Appointed auditors: Specific responsibilities

This information sets out more detailed information about the responsibilities of appointed auditors when carrying out the annual audit of a school.

The Auditor-General is the statutory auditor of all state schools under section 14 of the Public Audit Act 2001. The Auditor-General appoints auditors (known as appointed auditors) under section 32 of the Act to carry out the annual audit of the financial statements of all school Boards of Trustees.

Note to boards of trustees: We need to make arrangements with you to keep our audit staff safe while they are working at your premises. We expect you to provide a work environment for our audit staff that is without risks to their health and safety. This includes providing adequate lighting and ventilation, suitable desks and chairs, and safety equipment, where required. We also expect you to provide them with all information or training necessary to protect them from any risks they may be exposed to at your premises. This includes advising them of emergency evacuation procedures and how to report any health and safety issues.

Responsibilities for the financial statements

Appointed auditors have responsibility to carry out an annual audit, on behalf of the Auditor-General, and to form an opinion on whether the Board's financial statements comply with generally accepted accounting practice in New Zealand. They form an opinion on whether the financial statements fairly reflect the Board's financial position and the results of the Board's operations and cash flows (where required).

Appointed auditors also read other accompanying information to the financial statements to identify whether there are material inconsistencies with the audited financial statements.

Audit procedures generally include:

  • determining whether significant financial and management controls are working and can be relied on to produce complete and accurate data;
  • verifying samples of transactions and account balances;
  • performing analyses to identify anomalies in reported data;
  • reviewing significant estimates and judgements made by the Board;
  • confirming year-end balances;
  • determining whether accounting policies are appropriate and consistently applied; and
  • determining whether all financial statement disclosures are adequate.

The appointed auditor will ask the Board for written confirmation of representations made to them about the financial statements. In particular, the appointed auditor will seek confirmation that:

  • the adoption of the going concern assumption is appropriate;
  • all applicable legislative, regulatory, and contractual requirements have been complied with;
  • all material transactions have been included in the financial statements; and
  • uncorrected misstatements noted during the audit are immaterial to the financial statements.

Any representation made does not in any way reduce the appointed auditor's responsibility to perform appropriate audit procedures and enquiries.

Appointed auditors do not examine every transaction, nor do they guarantee that the financial statements are completely accurate. Because of the test nature and other inherent limitations of the annual audit, together with the inherent limitations of any accounting and internal control system, there is an unavoidable risk that some material misstatements may remain undiscovered.

Materiality is one of the main factors affecting the appointed auditor's judgement on the areas to be tested and on the timing, nature, and extent of the tests and procedures performed during the audit. In planning and performing the annual audit, appointed auditors aim to obtain reasonable assurance that the financial statements do not have material misstatements caused by either fraud or error. Material misstatements are differences or omissions of amounts and disclosures that would affect a reader's overall understanding of the financial statements.

If an appointed auditor finds material misstatements that are not corrected, they will refer to them in the audit opinion. The Auditor-General's preference is for the Board to correct any material misstatements and avoid the need for them to be referred to in the audit opinion.

page top

Responsibilities for the accounting records

Appointed auditors will perform enough tests to obtain reasonable assurance as to whether the underlying records are reliable and adequate as a basis for preparing the financial statements.

If, in the appointed auditor's opinion, the accounting records are not reliable or accurate enough to enable the preparation of the financial statements and the necessary evidence cannot be obtained by other means, the appointed auditor will need to consider the effect on the audit opinion.

page top

Responsibilities for accounting and internal control systems

The annual audit is not designed to identify all significant weaknesses in the Board's accounting and internal control systems. Appointed auditors review the accounting and internal control systems only to the extent required to express an opinion on the financial statements.

Appointed auditors will report to the Board separately any weaknesses in its accounting and internal control systems that come to their notice and that they consider may be relevant to the Board. Any such report will provide constructive recommendations to assist the Board and its management team to address those weaknesses.

page top

Responsibilities for being effective and efficient, minimising waste, and ensuring that decisions and actions are taken with due regard to probity and financial prudence

Appointed Auditors will, in carrying out the annual audit:

  • maintain alertness for, and awareness of, issues and risks with effectiveness and efficiency, waste, and a lack of probity or financial prudence;
  • audit areas of sensitive expenditure to assess whether individual staff members have been provided with actual or perceived private benefits; and
  • report in an appropriate manner on any matters that they identify.

page top

Responsibilities for preventing and detecting fraud and error

Appointed auditors design their audits to obtain reasonable, but not absolute, assurance of detecting fraud or error that would have a material effect on the financial statements. Appointed auditors review the accounting and internal control systems only to the extent required for them to express an opinion on the financial statements, but they will:

  • assess the effectiveness of internal control systems and procedures for preventing and detecting fraud and error; and
  • report to the Board weaknesses in internal control systems and procedures for monitoring the prevention and detection of fraud and error that come to their notice and that they consider could be relevant to the Board.

