Most Not-for-Profit Entities are registered with the ACNC, which then, in addition to the rules of each entity, prescribes the audit requirements for the entities.
An association may still require an audit to be carried out and this requisite would normally be specified in the rules. It is within the power of the members to pass a resolution that the accounts for a particular financial year be audited, especially if they had any reason to be concerned. Funding body agreements might also require the association’s accounts to be audited to ensure that the funds provided are used according to the funding agreement and for the purpose stated in the agreement.
The ACNC audit requirement is based on the turnover of each entity and it’s classification as small, medium or large.
- Tier 1: less than $250,000 in revenue.
A tier 1 association is not required to complete an audit or review of its accounts unless:
- it is a requirement of the association’s rules that one be completed;
- it is a requirement under the terms of the association’s funding agreement or licence;
- the majority of members at a general meeting pass a resolution that an audit will be completed; or
- the association is directed to do so by the Commissioner.
- Tier 2: $250,000 to $1,000,000 in revenue.
All Tier 2 associations must have their financial reports reviewed. The process of reviewing an association’s accounts is not as detailed as the process of completing an audit. A reviewer will look over the association’s financial report and provide a statement whether anything has come to their attention which might suggest that the association’s report does not comply with the requirements of the Act. In comparison, an auditor must collect evidence relating to the association’s financial records and transactions to satisfy themselves that the report is a true and correct reflection of the association’s finances. This enables them to provide a formal opinion whether the accounts meet the relevant legal requirements.
- Tier 3: over $1,000,000 in revenue.
The Act requires all Tier 3 associations to ensure that their annual financial report is audited and a copy of the audit report is presented to the members at each annual general meeting.
Reasons for auditing
Although it may seem like additional time, effort and expense to have an annual audit, there are a number of reasons why an association (or a funding body) would require records to be audited:
- an audit of the financial records of the association ensures greater accountability to the members (and for some associations, the public);
- the audit gives assurance that all funds received by the organisation have been correctly collected, documented and banked. It shows all monies spent by the organisation were for the purpose of the association, approved by the management committee, and documented. This also helps to protect management committee members against unfounded allegations of misconduct;
- the audit provides an account of the assets of the association and verifies that records and registers are properly maintained;
- the audit functions as a check and balance. It requires that the financial statements of the association be kept to a standard in order for the audit to occur and will indicate areas that may require improvement;
- audited financial statements are required if the association has charitable status; and
- funding bodies often require audited financial statements.
Our Audit and Review Services
At AMW, we have over 40 years of experience in auditing Not-for-Profit Entities. We audit anything from very small entities to large corporate entities with a nationwide footprint.
Depending on the size of the audit and the number of transactions, the audit can be performed either at your place of business or our offices via email or courier. All these factors will impact on the audit fee quote which is based on the number of hours likely to be spent by various levels of staff.
We can assist you in change of auditor request forms to ensure the process goes smoothly.