Audit of Not for Profit organizations
Not for Profit organizations can be summarized as organizations that are formed for specific not for profit purpose and do not operate for profit or for the benefit of its members or any other specific group of people.
Not-for-profits work towards particular objectives that are clearly stated on its constitution. All the profit earned is either retained for a specific purpose or re-invested towards the not for profit’s objectives. Not-for-profit organizations like every other business setups are required to be registered with Australian government. Most common structures used are a company, incorporated association or even a trust.
The Not-for-profit sector had very less regulations previously which indicated threat of fraudulent activities and the misuse of funds raised for specific purpose other than profit. As a result the ACNC as a precaution has indicated significant changes for financial reporting and auditing requirements for not-for profits.
Audit is an effective measure to review all aspects of an entity including performance, meeting with compliance requirements and outcomes of any entity. Audit helps check whether an entity is being operated according to rules and regulations right from preparation of accounts till reporting to ACNC. Financial reporting and auditing requirements are listed by ACNC accordingly for different types of entities. Reporting obligations vary based on the legal structure as well as turnover limits. With a certain turnover limit, ACNC allows review to be carried out instead of an audit. Audit of not for profits can be carried out by a Registered Company Auditor or any Authorized auditor or any firm with an ordinarily resident member who is a Registered Company Auditor. It is a must for every Not for profit to follow Australian Accounting Standards while carrying out a review or audit as applicable to the entity. After necessary audit work and review of accounts of entity, auditor has the duty to prepare and present an audit report stating a true and fair picture of the financial statements of an entity specifying whether financial reports meet requirements of the ACNC Act and also comments if they do not. An Audit/Review aims at bringing out issues if any in the entity’s operation and reporting and helps meet all requirements listed under Act.
It is very important to have all aspects considered while auditing as it will summarize the entire entity’s operation and help identify financial reporting and compliance issues.
An audit methodology looks at various source documents and analyses the governing documents to ensure the organization complies with the standards. Since most entities will be registered with ACNC, the source documents provided by the Not for Profit organization will be married up with the source documents provided to the ACNC on their register. Also too, money flows to and from members will be analyzed too to ensure compliance with governing documents. Receipts and Expenses will be matched to source documents and an opinion in the form or an Auditor’s report will be formed.
At A One Accountants, we have carried out numerous audits and if you are looking for an auditor for your Not for Profit entity, we could be the solution for you.
Our fee is fixed in most cases and we shall advise about our fee upon inspecting some basic documents for your entity.