Auditor-General supports proposal to extend statutory reporting time frames

Covid-19 has significantly affected many organisations in New Zealand, in both the public and private sectors.

In recent months, many public organisations have needed to work under extraordinary circumstances, dealing with changes to their spending, revenue, and their service delivery. Auditors have been unable to access all of the documentation, systems, and processes they could normally look at as part of an annual audit. Covid-19 has also added significant complexity to many audits.

In these unprecedented circumstances, the Auditor-General supports the proposal to amend legislation to extend the 30 June 2020 statutory reporting time frames by up to two months. This proposal depends on the legislation being passed before Parliament rises in early August.

We know that completing audited financial and performance reports is often pressured and requires considerable effort and resources in a normal year. Covid-19 has made this much more challenging.

To ensure a high quality of reporting, governors and preparers need time to fully consider all the risks and issues affecting their organisation, make the required judgements, document the rationale for those judgements, and make those judgements transparent through enhanced disclosures.

Auditors will also need more time to carry out most organisations’ audits. In a recent interview, the Chief Executive of the External Reporting Board noted that Covid-19 has led to audits taking up to 40% longer to complete.

The proposed legislative change includes most but not all 30 June reporting time frames. Because of their significance to the country, the Government is proposing to retain the existing time frame of 30 September for reporting on the financial statements of the Government. This means that auditing information held by the largest 49 public organisations that account for more than 95% of the money reported in the Government’s financial statements will need to be prioritised.

The Auditor-General has also asked auditors to prioritise audits of public organisations participating in debt and equity markets. We note that the Financial Markets Authority has already extended time frames for organisations that it oversees and time frames for listed entities have also been extended.

Given these circumstances, some organisations might be ready for an audit but the auditor might not be available. We appreciate that this is not ideal, but these are difficult times.

Accountability to the public through robust reporting about how much money is spent, what it is spent on, and the results that are delivered is critical to maintaining the public’s trust and confidence in public organisations.

We have asked all public organisations to keep open the lines of communication with their auditor, and agree time frames that are realistic for them to prepare the financial and performance reports, and for auditors to audit them.