Author: Clive McKegg

3 April 2024

For accounting periods that end on or after 28 March 2024, the threshold levels for not-for-profit entities have changed. Let’s review New Zealand’s reporting landscape while considering the changes.

A variety of reporting levels

Think of the reporting framework as a tree with two main branches – Public Benefit Entities (PBEs) and For-Profit Entities (FPEs). Some entities operate in the public sector for public benefit and some operate at the for-profit end of the scale. The needs of the readers of financial statements for for-profit entities and public-benefit entities will likely be somewhat different, so a distinction is made.

However, whether an entity is primarily for community and social benefit isn’t as clear-cut as it sounds, as most if not all entities have (hopefully) some public benefit. But the type and purpose of transactions often make the distinction clearer – many transactions are non-exchange in nature, and specialised assets are often held for which there may be no commercial market.

Not all entities want or need to trade or invest internationally or even have much of a public face at all. The NZ XRB recognised this and drew some distinctions between outward-facing entities requiring wide-scale credibility and smaller-scale local entities that will never have to be scrutinised on the international stage. Discussions of ownership, scale, public accountability, and purpose are factored into these distinctions. 

Public Benefit Entities

The Public Benefit Entities (PBE) branch of the reporting standards is somewhat easier to navigate than the For-Profit bough. If, after looking at founding documents, beneficiaries, and issues of funding we decide that the entity is indeed a PBE there are four slots of financial reporting that we can choose from.

Tier 1 – The plumpest fruit

To whom is the entity accountable? Where is the funding for the entity derived? An entity may be for public benefit but not publicly accountable – for example, a charity for helping the homeless that is funded by support from corporate sponsors.

Or an entity may be publicly accountable but for-profit rather than for public benefit – for example, banks, insurance and superannuation providers, publicly listed companies and others that trade debt or equity instruments to the public. The specific criteria are provided by the Financial Markets Conduct Act 2013 (FMC Entities) and by the IASB definition of public accountability. Anything that is publicly accountable will fall into Tier 1 – full compliance with full PBE accounting standards. 

Also falling into that basket will be large entities – defined in this case by expenditure – over $33 million over the last two periods (increased from $30 million). This size is specified by the XRB Amendments to XRB A1  document. There are only about 60 charities in this category in New Zealand. 

Tier 2 – Not so large and not accountable

PBEs that are neither publicly accountable nor with expenses over $33million are graded based simply on their expenditure level over the last two periods. Under $33million (previously $30million) but over $5million drops into Tier 2 (previously $2million). These are subject to the same PBE accounting standards as the larger entities, but with some reduced disclosure requirements concessions (“RDR”).

There are about 900 NZ charities in this category. An important point to remember is that all PBE entities, regardless of size and type, will by default go into the Tier 1 unless they elect to adopt another category. 

Tier 3 and 4 – Small in value but large in number 

Dropping into Tier 3 will be entities under the $5million expenses mark, but over $140,000. Anything under that level may fall into Tier 4. Tier 3 uses what is known as “PBE Simple Format Reporting Standard – Accrual” (PBE SFR-A). However, for accounting periods that begin on or after 1 April 2024 a new Tier 3 standard – now called  “Tier 3 (NFP) Standard –  Reporting Requirements for Tier 3 Not-for-Profit Entities” applies.

Tier 4 uses “Public Benefit Entity Simple Format Reporting – Cash” (PBE SFR-C (“C” for “cash”)).  As with Tier 3, for accounting periods that begin on or after 1 April 2024 a new Tier 3 standard – now called  “Tier 4 (NFP) Standard – Reporting Requirements for Tier 4 Not-for-Profit Entities” applies. See our article for details of the T3 and T4 changes.

Over 90% of the 27,000 NZ registered charities fall into Tier 3 and 4. The XRB has published extensive guides and Charities Services has downloadable Excel templates for completing these reports.

Impact of the threshold updates

The impact of the change in threshold between Tier 1 and 2 will be minimal. this is more or less an inflation adjustment, however, the threshold change between Tier 2 and 3 will have significant implications for preparers of financial statements and auditors. Many preparers will opt for dropping from the complex Tier 2 standards to the much more easily prepared Tier 3 standard. This will also be good news for auditors. SME-type firms that previously did not have the expertise to take on Tier 2 PBEs will feel much more comfortable taking on these jobs under Tier 3.

