The Quality of Charities’ Audit Reports in New Zealand

Authors:
Rowena Sinclair, The Auckland University of Technology
Keith Hooper, The Auckland University of Technology
Marini Mohiyaddin, The Auckland University of Technology

Abstract: The purpose of this study is to investigate the level of quality that auditors display during the audit of charitable organisations in New Zealand. Audit quality is defined by analysing the audit reports and audited financial statements of thirty-six registered children charities for compliance with specific auditing and financial reporting standards. The findings indicate two issues: First, a problem in audit quality amongst small-sized firms and secondly, a lack of understanding by charities of their financial information. The lack of compliance by auditors with professional standards including demonstrated expertise of the entity’s industry is an issue that must be addressed by the accounting profession otherwise the government is likely to extend the oversight of auditors (as is the case from 1 July 2011 in New Zealand) beyond those auditing issuers. The lack of understanding of financial information must be addressed by the Charities Commission with Charities to ensure the integrity of the information being received from Charities. The contribution that this study provides is from extending audit quality by examining auditor technical competence as required by professional standards. As well it offers insight into the integrity of the information being collected by the New Zealand Charities Commission.