Tupizagram #18

Whether you were deeply involved in the election or a confirmed abstainer, we have all enjoyed a few weeks when legislation was put on the back seat and there was no new law to learn.

Change of XRB References

Auditors have the option of describing the Auditor’s Responsibilities for the Audit of the Financial Statements in full in the audit report, or by referring to an XRB web page. The commonest one is probably https://xrb.govt.nz/Site/Auditing_Assurance_Standards/Current_Standards/Page8.aspx.

At some stage the XRB have secretly (well, without notifying Tupiza Ltd.) changed the web pages. The one quoted above has become http://www.xrb.govt.nz/standards-for-assurance-practitioners/auditors-responsibilities/audit-report-8/. As we all know, a visitor to a web page can be automatically redirected to another page, and the XRB knows this, too. We tested what happens now if you click on the original link. You are indeed redirected, but to the wrong page! 

The XRB has been informed (and have now corrected - AA), but our advice is to update your audit report templates to the new addresses (which we have now done - AA).

Which Framework?

There's quite a lot about reporting requirements in this Tupizagram. Of course, as an accountant you are passionately interested … you're not? Then I apologise. It may be a dull topic, but it is important and, as we all know, has become absurdly complex.

There are many not-for-profit entities that are not charities, and have no reporting obligations beyond the very basic ones in section 23 of the Incorporated Societies Act 1908. A lot of them are presenting financial statements based on the CAANZ SPFR and we have been asked “Is this OK?”.

There is no universal answer to this. Statute doesn’t prescribe any particular reporting framework, but many of these organisations have constitutions or rules that specify, say, GAAP. In most cases this is now PBE Tier 3. If there is nothing in the constitution they have great scope and can choose any reasonable set of accounting policies.

Those that do select their own policies may elect to follow SPFR, usually, we suspect, because their accountant has the formats already set up BUT 

  • SPFR is designed for for-profit entities so is not automatically suitable for a not-for-profit entity;
  • There is no “special purpose” framework as such. The organisation can elect to present a financial report that is for the special purpose of reporting to the members and adopt any set of policies that will sensibly do so;
  • Any audit report for SPFR or other special purpose reporting will have to comply with ISA (NZ) 800.

Can these kinds of entities opt to use PBE Tier 3 or 4 even though not required to do so? Yes, of course they can voluntarily adopt T3 or T4. Or adapt them by, say, using T4 without the statement of service performance. As treasurer of the Motueka Yacht Club I attempted to follow all of T4 this year. It wasn't particularly easy. I found the XRB's template difficult to edit. Some of its features are valid for charities, but simply didn't work for the yacht club.

The secretary was very impressed by the statement of service performance, but no-one else gave any feedback on the non-financial information. I still think it was worthwhile presenting one, though.

If it's not GAAP it must be special purpose, right?

We received a request for an audit report for a small NFP which does not prepare a statement of service performance. The requester used the expression “special purpose” and it got me thinking.

Many accountants use “special purpose” for any non-gaap accounts. This is incorrect. The Tier 4 NFP framework, for example, is non-gaap but is designed for general purpose reporting. If an entity does not have to follow a particular framework it can select whatever accounting policies suit its circumstances, but this is not necessarily “special purpose”. I suspect that most small non-charity NFPs will create one financial report and use it for everything, i.e. as a general purpose report.

Then I noticed that I had made the same mistake myself in a couple of the Tupiza audit report templates, describing non-compliance with a framework as “special purpose”. So I have re-named a couple of templates, and added one for an NFP that does not include a statement of service performance. They are all set up for either true special purpose or non-gaap general purpose. 

Audit Report Templates

As well as straitening out the special/general purpose options described above, some more templates have been developed. The full current list is attached, with the pricing details (see below). Note that the discounts are cumulative. If you have already purchased 4 templates at full price and order another one now, the 15% discount will be applied to ALL FIVE templates. How good a deal is that?
(NOTE: For Audit Assistant most of these reports are already incorporated in Audit Assistant or are in the process of being incorporated)

Maori Incorporations

Before the politicians focussed entirely on pleading for our votes, they did pass an amendment in 2017 to the Te Ture Whenua Maori Act 1993. Well, it was more of a correction than an amendment.

If you were involved with any Maori incorporations you will know that the 2013 amendments to the Act required those with total operating payments of $125,000 or more to comply with GAAP. This was fine if the incorporation was a public benefit entity (PBE), but if it was for-profit then GAAP meant NZ IFRS. The lawmakers had assumed that incorporations were PBEs, but many of them energetically pursue profits, and some, we hear, even pay dividends. One informed commentator we know has opined that they are all for-profit entities.

The imposition of NZ IFRS was unintended.

Fixing legislative cock-ups takes time, but it has finally been done. A Maori incorporation now only has to follow GAAP if it is “large”. This is defined as total (group) revenue exceeding $10 million. We understand that the change is retrospective and can be applied to any reporting period beginning on or after 1 April 2014.

Large Maori incorporations have to appoint an auditor.

Audit reports on Maori incorporations are now the only ones to our knowledge that must, by statute, include an 'other legal' section. The auditor has to offer an opinion as to the market value of the assets and state whether the share register and index have been “duly and correctly kept”.

Maori Trusts

From time to time we get asked about which reporting framework a Maori Trust must adopt. There is nothing in the Te Ture Whenua Maori Act 1993 or any other Act we have consulted, so our advice is to read the trust deed. On the plus side, every deed we have read does have something to say about accounts and audit. On the minus side, the language seldom conforms to modern accounting terminology. Does what was written, possibly decades ago, correspond to GAAP? We are willing to offer an opinion if the trustees and auditor are uncertain.


Another series of auditing webinars is being developed and will be announced in a separate Tupizagram sometime in the next month. If you have any suggestions for topics, now is the time to let us know.

Not everyone knows the full range of our services. Briefly:

For auditors: Advice on all aspects of auditing, particularly audit reporting, auditing standards, the related professional and ethical standards, how to tackle unusual situations and how to deal with awkward clients. Training for auditors at all levels. We can also assist with document templates and texts of audit reports.

For auditees: How to deal with awkward auditors. (This is very rare!)

For publishers: Technical writing on audit and accounting topics.

For everybody: Choosing the right reporting framework, advice on financial reporting standards, comment on sufficiency of disclosures and company secretarial matters.

Disclaimer. Tupizagrams are designed to give accurate but general information. No liability is accepted in any way to any person arising out of reliance on the contents for any purpose.

Best wishes,

Bill Heritage

2471 Motueka Valley Highway, RD1, Motueka 7196

Tel: +64 3 543 3668

Mob: +64 21 141 8831
Skype ID:  bill_heritage

At my age people expect me to be mature, wise and sensible.  I aim to disappoint them.
Quote of the week:

“The cow is of the bovine ilk; One end is moo, the other, milk.” Ogden Nash (19 August 1902 – 19 May 1971), American poet.


(reprinted with permission - to subscribe direct to Bill's email contact him via the above)


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