There will be some problems, however. Changing between Tiers will be complex in the first year. Changes in policies and restating comparatives could be tricky for auditors and preparers. Many entities may opt to continue as Tier 2 entities. We shall see…

For-Profit Entities

As noted, an entity may be publicly accountable and also for-profit rather than for public benefit – for example, banks, insurance and superannuation providers, publicly listed companies and others that trade debt or equity instruments to the public. These entities are by default Tier 1 FPE, required to comply with full NZ IFRS standards. Also, as per the PBE rules, anything with a total expenditure of over $30 million in the two preceding periods will fall into this tier, whether publicly accountable or not, captured by their sheer economic weight.

Similarly to the PBE branch, Tier 2 is only to be applied to non-publicly accountable entities, but the size criteria are a little more complex, and some other factors are considered. For Tier 1, economic impact is measured in terms of expenditure, but Tier 2 uses a definition of size based on a combination of revenue and assets. Additionally, the thresholds for assets and revenue differ depending on whether the Company (and these are likely to be companies) are locally or overseas owned.

To be “large” in terms of Tier 2, a locally owned entity must have assets exceeding $66 million or revenue exceeding $33 million. These thresholds must be reached at the balance date at each of the two preceding accounting periods. The thresholds for an overseas-owned company are lower – presumably because there is perceived to be a higher risk. Assets exceeding $22 million or revenue exceeding $11 million at the balance date at each of the two preceding accounting periods will trigger the “large” switch.

That’s not all though… if the entity is not large in the terms above but has 10 or more shareholders it is also caught in Tier 2 – unless 95% of the shareholders agree to opt out. Remember that as with PBE entities, regardless of size and type, FPEs will by default go into the Tier 1 bin unless they adopt another category.

After 1 April 2015, smaller for-profits could use NZ IFRS RDR, but so long as IRD and internal management requirements were met they were free to do what works best for them. This means that most small NZ companies, partnerships and sole traders do not need to prepare financial statements that comply with General Purpose Accounting Principles (GAAP). Of course, governance, banks and other investors need helpful information. To meet this need NZICA/CAANZ issued some optional guidelines (the SPFR for FPE framework). Entities not using these guidelines must still comply with IRD minimum reporting requirements.

Is an audit required?

Under the Accounting Infrastructure Reform Bill, charitable entities with expenditures over $1.1 million for the two preceding accounting periods must be audited. Entities with expenditures between $550,000 and $1.1 million for the two preceding accounting periods may opt for a review engagement. This work must be performed by a “qualified auditor” in compliance with the appropriate assurance standards. Under $550,000 there is no statutory requirement for audit or review unless the founding documents or funding sources require this. 

Tier 1 for-profit entities always require an audit, which makes sense, as do “large” overseas companies that are Tier 2. “Large” local companies may, in terms of Tier 2, opt out of the requirement for audit, as may smaller entities with 10 or more shareholders.

NOTE: Audit Assistant has a Financial Reporting Regime Testing Tool which may be used stand-alone, but is also incorporated into the newer templates. This has now been updated to the new thresholds, however, users will need to be mindful of the period being audited, to make sure that the results are applicable.

8 December 2023

If you are preparing engagement letters for assurance engagements, there are some changes of which you should be aware. These are contained in PS 3: Terms of Engagement, issued by CAANZ. This applies to professional services entered into after 1 January 2024 (early adoption permitted).

What is different about the new standard to what auditors have commonly included in their engagement letters, and what updates have been made in the standard Audit Assistant templates?

