Previous Insights

9 May 2022

Sunlight is the best disinfectant - The case for transparency and accountability in the charities sector


Think piece from Craig Fisher – Chair of the XRB's External Advisory Committee

Charites, large and small, do fantastic work in Aotearoa New Zealand. Many people, myself included, see them as an essential part of the glue that holds our communities and society together. As such, they should be supported.  

Support in New Zealand comes in many forms. Financially from generous individuals, businesses, and philanthropic trusts and foundations. In addition, our legislation and regulation in New Zealand mean that it is, by international comparison, very easy to establish a charity and for it to apply for, and be granted, charitable status.    

The main benefits of charitable status are primarily twofold: 

  1. Exemption from income tax
  2. Public recognition as a registered charity  

Exemption from income tax is effectively the Government granting, on behalf the general tax paying public, a tangible financial benefit (i.e. not having to pay 28% income tax like a business) to help support a charity’s mahi. A related additional financial benefit granted by the Government is donee status meaning that donors can get a tax rebate for their donation generosity. 

Having registered charity status is also very valuable for a charity’s credibility. It helps confirm to the general public the charity’s social licence to operate as charitable and helps engender trust in the charitable sector.  

A quid pro quo for the benefits

Legislative reforms regarding charities in New Zealand from 2005 onwards clarified that if a charity is to gain the considerable benefits of registered charity status, then an appropriate level of accountability and transparency to the tax paying public is required. In effect, it is the quid pro quo for the considerable benefits of registered charitable status.  

Key planks of the accountability and transparency would be delivered primarily by the creation of a public register, maintained by Charities Services, containing freely searchable information on all registered charities. Significantly this would include annual financial statements of each charity prepared in accordance with the appropriate accounting standards.  

Understandability and comparability are key features of transparency. The requirement to follow appropriate accounting standards assists with this.   

However also recognised was the very different sizes and complexity of our charities in New Zealand. Hence our 4 tiers of financial reporting standards which are essentially different levels of complexity for different sizes of charities – a pragmatic NZ “horses for courses” approach.

But do the compliance costs outweight the benefits?

With any system of tiers someone has to draw a line. And whenever you draw a line, some people will be unhappy. There will be grumbles of unfairness. However, in my personal view we have drawn the lines pretty fairly in this case.   

The other common grumble is the cost to comply: “But it is too hard”  “The compliance costs are too much for us”. 

I can personally attest to the considerable amount of very thoughtful effort which has gone into ensuring the reporting requirements are appropriate. In addition to this, helpful guidance, templates etc are also provided.    

The XRB is also undertaking a review of Tier 3 & 4 requirements, and anyone can engage in this process and have their say.  

I am aware that some in the charity sector remain unconvinced and still want to complain about the effort of compliance. However, in my mind, the answer is simple: No-one is forcing you to be a registered charity. It’s ultimately your choice. There are clear advantages to being a registered charity such as the income tax exempt status and public credibility. And if an entity wants to avail itself of these potentially considerable advantages, then there will be some compliance required.   

Quite simply this compliance is the “tickets to the game”.


As a proud New Zealander, I want to ensure we continue to have a strong, vibrant, wellsupported charitable sector for the health of our society. 

As a taxpayer and donor to charities, I want to ensure my charitable and public funds are being appropriately used and that there is appropriate accountability and transparency by charities for the benefits their status gives them. 

We have to strike a balance. We have to draw those difficult lines.  


About the Author

Craig Fisher FCA is a former audit partner and now Consultant at RSM. Craig chairs the XRB's External Reporting Advisory Panel. The views expressed here are his own.

Contact Craig on:

D: +64 21 899 848



Editor’s note:

The XRB have recently launched their consultation on Tiers 3 & 4 Not-for-Profit reporting standards. Read more here

31 March 2022

Disclaimers of opinion - last resort for auditors


An audit report is not an evaluation of whether an entity is a good investment but is focused instead on the integrity (material truth and fairness) of an entity’s financial statements. As such, auditors have a professional obligation to provide a level of comfort as to whether the financial statements fairly and accurately reflect the operations of an entity during the relevant period.  

