What is an audit?

An audit is an independent review of an organization’s financial statements and internal controls. It is conducted by a qualified auditor to provide an opinion on the accuracy and completeness of the financial information presented.

Why is audit important for charitable trusts?

Charitable trusts rely on donations and grants to fund their operations. Donors and grantors want to ensure that their contributions are being used effectively and efficiently. An audit provides assurance that the financial statements are accurate and reliable and that the organization is using its resources appropriately.

What are the consequences of noncompliance?

Noncompliance with audit requirements can result in penalties, fines, and reputational damage. It can also lead to a loss of donor and grantor confidence, which can have a significant impact on the organization’s ability to raise funds.

Preparing for the Audit: Points to Consider

Understanding the audit process

The audit process typically involves several stages, including planning, fieldwork, and reporting. It is important to understand the timeline and requirements for each stage to ensure a smooth audit process.

Identifying the auditor

Charitable trusts should engage a qualified auditor who is registered with Chartered Accountants Australia and New Zealand (CAANZ) or the New Zealand Institute of Chartered Accountants (NZICA). The auditor should have experience working with charitable trusts and be familiar with the accounting and auditing standards applicable to these organizations.

Preparing the audit plan

The audit plan should outline the scope of the audit, the objectives, and the procedures to be performed. It should also identify any potential risks or areas of concern that may require additional attention.

Gathering necessary documents

Charitable trusts should gather all relevant financial documents, including bank statements, invoices, and receipts. They should also ensure that their account details are up-to-date and accessible online.

Conducting the Audit

Reviewing financial statements

The auditor will review the financial statements to ensure that they are accurate and complete. They will also assess the organization’s accounting policies and procedures to ensure compliance with accounting standards.

Testing internal controls

The auditor will test the organization’s internal controls to ensure that they are effective in preventing and detecting fraud and errors. This may include testing the segregation of duties, reviewing access controls, and testing the effectiveness of the organization’s risk management processes.

Assessing compliance with regulatory requirements

The auditor will assess the organization’s compliance with regulatory requirements, including the Charities Act 2005 and the accounting and auditing standards applicable to charitable trusts.

Identifying areas of improvement

The auditor will identify any areas of improvement or recommendations for the organization to enhance its financial management processes.

Addressing Audit Findings

Understanding the audit report

The audit report will provide an opinion on the accuracy and completeness of the financial statements and internal controls. It may also include recommendations for improvement.

Addressing any issues or concerns

Charitable trusts should address any issues or concerns raised in the audit report promptly. This may involve implementing new policies or procedures or making changes to existing ones.

Developing an action plan for improvement

Charitable trusts should develop an action plan to address any recommendations for improvement identified in the audit report. This plan should include timelines, responsibilities, and measurable outcomes.

Maintaining Compliance with Regulatory Standards

Understanding the audit limit for charitable trusts

Charitable trusts with annual operating expenditures of less than $500,000 are not required to have an audit. However, they must still file an annual return with Charities Services that includes financial statements.

Staying up-to-date with regulatory changes

Charitable trusts should stay up-to-date with any changes to the Charities Act 2005 and the accounting and auditing standards applicable to charitable trusts.

Implementing best practices for ongoing compliance

Charitable trusts should implement best practices for ongoing compliance, including maintaining accurate and complete financial records, implementing effective internal controls, and engaging a qualified auditor on a regular basis.

Conclusion

In conclusion, conducting a successful audit of charitable trusts in New Zealand requires careful planning, preparation, and execution. By following the tips and best practices outlined in this guide, charitable trusts can ensure a smooth audit process and maintain compliance with regulatory standards. Remember to engage a qualified auditor, gather all necessary documents, and address any issues or concerns raised in the audit report promptly. With these steps in place, charitable trusts can continue to fulfill their important mission of serving their communities and making a positive impact.