REVIEWING AND AUDITING OF FINANCIAL REPORTS - CHARITIES

The requirement for a reviewed or audited annual financial report depends on the size of a charity.

Small charity

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.

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 charity

Medium-sized charities must have their financial report either 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 registered company auditor (as defined by the Corporations Act 2001)

• an audit firm, or

• an authorised audit company.

  
  

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 charity

Large 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:

• a registered company auditor (as defined by the Corporations Act 2001)

• an audit firm, or

• an authorised audit company.

  
  

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.

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:

• determining whether the financial reporting framework is acceptable,

• evaluating whether the financial report adequately refers to or describes the financial reporting framework, and

• including relevant reporting in the audit report if the financial reporting framework is a special purpose framework.

  
  

Deciding on a review or audit

You 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.

	Review	Audit
Positives	Generally cheaper than an audit Takes less time Easier to find a reviewer than auditor (especially in regional areas)	Higher level of assurance – opinion that your charity meets requirements, based on identifying any financial reporting issues Higher level of examination of the charity’s financial report based on more detail and evidence
Negatives	Lower level of assurance – less likely than an audit to identify financial reporting issues Lower level of examination of charity’s financial report	Can cost more money Can take more time Can be harder to find an auditor

Contact us today to stay compliant www.charitycompliance.com.au/contact