AUDITORS’ REPORT TO THE TRUSTEES/BOARD OF GOVERNORS/ MANAGEMENT COMMITTEE
The Issue
What should be the format of the auditors’ report regarding audits of Societies, NGOs and charity organisations?
Recommendations of the Technical Advisory Committee
As a standard format for an auditors’ report relating to audits of Societies, NGOs and charity organisations is not prescribed in any law and as there is no provision for maintenance of accounts and the audit of such entities either in the Trust Act, 1882 or the Societies Registration Act, 1860 therefore the Council has approved the enclosed formats of auditors’ reports as applicable, for use in this respect.
Members are advised to follow the following formats, whichever is relevant, according to the applicable financial reporting framework, while reporting on the financial statements of such entities. The commonly used financial reporting frameworks are as follows:
a) Preparation of financial statements in accordance with the requirements of the approved accounting standards as applicable in Pakistan (i.e. the International Financial Reporting Standards); and
b) preparation of statements in accordance with another comprehensive basis of accounting such as:
i) Receipts and disbursements basis of accounting
under the ‘receipts and disbursements basis of accounting’, revenue is recognised when received rather than when earned, and expenses are recognised when payments are made rather than when incurred.
ii) Receipts and expenditure basis where a receipt and expenditure account is prepared
under the ‘receipts and expenditure basis of accounting’, revenue is recognised when received rather than when earned, and expenses are recognised when incurred i.e. on an accrual basis.
iii) Receipts and expenditure basis where a balance sheet is prepared
under the ‘receipts and expenditure basis of accounting’, revenue is recognised when received rather than when earned, and expenses are recognised when incurred i.e. on an accrual basis.
Independent auditors’ report to the trustees / board of governors / management committee (under the financial reporting framework as in (a) above)
We have audited the annexed balance sheet of the ——————- as at —————-and the related income and expenditure account and cash flow statement together with the notes forming part thereof (here-in-after referred to as the financial statements for the —— months period ended ———-/ year then ended).
It is the responsibility of the trustees / board of governors / management committee (or other as appropriate) to establish and maintain a system of internal control, and prepare and present the financial statements in conformity with the approved accounting standards as applicable in Pakistan. Our responsibility is to express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with the auditing standards as applicable in Pakistan. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting policies used and significant estimates made by the management, as well as, evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion.
In our opinion the financial statements present fairly in all material respects the financial position of the —————— as at ———————– and of its surplus/deficit and cash flows for the year/——— months period then ended in accordance with the approved accounting standards as applicable in Pakistan.
Independent auditors’ report to the trustees / board of governors / management committee (under the financial reporting framework as in (b) (i) and (ii) above)
We have audited the annexed receipts and disbursements account / receipts and expenditure account of the …………… as at ……………….. together with the notes forming part thereof (here-in-after referred to as the statement for the ——- period ended ——– / year then ended). It is the responsibility of the trustees / board of governors / management committee (or other as appropriate) to establish and maintain a system of internal control, and prepare and present the statement in conformity with the cash receipts and disbursements / cash receipts and expenditure incurred basis as described in note X to the statement. Our responsibility is to express an opinion on these statements based on our audit.
We conducted our audit in accordance with the auditing standards as applicable in Pakistan. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the statement is free of material misstatement. An audit includes examining on a test basis, evidence supporting the amounts and disclosures in the statement. An audit also includes assessing the accounting policies used and significant estimates made by the management, as well as evaluating the overall presentation of the statement. We believe that our audit provides a reasonable basis for our opinion.
As described in note X, the statement has been prepared on the (cash receipts and disbursements basis / cash receipts and expenditure basis) of accounting, which is a comprehensive basis of accounting other than the generally accepted accounting principles.
In our opinion the statement presents fairly, in all material respects, the cash receipts and disbursement/cash receipts and expenditure of the ———————– for the year ended ———————- on the basis of accounting as described in note X to the statement.
Independent auditors’ report to the trustees / board of governors / management committee (under the financial reporting framework as in (b) (iii) above)
We have audited the annexed balance sheet of the …………… as at ……………….. and the related income and expenditure account and cash flow statement together with the notes forming part thereof (here-in-after referred to as the financial statements), for the ——- period ended ——– / year then ended). It is the responsibility of the trustees / board of governors / management committee (or other as appropriate) to establish and maintain a system of internal control, and prepare and present the financial statements in conformity with the cash receipts and expenditure incurred basis of preparation as described in note X to the annexed financial statements. Our responsibility is to express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with the auditing standards as applicable in Pakistan. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting policies used and significant estimates made by the management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion.
As described in note X, the financial statements have been prepared on the cash receipts and expenditure basis of accounting, which is a comprehensive basis of accounting other than the generally accepted accounting principles. In our opinion the financial statements present fairly, in all material respects, the cash receipts and expenditure of the ———————– for the year ended ———————- on the basis of accounting as described in note X to the statements.
This revised ATR – 17 (2012) supersedes the requirements as contained in revised ATR – 17 (2004) and is applicable for audits of financial statement/statements for periods beginning on or after July 1, 2011. However, earlier application is encouraged.
(230th Meeting of the Council – December 17, 2011)