The requirement for a reviewed or audited annual financial report depends on the size of a charity.
Small charity
For small charities, it is optional to submit a financial report in the Annual Information Statement, so there is no ACNC requirement for a small charity to have its financial report reviewed or audited.
However, we encourage small charities to submit a financial report as part of the Annual Information Statement.
If a small charity's governing document requires it to submit financial statements, it must do so.
Medium charity
Medium-sized charities must have their financial report either reviewed or audited. The reviewer’s or auditor’s report must be submitted as part of the financial report in the Annual Information Statement.
The audit or review must be conducted by:
- a registered company auditor (as defined by the Corporations Act 2001)
- an audit firm, or
- an authorised audit company.
A review may also be conducted by a current member of a relevant professional body (CPA, CAANZ or IPA) who is qualified to undertake a review (in line with the Corporations Act 2001).
Large charity
Large charities must have their financial report audited. The auditor's report must be submitted as part of the financial report in the Annual Information Statement.
The audit must be conducted by:
- a registered company auditor (as defined by the Corporations Act 2001)
- an audit firm, or
- an authorised audit company.
Note that these are the ACNC's requirements for financial reports. There may be specific requirements for financial reports from other regulators, agencies or even a charity’s own governing document. It is important to consider other requirements when preparing a charity's financial report.
See our guidance for charities preparing annual financial reports.
When having a financial report reviewed or audited, it is important to remember the principle of independence. A review or an audit requires the reviewer or auditor to provide the charity with a signed written independence declaration.
The Accounting Professional and Ethical Standards Board issues the Code of Ethics for Professional Accountants and this covers requirements for service providers to act, and to be seen to act, with independence and integrity.
The Auditing Standards ASA 210, 700, and 800 include requirements for an auditor in considering the financial reporting framework adopted by a charity at different stages throughout an audit process. The auditor’s responsibilities start as a precondition to accepting the audit engagement, and encompass:
- determining whether the financial reporting framework is acceptable,
- evaluating whether the financial report adequately refers to or describes the financial reporting framework, and
- including relevant reporting in the audit report if the financial reporting framework is a special purpose framework.
See our guidance about General and Special Purpose Financial Statements for more information.
Deciding on a review or audit
You can use this table to help you decide whether to have your charity’s financial report reviewed or audited. Remember that if your charity is a large charity, the financial report must be audited.
Please note that the points below are only a guide and not intended to capture all circumstances. Your charity should make a decision based on its situation, and seek professional advice if you are unsure.
Review |
Audit |
|
|---|---|---|
Positives |
|
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Negatives |
|
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Download a reviewer’s report template. This template is designed for use by auditors and developed with the assistance of the Australian Auditing and Assurance Standards Board (AuASB).
What a review includes
A review of your charity’s financial report is conducted by a reviewer. The reviewer states whether there is, or is not, anything that has come to their attention that causes them to believe the financial report does not meet the requirements of the ACNC Act (in all material aspects).
A review also evaluates whether your charity:
- provided all information, explanation and assistance needed to conduct the review
- kept good financial records so a financial report could be prepared and reviewed
- kept other records as required under the ACNC Act.
As part of your review, you only need to reference the Australian Charities and Not-for-profits Commission Act 2012 and the Australian Charities and Not-for-profits Commission Regulations 2022. Do not reference the Corporations Act 2001.
Level of assurance
A review only provides limited assurance (comfort). The reviewer states that they do not know of anything to suggest your charity’s financial report is non-compliant. A review is a lower level of assurance than an audit.
An audit is a direct opinion as to whether your charity’s financial report meets the requirements of the ACNC Act.
Review process
A reviewer will look at your charity’s financial statements and accounts but in less detail than an audit. A reviewer will speak to your charity’s staff, including those responsible for finance and accounting.
Reviews for medium sized charities can be done by:
- a registered company auditor
- an audit firm
- an authorised audit company
- a current member of a relevant professional body, CPA Australia – CPAA (CPA or FCPA designation), Chartered Accountants Australia and New Zealand – CAANZ (CA or FCA designation) or Institute of Public Accountants – IPA (FIPA or MIPA designation).
Reviewer’s report
Under the ACNC Act, a reviewer’s report must:
- state whether anything has come to their attention that causes them to believe your charity’s financial report does not meet the requirements of the ACNC Act. If the reviewer believes the report does not meet the Act, they must:
- explain why
- where possible, quantify the effect of this on your charity’s financial report or if it is not possible to quantify to explain why
- describe any material defect or irregularity in the financial report
- state any problems in the assistance they received from the charity when conducting the review, or any issues with the records kept by the charity as identified above, and
- include any statements or disclosures required by the auditing standards.
