A remarkable fact: 64% of small charities in New Zealand use auditors NZ without any legal requirement.
The numbers tell an interesting story about how organizations value financial transparency. Clear rules exist for registered charities. Those spending over $1 million yearly must get their financial statements audited. Organizations with expenditure between $500,000 and $1 million need a review at minimum. Small charities spending between $125K and $500K show an interesting trend – almost two-thirds choose professional assurance services on their own.
The benefits are clear. Charities that get their financial statements audited or reviewed earn more from goods and services (39% of their total income) compared to those without assurance services (27%). Many funding bodies ask for audited financial statements from smaller charities, even when the law doesn’t require it.
Picking the right professional is a vital step, whether the law requires you to have a qualified auditor or you want one to boost credibility. In this piece, we’ll help you understand how to find licensed auditors, use the auditors register, and learn what makes small charities NZ succeed with their financial reporting.
When Does a Charity in NZ Need an Audit?
You need to know if your charity requires an audit to stay compliant with New Zealand laws. The Charities Act 2005 sets specific thresholds that tell you what kind of reporting you need.
Legal thresholds for audit and review
The size of your charity’s finances determines your audit needs. These thresholds have been in place since January 2022:
- Large charities (annual operating expenditure over NZD 1.71 million in each of the previous two accounting periods) must have their financial statements audited by a qualified auditor
- Medium charities (annual operating expenditure between NZD 852,805 and NZD 1.71 million in each of the previous two accounting periods) must have their financial statements either audited or reviewed by a qualified auditor
- Small charities (annual operating expenditure below NZD 852,805) have no statutory requirement for audit or review
Your charity’s founding documents (constitution, trust deed, or rules) might still require an audit whatever your size. Many grant funders also ask for audited financial statements before they provide funding. You should check these requirements carefully to know what you need.
Voluntary audits for transparency
Small charities in NZ often choose to get audited even when the law doesn’t require it. Yes, it is true that audits provide benefits beyond just following the law:
They show financial transparency to donors and supporters. Organizations that give money and funding agencies want to see clear financial records before they help.
Audits can spot problems with financial controls and systems early. They help create accountability by looking at financial practices and checking internal controls.
Leaders can make better strategic decisions with audited financial statements that give them a clear view of their finances. This helps a lot in the ever-changing world of nonprofits.
Audit vs review: key differences
Medium-sized charities can choose between an audit or review. Here’s what makes them different:
An audit gives you a high level of assurance that your financial statements don’t have major errors or fraud. Auditors follow 36 International Standards on Auditing. This makes it a complete examination.
A review gives you limited assurance and needs less work. The process focuses on analyzing data and asking questions rather than testing every transaction in detail.
Audit reports and review reports look quite different. Audit reports say “the financial statements present fairly, in all material respects…”. Review reports state that “nothing has come to our attention that causes us to believe that the accompanying financial statements do not present fairly…”.
Money matters too. Audits take longer to complete than reviews, so they cost more. Many qualified auditors in NZ will help you find economical solutions that give you the right level of assurance.
The law says qualified auditors from Chartered Accountants Australia & New Zealand or CPA Australia must do all statutory audits and reviews. You can check the auditors register to verify credentials when you choose your professional.
Understanding the Role of a Charity Auditor
Charity auditors in New Zealand do much more than check numbers. Their influence goes way beyond the reach and influence of basic accounting. Let’s get into what these professionals actually do and how their work affects your organization.
What an auditor does and doesn’t do
A charity auditor checks your financial statements independently to ensure accuracy, completeness, and compliance with accepted accounting principles. Their main goal is to give stakeholders confidence that your charity’s financial reporting stays transparent and reliable.
What auditors do:
- Check financial records and statements
- Assess compliance with Generally Accepted Accounting Practice (GAAP) or Public Benefit Entity (PBE) standards
- Give their opinion on your financial statements’ fair representation
- Assess internal control systems (in full audits, not in reviews)
What auditors don’t do:
- Check if funds serve their intended charitable purpose – many people misunderstand this
- Stop fraud from happening – they’re more like “the ambulance at the bottom of the cliff”
- Take management decisions or design internal controls
- Promise error-free financial statements
Qualified auditors NZ must follow International Auditing Standards. These standards come with many regulations and required procedures that make audits thorough but can get pricey compared to reviews.
