FAQ

| Frequently Asked Questions

What financial reporting standards should we apply for our annual financial statements?

The Public Benefit Entity (PBE) financial reporting that are mandatory standards for charities since 2015. If your organisation is a charity then we’d recommend you visiting the External Reporting Board (XRB) web site, and their FAQ section, as referenced below. If you are a not for profit, i.e. sports club, but not a registered charity, then you currently have a choice of preparing special purpose financial statements under the for profit framework, or adopting the PBE reporting. Please note that while it is currently not mandatory for a non-charity not for profit to adopt the new PBE reporting standards, there will be a time when this will be needed. Below is a table of the new PBE financial reporting framework, and minimum statutory requirements:

The External Reporting Board (XRB) has recently announced changes to the threshold size of the reporting sized. The changes come into effect for reporting periods ending on or after 28 March 2024:

TIER	SIZE OF ORGANIZATION	ASSURANCE REQUIREMENTS	BASIS OF PREPARATION
2	PBE with annual expenditure greater than $5 mil, less than $30 mil.	Required to be Audited	NZ,International Public Sector Accounting Standard [NZIPSAS] with RDR
3	PBE with annual expenditure greater than $1 mil, and less than $5 mil	Required to be Audited	Tier 3 (NFP) standard
3	PBE with annual expenditure greater than $500,000, and less than $1 mil	Can choose an Audit or Review	Tier 3 (NFP) standard
3	PBE with annual expenditure greater than $125,000 and less than $500,000	No Audit or Review requirements	Tier 3 (NFP) standard
4	PBE with annual expenditure less than $125,000 p.a.	No Audit or Review requirements	PBE Simple Format Reporting cash accounting

For tier 3 entities, the Tier 3 (NFP) applies to accounting periods begin on or after 1^st April 2024. Early adoption is permitted for accounting periods that ends after 15 June 2023.

What financial reporting standards should you apply for your annual financial statements, if you have more than $5 mil of annual expenditure?

As per the table above, you are required to report as a tier 2 PBE.

How can you minimize your auditing cost?

The time and cost of auditing is dependent on not only the size and complexity of the organisation’s financial systems, but also the extent of the evidence of management oversight of key reporting, and the accounting control environment on significant transaction streams. We take a risk based approach to auditing and assess if the management oversight is good, and the accounting control environment is one in which errors and omissions would be detected by a number of people. Thus, if the audit risk assessment is low, then the audit time can be reduced, as low risk audits means less audit evidence is required to gain the assurances needed.

How long does an Audit or Review take?

About 6 weeks. For an audit, the time delay can depend on how long it takes to get the confirmation of bank balances, loans, outstanding debtor balances, or other communications where we consider that the information is relevant to the financial statements.

You are a small organisation and have not been reviewed or audited for years, is it necessary?

As noted in the above table, tier 3 organisations below $500,000 expenditure and tier 4 do not need external assurances on their performance reporting. However, other aspects such as funders, membership, or deeds of incorporation may request or stipulate some assurances on performance reporting. Audits and reviews may be undertaken as and when required, or deeds of incorporation updated to reflect the current environment. Our first year assurance work will often have a qualification with respect to the opening balances that have not been audited or reviewed.

Your Trust Deed / Constitution requires an audit, the total expenditure is below $1mil, can you elect not to have an audit?

The members can be advised of a motion to change the deed requiring that an external assurance on Performance Report be done as required by the management, statute, or by the members at any special meeting. Please ensure that you understand the clauses in the deed or constitution around the amending process, and consult a legal representative, if professional guidance is needed.

You have your accounts prepared by a Chartered Accountant, will the audit or review fee be less?

Yes. Audit and review fees can be reduced because of the time saved when properly constructed and reconciled financial reports are presented for audit or review. Also, the accountant will provide a file showing how they have reconciled key balances, thus showing some integrity of the accounting systems, and accuracy of some figures reported in the financial statements.

If you are a large Charity who issues Debentures or an Investment Prospectus to the public, can we help?

We are not registered auditors of issuers and these audits are outside our scope of audit work.

Is it acceptable for your Treasurer to do everything?

Reliance on one person for all the accounting processing, receipting, and payments does give rise to more auditing work because the risk of errors or omissions are higher. These risks can be minimized if the organization’s governance, receive monthly financial reports showing the actual compared to budget, and a list of payments made.

| Frequently Asked Questions

What financial reporting standards should we apply for our annual financial statements?

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