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When a donor writes “project audit under ISA 800” or “assurance engagement under ISAE 3000” in its terms of reference, an NGO accountant often sees a set of look-alike abbreviations. In reality, each number stands for a separate IAASB standard with its own subject matter, level of assurance and form of conclusion, and the choice determines the scope of work, the list of documents and what the donor receives in the end.<\/p>\n
Confusion is expensive. If an organisation orders a report of factual findings under ISRS 4400 while the grant agreement requires an auditor’s opinion under ISA 805, the donor will return the report and ask for the engagement to be repeated. In the opposite case, the NGO pays for a full audit where agreed-upon procedures would have been enough. Below we explain the four verification formats and how to read the terms of reference of the EU, GIZ, UN agencies, embassies and foundations.<\/p>\n
International standards on auditing and related services are issued by the International Auditing and Assurance Standards Board (IAASB). Donors refer to them so that the result is understood in any country. The main groups are:<\/p>\n
The donor chooses the standard depending on what it wants to know: whether the project report as a whole is reliable, whether a specific expenditure line is confirmed, whether the terms of the agreement were complied with, or whether it only needs a list of facts. A general overview of donor project verification is available on our grant audit<\/a> page.<\/p>\n ISA 800 (Revised) applies when financial statements are prepared not under a general purpose framework but under a special purpose framework. For donor projects this is the typical situation: the statement of receipts and use of grant funds is prepared according to the donor’s rules.<\/p>\n The auditor audits the complete set of such statements in accordance with all applicable ISAs and expresses an opinion on whether the statements are prepared, in all material respects, in accordance with the donor’s rules. The standard requires the auditor’s report to include a paragraph alerting readers that the statements are prepared under a special purpose framework and may not be suitable for other purposes, so such a report does not replace the organisation’s statutory audit.<\/p>\n ISA 800 is required when the donor has approved its own format of project financial statements with a defined basis of accounting, and the statements cover the whole project and include several schedules: receipts, expenditure, balances, bank reconciliation.<\/p>\n ISA 805 (Revised) covers cases where the subject of the audit is not a complete set of financial statements but a single financial statement or a specific element, account or item. In donor practice this is most often the statement of expenditure of the project, a schedule for a specific budget line, or a statement of the balance of funds in the project account.<\/p>\n The auditor applies the relevant ISAs but determines materiality for the specific element and forms an opinion on it alone: whether the project statement of expenditure presents expenditure, in all material respects, in accordance with the donor’s requirements.<\/p>\n The line between ISA 800 and ISA 805 depends on what the donor calls “project financial statements”. A single statement of expenditure: ISA 805. A set of schedules with a description of accounting policies: ISA 800. Sometimes both standards are referenced together, and that is correct.<\/p>\n ISAE 3000 (Revised) covers assurance engagements other than audits or reviews of historical financial information. It is used when the donor needs not an opinion on figures but an independent conclusion on something else: whether the terms of the grant agreement were complied with, whether procurement followed the donor’s rules, whether performance indicators (number of beneficiaries, events, services) are reliable, whether internal control works.<\/p>\n The standard provides for two levels of assurance:<\/p>\n The standard requires the practitioner to be independent, to have a quality management system and to apply clear criteria. For a project these are usually the grant agreement, the donor’s financial guidelines and the approved budget; vague criteria are agreed with the donor before the work starts.<\/p>\n ISRS 4400 (Revised) is fundamentally different: the auditor performs procedures agreed with the donor and the organisation and reports factual findings, but expresses no opinion and provides no assurance. Conclusions are drawn by the user of the report. The format is described in detail in our article on agreed-upon procedures under ISRS 4400<\/a>.<\/p>\nISA 800: audit of financial statements prepared under a special purpose framework<\/h2>\n
ISA 805: audit of a single financial statement or element<\/h2>\n
ISAE 3000: assurance on non-financial information and compliance<\/h2>\n
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Comparison with ISRS 4400: four formats in one table<\/h2>\n