Audit report structure explained
A well-laid-out audit report from registered auditors NZ has these essential parts:
- Title – Shows the report comes from an independent auditor
- Opinion – Presents the auditor’s final assessment and what it covers
- Basis for Opinion – Shows how the auditor reached their conclusions
- Auditor’s Responsibilities – Lists what the auditor needs to do
- Responsibilities of Those Charged with Governance – Details the charity’s duties
- Other Information – Might include extra relevant details
The report needs a signature, date and the auditor’s location to be valid.
Types of audit opinions and what they mean
Your charity will end up with one of four possible audit opinions:
- Unmodified/Unqualified Opinion – This “clean bill of health” shows no major issues. Your financial statements fairly show your charity’s position without material misstatements.
- Qualified Opinion – Points out specific issues that are material but not systemic. Think of it as “clean except for…”.
- Adverse Opinion – Shows serious, systemic problems with the financial statements. The auditor believes your statements mislead readers due to material and widespread misstatements[94].
- Disclaimer of Opinion – The auditor couldn’t find enough evidence to form any opinion. This happens when restrictions prevent proper examination of your financial records[94].
The auditor might also add an “Emphasis of Matter” paragraph that highlights crucial information without changing their overall opinion.
These opinions help your charity understand audit results better and fix any issues that registered auditors NZ find to stay transparent and compliant.
5 Key Factors to Consider When Choosing a Charity Auditor
Choosing the right audit professional for your charity goes beyond meeting statutory requirements. These factors will help you make a choice that works best for your organization.
1. Experience with not-for-profits
The charitable sector has unique financial reporting needs that set it apart from commercial entities. Look for NZ auditors who have worked extensively with charitable organizations. These experts know how to handle donation accounting, restricted funds, and grant compliance. Auditors who understand government agency requirements for specific sectors like education or health can give valuable input for charities in those areas. This expertise becomes vital because most small charities NZ don’t have their own financial reporting specialists.
2. Registration status: licensed vs qualified auditors
You need to know the difference between qualification types:
- Qualified auditors are recognized by professional accounting bodies to conduct statutory assurance engagements for most organizations
- Licensed auditors need extra credentials to audit FMC reporting entities (issuers)
Most charities only need a qualified auditor recognized by the Chartered Accountants Australia and New Zealand (CAANZ) or CPA Australia. You should always check credentials through the auditors register to meet regulatory requirements.
3. Familiarity with NZ audit standards
Auditors must follow all auditing and assurance standards when they review charity financial statements. Look for professionals who know these standards well and keep up with regulatory changes. NZ registered auditors should understand the Financial Reporting Act, Charities Act, and other relevant laws. This knowledge helps your charity meet all statutory requirements.
4. Communication and reporting style
Good communication between your organization and the auditor helps the audit work better. Research shows audit seniors plan more follow-up procedures and rate staff better when communication is clear, particularly in autonomous team cultures. Clear audit reporting builds stronger relationships between management and auditors, helps resolve issues faster, and makes everything run smoothly.
Choose auditors who:
- Write clear, simple reports that trustees and board members understand easily
- Share findings helpfully rather than critically
- Talk about issues throughout the process to understand the context better
5. Cost and value for money
Cost matters—especially for small NZ charities with tight budgets, though it shouldn’t be your only deciding factor. Audit fees depend on:
- Your financial systems’ size and complexity
- How well management oversees key reporting
- Your accounting control environment’s strength
Audits cost more than reviews because they need more skill, expertise, and must follow strict statutory frameworks. Many small charities think this extra cost isn’t worth it. Good financial records can help reduce audit fees because auditors spend less time checking everything.
Where to Find Registered and Licensed Auditors in NZ
The right professional to handle your charity’s audit is easier to find when you know where to look. New Zealand has official registers that make this process simple for small charities NZ looking for qualified professionals.
Using the auditors register
The Companies Office has a detailed auditors register that serves as your main resource to find licensed auditors NZ. You’ll need to access this register through the Companies Office website. The website has information that helps you understand how and why certain auditors and audit firms get their licenses and registration. The register has essential details like auditors’ contact information and their current license or registration status.
You can find the NZICA Register of Qualified Auditors on the Chartered Accountants Australia New Zealand website if you need charity-specific auditing. This specialized directory helps you find professionals who know their way around not-for-profit organizations.
Verifying credentials and licenses
Verification becomes a vital step after you spot potential auditors. We checked whether they’re properly registered with recognized accredited bodies. The Register of Approved Overseas Auditors and Associations of Accountants should list any overseas auditors who want to perform non-issuer statutory audits on NZ entities (non-FMC audits).