The basic requirements for engagement letters are included in ISA 210 – Agreeing the Terms of Audit Engagements. Our standard built-in Audit Assistant engagement letters are based on the ISA 210 examples with some additional content (such as optional Bannerman clauses). Most of the requirements in PS 3 that pertain to audits are already covered in ISA 210, however, there are a couple of important additional pieces of information required as follows:

Basis of Fees

The letter is to identify “the basis on which fees will be calculated and clearly define the billing arrangements including specifying any consequences of nonpayment.” (para R2.4) Many firms currently include this detail in their annual Audit Planning Letter (also known as an Arrangement Letter). It now must be in the Engagement Letter and include (from Appendix 2) such things as:

• What is the method and basis of billing (time and cost including rates, fixed fee including the scope of services covered and what services would result in additional charge, etc.).
• When will bills be rendered (frequency and estimated timing).
• What the payment terms are, including what happens if the client does not pay by the agreed date (i.e. whether interest and/or penalties will be charged and/or whether a lien will be asserted)
• Whether the member will progress bill for the engagement.
• How the member will price a change in scope.

The Appendix also states that “The member should also consider including an initial fee estimate, if possible.” If a fixed fee is being used this amount would be included. One of the implications of this change is that a fresh engagement letter may need to be issued annually. As this will depend largely on the individual firm policy and possibly be different for various clients these details may need to be added on a case-by-case basis.

We have added a standard paragraph to our latest engagement letters, (based on what is in our annual planning letters) which may be edited as required.

Services from a Service Provider

Where a member uses services from a service provider to perform their professional services for a client and the member will disclose the client’s confidential information to that service provider, the disclosure permissions required must include disclosure of (per para R2.7):

• the identity of the service provider;
• the service used;
• how and where the client’s confidential information will be used and/or stored (including geographical location, where identifiable, or a statement that this geographical location cannot be identified and the reason(s) why not); and
• any other information that is required to comply with applicable technical and professional standards. and laws and regulations.

This includes contractors and cloud-based processing or data storage services. A service provider is defined as “an individual or organisation external to the firm that provides a human, technological, or intellectual resource that is used in the performance of engagements.”

Fortunately, if you use Audit Assistant this is straightforward. All the client data is encrypted – including transfers – and maintained within Australia and NZ. No client data needs to be transferred outside of the software if the ‘sharing‘ and ‘requests‘ features are used.

We have added a paragraph to this effect under the “Ownership of and access to audit file” paragraph in our standard Engagement Letters.

Complaints policy

The engagement letter is to “… include a description of the firm’s complaints policy.” This should mirror how the firm handles complaints as per their Quality Management policies and procedures. This may include the use of mediation services. Again, this will depend largely on the individual firm policy.

We have added a basic response to our standard engagement letters as follows:

“If you have any concerns about our costs or services, please speak to the person responsible for this engagement (signed below). We have policies and procedures in place to deal appropriately with any complaints and we will do our best to resolve any issues that may arise. We suggest that any such complaint be made in writing to allow us to investigate the issue raised.”

You may edit this if you require something more bespoke.

Use and distribution of the report

If there are any restrictions on who should have access to the audit report or other outputs of the engagement, these restrictions should be clearly stated in the terms of engagement. An appropriate disclaimer should also be included. (para 11)

This is normally specified in the audit report itself, an example of which is normally attached to or quoted within the engagement letter. PS 3 states that this should be included in the letter, along with a suitable disclaimer.

We have added space into the Reporting section of our standard engagement letters for the manual insertion of any such restrictions.

Other matters

Ownership of documents and Confidentiality:

This is already included in our audit templates.

Period of application:

The period of the first financial statement is stated. Ongoing application is covered in broad terms to the effect that, “This letter will be effective for future years unless it is terminated, amended, or superseded by either ourselves or the (governing body).”

Identity of client:

The full legal name of the client and the kind of governing body should be used when setting up the audit file, so it is very clear who the legal body is that the firm is contracting with. These details carry automatically into the engagement letter within Audit Assistant. If the entity is a group the group’s legal name should be used or (and Group) be added to the client name.

Description of services:

Audit engagements are usually very clear, and this is explicit in the Objective and Scope paragraph. However, if any additional services are being provided – such as the completion of any additional reports – these should be added manually to the letter.

Client responsibilities:

Again, this is generally spelled out fairly clearly in the standard audit engagement letters, but PS 3 does recommend that if there are any critical deadlines for the supply of information this should be identified, and if there is any specific access to data permissions required that this also be included. These issues are currently covered in our annual audit planning letter, however, you may wish to manually add them in the engagement letter as well if they are critical to the work.

Independence:

This is covered in current templates.

