The audit of not-for-profit organization-AuditingAssigment Essay

The audit of not-for-profit organization-AuditingAssigment - Essay Example 62). It involves high level of testing and application of audit procedures which results in high level of assurance, providing reasonable assurance on financial statements that financial statements are true and fair in all material aspects. However Assurance Engagement is expensive, so companies which are exempt from statuary audit may go for a Review Engagement. â€Å"The objective of a review engagement is to enable an auditor to state whether, on the basis of procedures which do not provide all the evidence that would required in an Assurance Engagement, anything has come to the auditor’s attention that causes the auditor to believe that the financial statements are not prepared, in all material respect, in accordance with an identified financial reporting framework† (Puttick, Van Esch, & Kana 2007 p. 73). As it is less expensive so it involves application of less detailed audit procedures than an Audit and provides moderate level of assurance which is expressed in t he form of negative assurance. The review engagement is hence, suitable for small NFPs to ensure the donators and volunteers of their fairness of operations and activities to achieve the goals of the organization. Non-Profit Organizations There are many forms of business organizations and non-profit organizations are one of the sorts which are increasingly gaining attention by authorities. Non-profit organizations include charities, local government bodies like councils and other government funded bodies like housing associations. Broadly speaking, NFP’s include bodies whose aim is to provide some educational, health or other social service with an intention to aid the society rather than generating wealth or profits of the organization (Wood & Powell, 1989). Charity is of the most common forms in not for profit organizations. The major differences between a company and a charity when it comes to auditing involve the presentation criterion which differs for both. Charities ar e normally tax exempt hence auditing changes for the charities. Auditing scope and method changes greatly as charities rely on cash donations and grants for the regular operations of the organization (Becker & Terrano 2007, pp. 1-5). However, larger NFPs and charities must have good internal control system to prove the controls reliable for the audit purposes reducing the overall work requirements for the audit engagement. Objectives of Non-profit Organizations Non profit organizations are either public sector organizations or other organizations whose primary purpose is to benefit the public rather than generating profits, which differentiate them to profit organizations whose main objective, is to maximize share holders’ wealth. Not just they differ from commercial organization; non-profit organizations differ from other non-profit organization for example: Local councils and public services organizations’ objective is to provide local services to a budget based on p ublic money which is likely to be based on value for money. While clubs, associations and unions’ objective would be of furtherance of the aims of club and to provide services to members which may include managing subscriptions paid and