Here at Ashton Wheelans, we view Audits not as an overhead or a necessary evil but rather as a great opportunity to review your business.
Our audit team will work closely with you to get to know your business. We use the latest computerised systems and perform our audit based around a detailed analytical review of the accounts. This allows us to offer an objective view of your business so we can advise you of any potential problem areas.
There are three broad types of audit than an organisation can request. These are outlined below.An audit is where an independent expert (the auditor) provides an opinion on "a matter of accountability" - for example the Financial Statements. The "matter of accountability" is generally the responsibility of someone else - usually the management or governing body who are presenting financial information.
An audit is designed to provide a high, but not absolute, level of assurance that the information subject to audit is free from material misstatements. Thus, an audit may be requested for Financial Statements in order to enhance the degree of confidence the intended users have in the Financial Statements.
An audit usually takes the most work and has the highest cost, however will present a true and fair view of the financial statements.
Full audits are usually performed on the following entities:
- Issuers and Listed Entities
- Government Entities
- Unit Trusts
Full audits are usually required in the following circumstances:
- New Zealand Stock Exchange Requirement
- Constitutional Requirement
- Third Party Requirement
- Shareholder Request
- Parent Company Requirement
- Issuing of Prospectus
- Raising Capital for Future Plans
A review engagement is designed to give the reader of the financial statements limited assurance on the information.
- Lower level of assurance than an audit
- Controlled by standards, guidelines and established practice
- It is an independent examination of information
- It requires enquiry and analytical procedures to assess the information
- The reviewer needs to have a level of knowledge of the organisation in order to be able to identify events and transactions that may have a significant effect on the financial statements
A review is a limited assurance engagement designed to provide moderate level of assurance on the subject matter. The reviewer expresses this limited assurance as "nothing has come to my attention that causes me to believe the Financial Statements do not present a true and fair view of various matters."
A review may be a better solution for an entity where no statutory obligation for an audit exists but the governing body or its stakeholders (members or beneficiaries) still want an independent assessment of the financial statements without going the full stretch of an audit, and is sometimes used as a "sanity"check by larger companies and organisations half way through the financial year.
A review is quicker to perform than an audit and is therefore less expensive (usually around 70%-80% of the cost of an audit over the same entity), however a review is often misunderstood as many people see this as an audit and have expectations that it will pick up the same issues and outputs. A review is not suitable when the confirmation of the existence of balances in the financial statements is required and may require additional work in the future to gain sufficient comfort in the financial results.
An agreed upon procedures engagement may also be requested. In this type of engagement a member of the institute is required to perform specific procedures with respect to financial information and report on the factual findings resulting from the procedures.
This type of engagement is appropriate when the governing body is seeking assurance over a specific area of the organisation but doesn't require an opinion on the overall Financial Statements. The following could be considered as part of an agreed upon procedures engagement:
- Confirming a grant has been spent in full for its intended purpose
- Stocktake attendance to confirm accuracy of count for an interested party
- Payroll systems review
- Reviewing systems to ensure new GST rates correctly implemented
An agreed upon procedures engagement is often misunderstood and users believe that they will receive an opinion and a level of assurance. This is not the case. An agreed upon procedures engagement provides a factual report only and does not provide an opinion. It is quick to perform and the most cost effective option available. It is ideal when more information is required on certain areas and can enhance stakeholder comfort over specific concerns, however reliance on the report in the future will be limited to the procedures performed.
If you wish to know more about any of these please feel free to contact audit partners
Mark Tynan and
Andrew Oorschot or audit manager
Nigel Perkins.