Due to COVID-19 and the uncertainty that its created, we’re starting to see more modifications being made to audit reports, including disclaimers of opinion. 

What is a disclaimer of opinion?

This type of audit report modification is only used when the auditor has exhausted all avenues to get the evidence needed to form an opinion that provides some level of comfort over the financial statements.

Why is a disclaimer of opinion given?

There are several reasons why an auditor might issue a disclaimer of opinion.  

Missing or unreliable financial information can be a driver and includes things like gaps in the financial records, such as details of significant transactions being lost due to changes in key personnel or misplaced records. 

Significant inherent uncertainties can also contribute to an auditor issuing this type of modified opinion. For example, a disclaimer of opinion will be issued where there is significant uncertainty relating to going concern. In this instance, an auditor may have concerns about the level of uncertainty surrounding future cash flow forecasts or the future forecast borrowing levels of an entity. This has been exacerbated in the current COVID environment due to the uncertainty around future operating conditions for many entities due to lock downs, border closures and red light settings.

An inability by the auditor to complete all the audit procedures required for significant balances might also cause the auditor to disclaim. The auditor may not have been appointed until after the inventory count was completed and is unable to substantiate inventory balances by normal and/or additional procedures.

Where balance dates have occurred during COVID-19 lockdowns, we’ve seen auditors go to extraordinary lengths to complete inventory stock takes from a safe distance, such as using drones to verify inventory levels, to avoid the need to issue a disclaimer. Some auditors have performed inventory counts at a time other than year end with additional procedures to cover the intervening period, to ensure that they can get comfort over inventory balances.

Not given lightly

It is important to highlight that although we’re seeing more disclaimers of opinion than in pre-COVID times, we would expect this type of modified opinion to only be issued as an absolute last resort.

An auditor will only issue a disclaimer when they have exhausted all reasonable means to issue an opinion which provides a greater level of comfort to users of the financial statements. They’re also not done at the stroke of a pen - rigorous quality management and approval processes exist that audit firms work through before a disclaimer can be issued.  I can assure you auditors are doing their absolute best to ensure that disclaimers of opinion are the exception rather than the rule.

John Kensington is a Member of the External Reporting Board and Vice Chair of its Auditing and Assurance Standards Board.

Editor’s note:

The External Reporting Board (XRB) receives modified audit reports due to statutory requirements. All modified audit reports received are reviewed to inform decisions about whether changes to accounting or assurance standards need to be made.
This review by the XRB provides another check and balance in the financial reporting eco-system which ensures the standards issued by the XRB are fit for purpose.

27 January 2022

Michele Embling - Chair of the External Reporting Board  

Delivering on our vision of achieving prosperity for New Zealand, through effective decision making informed by high-quality reporting, requires us to work across all sectors of the economy, and engage with a broad range of stakeholders. Our adoption of international standards to support firms to be competitive and comparable on the global stage is critical to ensuring New Zealand’s capital markets thrive. The Not-for-Profit and Public sectors make an important contribution to the well-being of New Zealanders extending beyond monetary value. The reporting standards we set play a vital role in ensuring transparency, accountability and trust in these sectors is maintained.  
Developing and issuing reporting standards is not a one-way street. We must continuously strive to maintain a balance between the quality of the standards with their practical application and use. This requires us to talk, and more importantly, to listen. I am continuously impressed by the willingness of individuals and organisations to help us achieve that balance. Whether that’s by giving feedback, collaborating with us to develop new and innovative solutions, contributing technical expertise, or in the case of our climate-related disclosures work, supporting us to engage with new and different stakeholders. On behalf of my fellow Board members, and the XRB, I would like to say thank you to all of you for your invaluable support.  
Ehara taku toa
i te toa takitahi
Engari, he toa takitini
Success is not the work of one, but the work of many.