Acceptance:

PS 3 points out that the client’s acceptance (signed and dated) is essential. This is covered in the current templates, however, firms must ensure that this is done and the signed version is attached to the audit file.

Additional recent updates to engagement letters and audit reports

In addition to the above, there has been a small update made to the wording of engagement letters and audit reports for IFRS entities due to an update in NZ IAS1 – Presentation of Financial Statements.

The wording “including a summary of significant accounting policies” must now read “including material accounting policy information.” We have updated this in relevant engagement letters and audit reports.

We have also updated our NFP engagement letters and audit reports to reference NZ AS1 (Revised) with appropriate language to reflect some terminology changes in the new Tier 3 and 4 NFP standards.

Note:

The templates in the 2024 series audit templates have been updated for the new content. Some areas need to be manually completed (marked yellow) for fee estimates and restrictions on use and distribution. The letters may also be customised on a job-by-job basis by clicking the customise button in the bottom right. You should read through the letter to make sure it is appropriate, but there should be nothing further required if you have selected the correct options where there are potential reporting variations etc.

If you are updating from an earlier template and you have used the previous engagement letter and this has been rolled forward this should be deleted and then the new version will be able to be selected.

5 September 2023

For those who prepare and audit financial statements for “small” (under $5m expenditure) charities and other not-for-profits, there are some important changes coming up.

In New Zealand, these smaller entities are very common – there are about 30,000 of them including some soon to be included in this reporting under the Incorporated Societies Act 2022.

The Standards have a mandatory date of 1 April 2024, meaning they must be applied for accounting periods that begin on or after 1 April 2024. A Tier 3 or 4 entity may choose to apply the Standard before the mandatory date for accounting periods that end after the Standard takes effect on 15 June 2023. 

The Tier 3 standard – now called  “Tier 3 (NFP) Standard –  Reporting Requirements for Tier 3 Not-for-Profit Entities” – continues to be accrual-based. And Tier 4 – now called  “Tier 4 (NFP) Standard – Reporting Requirements for Tier 4 Not-for-Profit Entities” – is a cash-based alternative for smaller entities (under $140k expenditure).

This article focuses on the Tier 3 (NFP) standard, which tends to be much more commonly used than the cash-based standard even for many smaller entities – as it is much more like traditional reporting. We will look briefly at the Tier 4 changes at the end.

Service performance

When the standards were introduced there were no NZ reporting or auditing standards for Service Performance Information (SPI). Now we have PBE FRS 48 for Tier 1 and 2 entities, and NZ AS-1 (shortly to be NZ AS1 (Revised)) for the audit of Service Performance Information (SPI) across all the tiers.

In a way, the changes in Tier 3 are simply following the direction set by PBE FRS 48 and NZ AS-1. The terms Outcome and Output were always confusing, so these are being replaced with more descriptive terminology as per PBE FRS 48.

There is also some helpful guidance provided about what to report as SPI, and how to report it. Reporting must be (as per para A14):

• Relevant and faithfully represented
• Understandable
• Timely and comparable
• Verifiable

As such, any changes in reporting from the prior year must be explained, so there is consistency in reporting.

From an audit perspective, NZ AS-1 (Revised) is a great improvement on the previous more complex standard that now feels like a better fit for smaller entities.

Changes to standard revenue and expenditure categories

A common criticism of reporting under the existing Tier 3 standard was that the reporting categories were so broad as to be almost meaningless in some cases. The new standard splits some of the categories into smaller classifications. For instance,

• Commercial activities are split out;
• Grants for capital projects are split from other grants;
• Government funding is split from non-governmental funding;
• Donations are now clearly differentiated from membership fees and subscriptions;
• Employee remuneration (apparently including those paid as contractors) is to be split out from volunteer and other employee expenses.

Preparers of performance reports will be able to tweak the names of the categories, but will not be allowed to add additional categories as before. (para A68) This is probably for aggregation and analysis purposes. This will make the Statement of Financial Performance more meaningful and reduce the need for extensive notes breaking down the categories.

Revenue recognition changes

The old standard was fairly inflexible in matching revenue from grants and other bequests and gifts with the use of that money. Donations with a use or return condition were recognised as the condition was fulfilled. Any income without such a condition was recognised in the period it was received.

