The regulatory framework for not-for-profit entities can be complex. not-for-profit entities may operate under a variety of legal structures, such as a company limited by guarantee, a trust, an incorporated or unincorporated association, Royal Charter or pursuant to legislation enacted specifically to establish the entity (e.g. Charitable Fundraising Act 1991). Each of these legal structures may impose specific financial reporting and auditing requirements. A not-for-profit entity’s governing documents may prescribe specific disclosure requirements to be made in its financial report or other responsibilities which impact on the scope of the audit. The legal structure may also affect the financial reporting framework, for example, the extent to which compliance with Australian Accounting Standards is required.

For a not-for-profit entity that is a company limited by guarantee, further consideration needs to be given to the recent changes to the Corporations Act 2000. Refer to Corporations Amendment (Corporate Reporting Reform) Act 2010 which establishes a three tier system for these entities based on annual revenue and the status of the entity, as to whether they are required to prepare a financial report and have the report audited or reviewed. If the company limited by guarantee meets the criteria and the auditor is able to conduct a review instead of an audit this guidance statement provides an illustration of a Qualified Review Report (Limitation of Scope) as set out in Appendix 4. For further information, refer to ASRE 2415 Review of a Financial Report - Company Limited by Guarantee.

The conduct of some activities undertaken by not-for-profit entities, for example, major fundraising events or other activities associated therewith may be governed by specific regulations. Such regulations may prescribe compliance and reporting obligations by the entity’s governing body and the auditor in connection with the particular event. Any material non-compliance with these regulations could have a significant financial impact should any limitation be placed on the not-for-profit entity undertaking similar activities in the future.