In order to form an opinion under ASA 700^[5] Forming an Opinion and Reporting on a Financial Report “the auditor shall conclude as to whether the auditor has obtained reasonable assurance about whether the financial report as a whole is free from material misstatement, whether due to fraud or error”. In relation to the above the auditor needs to consider:

1. whether sufficient appropriate evidence has been obtained and under ASA 330^[6] in particular, the auditor needs to consider the controls and the effectiveness of controls over each source of fundraising revenue;
2. whether uncorrected misstatements are material, individually or in aggregate^[7], under ASA 450 Evaluation of Misstatements Identified during the Audit; and
3. whether the financial report, in all material respects, is in accordance with the requirements of the applicable financial reporting framework^[8]. This evaluation shall include consideration of the qualitative aspects of the entity’s accounting practices, including indicators of possible bias in management’s judgements, In particular consideration may be given to whether:
   1. adequate disclosure of significant accounting policies for fundraising revenue has been made, their selection appropriate and that they have been consistently applied within the reporting framework;
   2. accounting estimates made by management are reasonable;
   3. information presented in the financial report is relevant, reliable, comparable and understandable; and
   4. the financial report provides adequate disclosures to enable intended users to understand material transactions and events in the information conveyed in the financial report.

The auditor may also need to consider any obligations under ASA 260 Communication with Those Charged with Governance to communicate significant findings from the audit.

Where the auditor obtains sufficient appropriate audit evidence to conclude that fundraising revenue reported in a not-for-profit entity’s financial report is, in all material respects, presented fairly in accordance with Australian Accounting Standards and other relevant professional reporting requirements, the auditor issues an unmodified audit opinion. This may be the case where for example, a not-for-profit entity receives most of its fundraising revenue in the form of grants, contributions or fees and adequate and effective controls are in place over these sources of revenue and there is only an immaterial amount from cash donations and other fundraising sources.

Where considered fundamental to the users’ understanding of the financial report, the auditor may deem it necessary to draw to the attention of users, the inherent risk of the not-for-profit entity’s operating environment as it relates to revenue recognition from fundraising sources. This may be achieved by the inclusion of an Emphasis of Matter paragraph, in accordance with ASA 706 Emphasis of Matter Paragraphs and Other Matter Paragraphs in the Independent Auditor’s Report^[9]. Appendix 2 provides an illustration of an auditor’s report with the inclusion of an example Emphasis of Matter paragraph.

A not-for-profit entity may derive a material proportion of its fundraising revenue from sources for which there are limited controls e.g. street collections. It may be impracticable to maintain effective controls due to resource constraints, prior to the recording of fundraising revenue in the financial records. Accordingly, it may not be possible to obtain reasonable assurance about the completeness of fundraising revenue from these sources. In the absence of other evidence and qualitative factors, and where cash donations as a portion of total fundraising revenue is material, the scope of the auditor’s work may be limited in so far as being able to obtain sufficient appropriate audit evidence to conclude whether the financial records reflect fundraising revenue from the point at which the not-for-profit entity should have gained control of the cash donations.

ASA 705 Modifications to the Opinion in the Independent Auditor’s Report describes the circumstances when a modification to the auditor’s opinion is required including when the auditor is unable to obtain sufficient appropriate audit evidence to conclude that the financial report as a whole is free from material misstatement. In these circumstances the auditor would issue a qualified audit opinion as illustrated in Appendix 3.