The reviewer’s report generally also includes:
- a title stating that it is an independent review report, and who it is addressed to, for example, the members of the charity
- an introduction covering the basics of the engagement and what has been reviewed
- a section outlining the governing body’s responsibility for the financial report
- a section outlining the reviewer’s responsibilities
- a conclusion of the review
- if it applies, a section outlining reporting responsibilities to other government agencies
- the date of the report, and
- the reviewer’s signature and address.
Reviewer’s independence declaration
You must get a signed written declaration from the reviewer of your charity’s financial report that states that to the best of the reviewer’s knowledge and belief that:
- there have been no contraventions of any applicable code of professional conduct in respect of the review, or
- the only contraventions of any applicable code of professional conduct in respect of the review are those explained in the declaration.
Download an auditor’s report template. These templates are designed for use by auditors and were developed with the assistance of the Australian Auditing and Assurance Standards Board (AuASB).
Definition of audit
An audit of your charity’s financial report provides an auditor’s opinion as to whether the report:
- has been prepared correctly under the ACNC Act
- represents a true and fair view of the charity’s financial position (its net wealth) and performance (how it has gone)
- meets all applicable Australian Accounting Standards.
An audit aims to identify material misstatements in the financial report, including those resulting from fraud. The auditor will also obtain sufficient and appropriate evidence to evaluate whether your charity:
- provided all information, explanation and assistance needed to conduct the audit
- kept good financial records so a financial report could be prepared and audited, and
- kept other records as required under the ACNC Act.
Level of assurance
An audit provides more assurance (comfort) than a review. Unlike in a review, an auditor must collect evidence to allow them to give a direct reasonable assurance opinion that is positively stated, namely that your charity’s financial report meets the requirements of the ACNC Act.
Audit process
An auditor’s process is more detailed than a reviewer’s, and involves additional procedures to enable them to provide an opinion of reasonable assurance in relation to your charity’s financial statements and accounts.
You only need to reference the Australian Charities and Not-for-profits Commission Act 2012 and the Australian Charities and Not-for-profits Commission Regulations 2022. Do not reference the Corporations Act 2001.
Who can do an audit
Audits can be done by:
- a registered company auditor
- an audit firm
- an authorised audit company.
Auditor’s report
Under the ACNC Act, an auditor’s report must:
- state whether in the auditor’s opinion your charity’s financial report has been prepared correctly under the ACNC Act. If the auditor believes that your charity’s financial report does not meet the requirements of the ACNC Act, they must:
- explain why
- where possible, quantify the effect of this on your charity’s financial report or if it is not possible to quantify to explain why.
- describe any material defect or irregularity in the financial report
- state any problems in the assistance they received from the charity when conducting the audit, or any issues with the records kept by the charity as identified above, and
- include any statements or disclosures required by the auditing standards.
The auditor’s report generally includes:
- a title stating that it is an independent audit report, and who it is addressed to – for example, the members of the charity
- the auditor's opinion of the audit
- the basis for the opinion
- a section outlining the governing body’s responsibility for the financial report
- a section outlining the auditor’s responsibilities
- if applicable, a section outlining other reporting responsibilities to other government agencies
- the date of report, and
- the auditor’s signature and address.
Auditor’s independence declaration
Your charity must get a signed written declaration from your auditor that states that to the best of the auditor’s knowledge and belief that:
- there have been no contraventions of any applicable code of professional conduct in respect of the audit, or
- the only contraventions of any applicable code of professional conduct in respect of the audit are those detailed in the declaration.
If the financial report fully complies with the ACNC requirements the review or audit report will be ‘unmodified’.
A review or audit report may be ‘modified’ if the auditor believes that the charity’s financial report contains material misstatements or if the auditor has been unable to obtain evidence to form an opinion.
There are three types of review or audit report modifications:
- Qualified: the financial report complies with the ACNC requirements except for a specific part or parts of the financial report.
- Disclaimer: no opinion is expressed about the financial report, for example because the auditor was unable to obtain sufficient evidence to express an opinion.
- Adverse: the financial report does not comply with the ACNC requirements due to material and pervasive misstatements.
The review or audit report will clearly state if it is modified, and will also include additional text explaining the basis for the modification, here is an example of the ‘basis for qualified opinion’ text for a more common type of qualified audit opinion.
Basis for qualified opinion
The charity has determined that it is impracticable to maintain an effective system of internal control over the collection of cash donations until their initial entry into its financial records. Accordingly, our audit on the charity’s income was limited to the amounts recorded in the financial records. We are therefore unable to express an opinion whether the revenue including cash donations is complete.