Under the new standard, if there is a clear expectation of when funds are to be used in terms of an agreed expectation from the grantor, the revenue may be recognised as or when the conditions are satisfied. See the decision tree below which is from the standard:

This seems like a clear, common-sense response, more in line with the commonly accepted matching principle of accrual accounting.

Alternative measurement for assets

Under the old standard, if fixed assets are revalued, the Tier 2 standard must be used. The new standard allows revaluation based on say, RV (rateable value) for land and buildings, or valuation by an independent qualified valuer. (para A133) Depreciation must still be calculated on revalued assets. (para A134)

Changes are made straight to a separate property, plant and equipment revaluation reserve within accumulated funds in the Statement of Financial Position. The whole class of assets must be revalued. Once a revaluation is made there must be consistency going forward, with no changing back to other methods, and revaluation updates made on a regular schedule. (para A139)

Assets classed as investment properties may be accounted for in the same way. (para A144) Where an entity holds investments that are publicly traded, it may elect to measure that class of investment at its current market value. (para A145) It may elect to recognise gains/losses on revaluation of publicly traded investments either in revenue or expenses in the statement of financial performance, or in accumulated funds in a separate investment revaluation reserve. (para A148) 

Accumulated funds

In the old standard, there was no requirement to disclose any details of accumulated funds. The new standard says that to make information understandable to users, the balance of accumulated funds is to be aggregated and presented separately in categories, as applicable. These include any capital contributed by owners, accumulated surpluses or deficits, revaluation reserves (as above), restricted and discretionary reserves, and any other reserves. (para A175)  

For transparency, there is to be a note that discloses objectives and policies for managing accumulated funds and any plans for applying accumulated funds to meet the entity’s objectives. (para A231-A235)

This seems to be designed to make entities think about why they have significant reserves (if in fact, they do) and perhaps how they could be better using these to meet their objectives. If they view their reserves as investments, are they making the best use of their capital? Could they be meeting their objectives in more efficient ways with a redeployment of their equity?

On the other hand, many charities certainly don’t have excess cash or investments and their equity simply represents assets such as land and buildings that are essential to their service delivery. Having to make up a nice story to put into a note in these cases seems a bit pointless – and could be difficult to audit.

Simplification to the statement of cash flows

Cash flow statements are typically a headache for both preparers of financial statements and auditors. Accounting software often struggles and the results are hard to audit and hard for users to understand.

The new standard aligns the categories in the Statement of Cash Flows with the categories in the Statement of Financial Performance. The Statement of Cash Flows is to be essentially a statement of receipts and payments.

Tier 4 changes

There are a couple of changes for Tier 4 (NFP) reporting. These reflect the changes in categories for Tier 3, changing the language around outcomes and outputs, removing the need for a “Statement of Resources and Commitments” and replacing this with significant assets and significant liabilities listed in the notes. The name of “Statement of Receipts and Payments” is changed to “Statement of Cash Received and Cash Paid.”

Transition to the new standards

The changes currently being adopted to reporting for small charities (Tier 3 and 4) have been largely welcomed as positive and sensible. However, there will be some transitional issues that will present challenges to preparers and auditors, for the first year of adoption when the old standard was previously used.

Some of the key items to keep in mind are as follows:

• Comparatives will need to be restated to line up with the new categories (unless it is impractical to do so). (para C14)
• Revenue recognition changes will be treated as changes in accounting policy with an appropriate note. (para C15)
• Adopting the revaluation provisions will need to be acknowledged as a change in accounting policy. (para C18)
• An entity previously using a Tier 2 standard may continue to do so, or change to the new option, however, this will be a change of accounting policy. (para C21)

Note that there may still be the requirement to use Tier 2 standards where consolidated financial statements, investments in associates or joint ventures, or joint arrangements are involved. (para D1) It may also apply other specific standards to specific transactions. (para D2)

We have included checklists for the new standards, including transitional requirements, in our new Tier 3 and 4 (NFP) Review (2023) templates, our new Tier 3 and 4 (NFP) Audit (2023) templates, plus we have stand-alone checklists for preparers of financial statements to use.

4 September 2023

I have good news and bad news.