The register should also approve overseas associations of accountants whose members need qualification to perform non-issuer statutory audits in New Zealand. This verification step protects your charity from potential compliance issues.
Questions to ask before hiring
A solid list of key questions helps you make the right choice:
- “Can you provide a list of references from other tax-exempt charitable clients?” – This helps you find if they audit similar nonprofits
- “What is your availability and what’s the technical experience of staff we’ll be working with?” – You might want to see resumes of the core team assigned to your audit
- “What will the audit process look like?” – Some firms need in-person visits while others work completely remotely
- “What are your fee structures and timing expectations?” – Prices vary substantially between auditors
The speed of their proposal response often shows their efficiency and interest in working with small charities NZ.
What to Expect After Hiring an Auditor
Selecting a qualified auditor is your first step. A good understanding of the complete process will help you prepare quickly and keep your operations running smoothly.
Audit engagement process
Your audit experience starts when you receive an engagement letter. This document outlines the scope of work and terms your auditor will follow. You need to sign this formal document before the audit starts. It sets clear expectations between your charity and the auditor.
Your auditor will need access to financial records and documentation during this time. They will review these materials against relevant standards and stay in touch with your team. The process ends when they issue your final audit report after your charity’s accounts get formal approval.
Documents you’ll need to provide
Here are the key documents you should prepare to make your audit work:
- Complete financial records including bank statements
- All invoices and receipts for the audit period
- Minutes from board meetings
- Asset registers and depreciation schedules
- Grant documentation and funding agreements
- Evidence of internal controls and policies
Most qualified auditors NZ give small charities NZ a detailed checklist to gather all relevant information. This preparation significantly affects your audit’s speed and cost.
What not to submit to Charities Services
After your charity audit finishes, you should know exactly what to submit to Charities Services. The final auditor’s report must go with your performance report. Some documents should stay internal:
- Engagement Letter – Contains terms and conditions of the audit work
- Management Letter – Formal confirmation from management about providing all necessary information
- Other Auditor Reports – Detailed reports about the audit process or difficulties encountered
Understanding these differences helps you comply properly while keeping the right balance between internal governance and external reporting needs.
Conclusion
Selecting the right auditor for your charity is the life-blood of good governance and financial transparency. Five key factors will help you make an informed decision that benefits your organization over the next several years. These factors include experience with not-for-profits, proper registration status, familiarity with NZ audit standards, communication style, and value for money.
The audit trip doesn’t end after hiring a professional. You should gather all necessary documentation beforehand, understand the engagement expectations, and know the exact requirements for Charities Services submissions. This proactive approach makes the whole process run smoothly and provides affordable solutions for your organization.
Your charity’s partnership with the right professional will maintain transparency and build trust with stakeholders. This allows you to focus on what matters most—your charitable mission, whether you need an auditor legally or want one to improve credibility.
FAQs
Q1. What are the legal thresholds for charity audits in New Zealand?
Large charities with annual operating expenditure over NZD 1.71 million must have their financial statements audited. Medium charities (expenditure between NZD 852,805 and NZD 1.71 million) require either an audit or review. Small charities (below NZD 852,805) have no statutory audit requirement.
Q2. What’s the difference between a qualified auditor and a licensed auditor?
Qualified auditors are recognized by professional accounting bodies to conduct statutory assurance engagements for most organizations. Licensed auditors hold additional credentials specifically required for auditing FMC reporting entities (issuers). Most charities only need a qualified auditor.
Q3. Why might a small charity choose to have a voluntary audit?
Small charities often opt for voluntary audits to demonstrate financial transparency to donors and supporters, identify potential issues with financial controls, and present a clear financial profile for strategic decision-making. Many funding organizations also require audited financial statements.
Q4. What documents should a charity prepare for an audit?
Charities should prepare complete financial records, bank statements, invoices and receipts, board meeting minutes, asset registers, depreciation schedules, grant documentation, and evidence of internal controls and policies. Many auditors provide a detailed checklist to help gather all relevant information.
Q5. What are the different types of audit opinions and what do they mean?
There are four types of audit opinions: Unmodified (clean bill of health), Qualified (specific issues but not pervasive), Adverse (major, widespread problems), and Disclaimer of Opinion (insufficient evidence to form an opinion). Understanding these helps charities interpret audit results and address identified issues.
