and accounts but in less detail than an audit. A reviewer will speak to your charity’s staff, including those responsible for finance and accounting. Reviews for medium sized charities can be done by:
Reviewer’s reportUnder the ACNC Act, a reviewer’s report must:
The reviewer’s report generally also includes:
Reviewer’s independence declarationYou must get a signed written declaration from the reviewer of your charity’s financial report that states that to the best of the reviewer’s knowledge and belief that:
Audit of financial reportsDownload an auditor’s report template. These templates are designed for use by auditors and were developed with the assistance of the Australian Auditing and Assurance Standards Board (AuASB). Definition of auditAn audit of your charity’s financial report provides an auditor’s opinion as to whether the report:
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:
Level of assuranceAn audit provides more assurance (comfort) than a review. Unlike in a review, an auditor must collect evidence to allow them to give a direct reasonable assurance opinion that is positively stated, namely that your charity’s financial report meets the requirements of the ACNC Act. Audit processAn auditor’s process is more detailed than a reviewer’s, and involves additional procedures to enable them to provide an opinion of reasonable assurance in relation to your charity’s financial statements and accounts. You only need to reference the Australian Charities and Not-for-profits Commission Act 2012 and the Australian Charities and Not-for-profits Commission Regulation 2013. Do not reference the Corporations Act 2001. Who can do an auditAudits can be done by:
Auditor’s reportUnder the ACNC Act, an auditor’s report must:
The auditor’s report generally includes:
Auditor’s independence declarationYour charity must get a signed written declaration from your auditor that states that to the best of the auditor’s knowledge and belief that:
Modified review and audit reportsIf the financial report fully complies with the ACNC requirements the review or audit report will be ‘unmodified’. An review or audit report may be ‘modified’ if the auditor believes that the charity’s financial report contains material misstatements or if the auditor has been unable to obtain evidence to form an opinion. There are three types of review or audit report modifications:
The review or audit report will clearly state if it is modified, and will also include additional text explaining the basis for the modification, here is an example of the ‘basis for qualified opinion’ text for a more common type of qualified audit opinion. Basis for qualified opinion The charity has determined that it is impracticable to maintain an effective system of internal control over the collection of cash donations until their initial entry into its financial records. Accordingly, our audit on the charity’s income was limited to the amounts recorded in the financial records. We are therefore unable to express an opinion whether the revenue including cash donations is complete. What are the 3 main types of audits?There are three main types of audits: external audits, internal audits, and Internal Revenue Service (IRS) audits. External audits are commonly performed by Certified Public Accounting (CPA) firms and result in an auditor's opinion which is included in the audit report.
What are the 4 types of audits?They include:. Clean Report or Unqualified Opinion.. Qualified Report or Qualified Opinion.. Disclaimer Report or Disclaimer of Opinion.. Adverse Audit Report or Adverse Opinion.. What are the 5 stages of an audit?Key points. Audit measures practice against performance.. The audit cycle involves five stages: preparing for audit; selecting criteria; measuring performance level; making improvements; sustaining improvements.. What are the 4 types of audit risk?Types Of Audit Risks. Meaning and Definition Of Audit Risks. ... . Types of Audit Risks. ... . Inherent Risk. ... . Detection Risk. ... . Control Risk.. |