The good news is that the new standard for the audit of service performance (NZ AS1 (Revised)) is actually much simpler than the original standard released three years ago. The bad news is the shambles created by rushing through the original standard without proper consultation, deferring it twice, and then effectively cancelling it altogether.

Diligent auditors (and software/content developers) front-footed it and adopted NZ AS1 anyway, thinking we were doing a good thing – despite complaints from our customers about how complex it was – only for it to be deferred.

We had updated our templates and encouraged auditors that this was the way to go, knowing that it would apply sooner or later, and although the standard was a bit of an overkill for smaller entities, it seemed to fit well with its sister reporting standard for Tier 1 and 2 PBE’s – PBE FRS-48.

Those firms that muddled along using bits and pieces from ISAE (NZ) 3000 (Revised) and EG Au9 can now go straight to the new standard, without the pain of having to do that hard work. One up for procrastination!

Anyway, now that I’ve got that off my chest, what about the new standard? And why was it changed?

The XRB issued a statement in July 2023 explaining the rationale for the changes. One major issue was that the Office of the Auditor-General raised concerns regarding the suitability of NZ AS 1 for the public sector.

So the standard, while already released, was at the last minute deferred to allow time for the XRB to work with the OAG to address these concerns and consider the future application of NZ AS 1. This was after the original 12-month deferral due to COVID – which also reflected the deferral of PBE FRS-48.

PBR FRS 48 was released at a similar time to the original NZ AS1. The language was aligned – in that “service performance information” was used instead of the “outcomes” and “outputs” language of the old Tier 3 and 4 standards. I get the feeling that the original NZ AS1 was really made for large Tier 1 and 2 PBE entities without a lot of thought given to small charities.

The new standard changes the language from the complex audit-speak to friendly terms like “appropriate and meaningful.” (Para 25 describes what this means.) This is to be applied as follows:

• Are the elements/aspects of service performance that the entity has selected to report on appropriate and meaningful?
• Are the performance measures and/or descriptions the entity has used to report on what it has done in relation to those elements/aspects of service performance during the reporting period appropriate and meaningful?
• Is the measurement basis or evaluation method used to measure or evaluate the performance measure and/or description appropriate and meaningful? (para 7(a))

The questions above form the first step of the two-step process.

The second part is to assess whether the reported service performance information fairly reflects the actual service performance and is not materially misstated. (para 7(b))

To carry out this part, we need to apply our risk identification skills. The standard echoes the emphasis of ISA 315 (Revised 2019) focusing first on Inherent Risk (risk before consideration of any related controls), then Control Risk.

Then we basically just follow normal audit procedures, but include consideration of service performance information and controls when we look at things like entity and environment, regulatory framework, control systems, materiality, analytical review, and deciding how much reliance to place on controls testing, analytical review and substantive testing.

This will of course impact our documentation and the content of our engagement letters, representation letters, and audit reports, as they relate to responsibilities of governance and the auditor’s responsibilities. Our updated templates have taken all this into account.

The standard emphasises that we “…develop an audit plan with a single audit approach to concurrently cover the service performance information and the financial statements.” (para 20)

Part of the reason for this change is that since the original standard there have been a couple of other major standards released.

It seems that ISA 315 (Revised 2019) has mainly influenced the changes. Much of the language of (NZ AS1 (Revised)) is directly parallel to ISA 315 (Revised 2019) – which is a good thing.

The other influence is the new Tier 3 and 4 NFP Standards. Again they have taken out the “outcomes” and “outputs” language (which very few people actually followed or understood), and replaced it with the nice broad term “service performance information.”

When do we have to use the new NZ AS1 (Revised) standard?

NZ AS 1 (Revised) was approved for issue in July 2023. It is applicable for periods beginning on or after 1 January 2024. Note that it may be early-adopted for periods ending after 24 August 2023 – so essentially jobs ending from now. Auditors may use either the current NZ AS1 or ISAE (NZ) 3000 (Revised) until then. The following graphic is from the XRB:

To accommodate for the new standard we have (so far) reworked our latest Tier 3 and 4 (NFP) templates for both the change to the new Tier 3 and 4 (NFP) standards and also to NZ AS1 (Revised).

