Auditing is the process of independently reviewing and checking that the year-end financial statements reflect a true and fair view of the financial activities of the year. If accounts are audited accounts, this means that the financial records have been checked by a chartered accountant as being a true and correct record of the financial operations and position of your organisation.
Anyone can audit your accounts, but if you want an Auditor’s Declaration signed then that person must be registered with the Institute of Chartered Accountants. The Institute will be able to help you find an auditor.
The auditor will need to review:
- the cash and petty-cash books
- bank statements
- suppliers invoices (in order as paid)
- cheque butts
- receipts
- bank pay-in books
- amounts owed to the organisation (e.g. outstanding user fees)
- lists of amounts owing
- list of any equipment purchased and when
- the previous year’s accounts and audit file.
Statutory audit and review requirements
If a charity’s total operating expenditure for each of the previous two accounting periods was:
- over $500,000 (medium) – financial statements must be either audited or reviewed by a qualified auditor
- over $1 million (large) – financial statements must be audited by a qualified auditor
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.
Both an audit and a review require financial statements to be prepared in full compliance with Generally Accepted Accounting Principles (GAAP). For Registered Charities, compliance with the financial standards issued by the External Reporting Board (XRB) is considered compliance with GAAP. For those charities using the Tier 3 reporting standards, their non-financial information will be included in an audit or review. Click here to find out more.