Update on the completion of 30 June 2021 audits

In July this year, Parliament extended statutory reporting time frames in the Crown Entities Act 2004 and the Local Government Act 2002 by two months.¹ With an acute shortage of senior auditors in New Zealand and Australia, this extension recognised the challenges caused by Covid-19 restrictions. It was designed to allow time to complete the audits of public organisations with a 30 June balance date, while respecting the importance of public accountability arrangements.

As we have said from the outset of Covid-19, it is vital we do not compromise the quality of the audit work carried out, especially during times of increased public spending and uncertainty. The reporting time frames were extended to allow auditors to sequence their work over a longer period and maintain the quality of their work.

We have completed almost all audits with 30 September reporting time frames

We have completed almost all audits with 30 June balance dates that were required to report by 30 September 2021. The few exceptions are public organisations that were unable to provide all the information needed for the audit in a timely manner, most often due to Covid-related restrictions. This is a significant achievement in the current environment.

The audits that are most important to New Zealand’s public accountability system – such as the audits of the financial statements of the Government, many government departments, Reserve Bank of New Zealand, New Zealand Superannuation Fund, State-owned enterprises, and Financial Markets Conduct reporting entities, such as Auckland Council – have been completed, as have many others.

This achievement is the result of extraordinary efforts by public organisations to produce their accountability documents under challenging circumstances, and by our auditors working greatly extended hours for many months, under equally challenging circumstances, to complete their work.

Good progress is being made on other audits

We remain on track to complete district health board, nearly all council, and larger public organisations’ audits that had statutory reporting time frames extended by Parliament. Doing so will require these organisations to have information ready for audit so we can progress these audits as efficiently as possible.

Two councils have been particularly late in completing their long-term plans, which has taken up time that would otherwise have been available to work on their annual audits. With acute auditor shortages, we are not able to schedule their annual audits until early 2022.

Despite good progress on audits, restrictions in response to Covid-19 (since statutory reporting time frames were extended) have meant that audit work has been less efficient than normal. The restrictions make audits much more difficult because they can affect access to people and information, often mean slower delivery of information, and, for some, require more work to test judgements in new and disrupted areas of a public organisation’s work.

These inefficiencies, and the continued shortage of auditors across the audit profession in New Zealand and Australia, have affected our ability to work on audits for some smaller public organisations with 30 June 2021 balance dates.

Some smaller 30 June 2021 audits will now be completed in early 2022

There are some smaller audits that we will not now be able to complete by the end of this calendar year. These audits play a smaller role in New Zealand’s public accountability system and will be completed in the first few months of 2022.

This is not something that we wanted, nor is it something that the affected organisations wanted, but it is now unavoidable. The impact on our audits is just one of many aspects of life affected by the need to prevent a widespread outbreak of Covid-19.

We have been contacting chief executives and governors of the affected public organisations to let them know about the revised timing for their audits. We have also notified the relevant regulatory agencies.

We will provide a further update on our progress later in the year.

1: The extensions apply to Crown entities and organisations listed in Schedules 4 and 4A of the Public Finance Act 1989 and local authorities and council-controlled organisations with 30 June balance dates. It applies this year and in 2022. A similar extension was made in 2020 covering a broader range of public organisations, in response to Covid-19 restrictions.