So, because it is not cost-effective to revise our current Tier 3 and 4 PBE templates from using NZ AS1 to NZ AS1 (Revised), then create a new set of templates for using the new Tier 3 and 4 (NFP) standards with NZ AS1 (Revised) we have added both updates into our Tier 3 (NFP) 2023 and Tier 4 (NFP) 2023 templates. Basically, if the client is using the new Tier 3 and 4 reporting, then use the new template, which will also give you NZ AS1 (Revised).

So we are suggesting that users step up to NZ AS1 (Revised) while also stepping up to the new Tier 3 and 4 (NFP) standards, by swapping to our 2023 NFP series templates (see flowchart below). Note that the new templates are marked NFP, while the existing ones are PBE. We did this to differentiate as they are all marked as 2023! We have not yet updated our Tier 1 and 2 templates for NZ AS1 (Revised). This will happen in the next month or two.

To treat this as a “…single audit approach to concurrently cover the service performance information and the financial statements…” we have integrated the service performance steps into existing pages – rather than treating them as separate pages as in the existing template. For instance Entity and Environment includes some questions related to Service Performance, as does materiality and internal control checklists. This should simplify the work considerably compared to our extant templates.

When do we get the new Tier 3 and 4 (NFP) templates?

The new Tier 3 and 4 NFP templates are up now (5 September 2023), but we are not flagging existing jobs to push to upgrade because there will still be jobs that use the old Tier 3 and 4 standards. So wait until the client adopts the new reporting standards, then update manually to the new template after rollover.

The Standards have a mandatory date of 1 April 2024, meaning the Standard must be applied for accounting periods that begin on or after 1 April 2024. However, these new standards may apply for accounting periods ending after 15 June 2023 – so any balance dates from 30 June this year may be using the new Tier 3 or 4 standards.  Hence the reason we have been pushing to update our Tier 3 and 4 audit and review templates.

We have reduced our current templates for the update to the new standards. Instead of two Tier 4 (one full ISA and one reduced for smaller entities that we call our ‘LCE’ versions), we now just have the compact version for the new NFP standard. For Tier 3, we will still have an LCE version for simpler entities and a full ISA version, but we have combined the ‘group’s’ content back into this one as well. So now there are two instead of three options.

To summarise:

9 March 2023

Audit Assistant has been making online collaboration tools for auditors for many years, so we thought why not use this incredible functionality to help accountants who prepare financial statements as well?

If you carry out the preparation of financial statements for audit, or review, or just want to have a great paperless compilation process to streamline your business advisory services practice, we have the tool for you.

The annual compilation file meets the need for a central digital repository for annual compilation work. It includes financial reporting checklists for:

• Tier 1 and 2 Public Benefit Entities
• Tier 1 and 2 For-Profit Entities
• Tier 3 Public Benefit Entities
• Special Purpose (SPFR for FPE) Companies

The output is a PDF that can then be sent directly to your auditor or reviewer, which contains most of what they will need for their work. Alternatively, you can give them direct access to the file so they can pull the data they need for their audit or review file.

Other great features include:

• Checklists to gather data from your clients via the internet
• Checklists for confirming compliance with SES-2 and Code of Ethics requirements
• Standard engagement letters and completion letters including suggestions generated during the work
• A requests feature whereby client queries are responded to directly into the file
• Trial balance upload from Xero and other common software that populates ‘lead schedules’ for sections (income, expenditure, bank, debtors etc.)
• PDFs or spreadsheets can then be added to the correct part of the file supporting the different items in the financial statements
• External links may be added to say the business website, online repository or client online software
• Journals may be created from the system that updates the trial balance and form source documents for posting to the client ledger
• Key Documents such as minutes, constitutions, contracts etc may be uploaded and brought forward each year for reference
• At completion, the job is rolled over, and ready for the next year, with much of the work just needing to be brought forward and updated for the new year
• Rollover produces a PDF of the whole job plus attachments for archiving

More than 40% of NZ audit firms use our auditing software, so it makes sense to use our proven and familiar tools to prepare data for your auditor, saving time and hassle.

The Accountants Tool package is designed primarily for CA firms preparing multiple jobs but is also suitable for entities that prepare their performance reports and financial statements in-house. We provide special discount pricing packages in these cases.

Contact us to find out more or for a free demonstration.