As part of the audit, the Board will be asked for written confirmation that it has disclosed all known instances of fraud or suspected fraud affecting the Board.

If an appointed auditor becomes aware of the possible existence of fraud – whether through applying audit procedures, advice from the Board's management or by any other means – they will communicate this to the Board with the expectation that the Board will consider whether it is appropriate to report the fraud to the appropriate law enforcement agency.

The Auditor-General's policy is that, if the Board does not report fraud to the appropriate law enforcement agency, the Auditor-General will consider doing so – for the purpose of protecting the interests of the public.

page top

Responsibilities for compliance with laws and regulations

Appointed auditors will assess whether the Board has systems, policies, and procedures to ensure compliance with those legislative, regulatory, and contractual requirements that are relevant to the audit. They will perform specific audit tests to assess whether the Board has complied with the statutory requirements for banking arrangements, borrowing, acquiring securities, and conflicts of interest.

The way in which an appointed auditor will report instances of non-compliance that come to their attention will depend on significance. They will report to the Board and to the Auditor-General all significant instances of non-compliance.

Appointed auditors will also report to the Board any weaknesses that they observe in internal control systems, policies, and procedures for monitoring compliance with laws, regulations, and contractual requirements, where relevant.

page top

Responsibilities to establish and maintain appropriate standards of conduct and personal integrity

Appointed auditors will have regard to whether the Board maintains high standards of conduct and personal integrity. Specifically, they will be alert for significant instances where members and employees of the Board may not have acted in keeping with the standards of conduct and personal integrity expected of them.

The way in which an appointed auditor will report instances that come to their attention will depend on significance. They will report to the Board and to the Auditor-General all significant instances of departure from expected standards of conduct and personal integrity.

The Auditor-General, on receiving a report from an appointed auditor, may, with due discretion and consideration of the report’s significance, decide to conduct a performance audit of, or an inquiry into, the matters raised. The performance audit or inquiry will be subject to specific terms of reference, in consultation with the Board.

page top

Responsibilities for conflicts of interest and related parties

To help determine whether Board members have carried out their duties free from bias, appointed auditors will review information provided by the Board that identifies related parties and will be alert for other material related party transactions. They will check that the Board has complied with any statutory requirements for conflicts of interest and whether these transactions have been properly recorded and disclosed in the financial statements.

page top

Responsibilities for publishing the audited financial statements on a website

Appointed auditors will perform procedures to satisfy themselves that the information the Board intends including on its website is consistent with the audited financial statements and that the audit report will not be inappropriately associated with any information that has not been audited.

Examining the controls over the electronic presentation of audited financial statements and the associated audit report on the Board's website is beyond the scope of the annual audit.

Appointed auditors will vary the audit report published on the website in keeping with the professional requirements on the publication of financial statements and related audit reports on websites.

Appointed auditors will review the material on initial posting on the website of the audited financial statements and on notification from the Board that new material about the audited financial statements has been posted on the website. Appointed auditors do not provide ongoing monitoring of the material.

page top

Other responsibilities

To meet the reporting deadlines, appointed auditors depend on receiving the Board's financial statements ready for audit and in enough time to enable the audit to be completed. "Ready for audit" means that the financial statements have been prepared in keeping with legal requirements, comply with generally accepted accounting practice, fairly reflect the activities and position of the Board, and are supported by proper accounting records and complete evidential documentation.

The appointed auditor will ensure that the annual audit is completed by the reporting deadline or, if that is not practicable because of the non-receipt or condition of the financial statements, or for some other reason beyond their control, as soon as possible after that.

The workpapers that the appointed auditor produces in carrying out the audit are the property of the Auditor-General. Workpapers are confidential to the Auditor-General and subject to the disclosure provisions in section 30 of the Public Audit Act 2001.

Page last updated: 2 August 2016

page top