TO:                     MANAGING PARTNER
FROM:              AUDIT SENIOR
SUBJECT:          AUDIT CHARACTERISTICS OF INTERNATIONAL NON-GOVERNMENTAL ORGANISATIONS
DATE:               ×××
In respect of your request on the above subject matter please find below my findings:
Audit of international non-governmental organisations falls under transnational audits. Transnational audits means audits of financial statements which are or may be relied upon outside the entity’s home jurisdiction for purposes of significant lending, investments or regulatory decisions, this will include audits of all financial statements of companies with listed equity and debt and other public interest entities which attract particular public attention because of their size, products or services.

Other public interest entities include those entities in either the public or private sectors which have significant transactions across national borders, whether or not having either listed equity or debt. These will include for example large charitable organisations or trusts, major monopolies or duopolies, providers of financial or other borrowing facilities to commercial or private customer’s deposits taking organisations and those holding funds belonging to third parties in connection with investment and savings.

Significant transactions across national borders shall include transactions such that, there is a reasonable expectation that the financial statements of the entity may be relied upon by the user outside the entity’s home jurisdiction for purposes of significant lending, investments or regulatory decision. In principle, the definition of transnational audit should be applied to consolidated entity as a whole including the individual entities comprising the consolidated entity.

An international charity taking donations through various national branches and making grants around the world is clearly considered as a public interest entity and operating across national borders. Further, the international structure would create reasonable expectation that the financial statements would be used across national borders by donors in other countries, if not by others for purposes of significant lending, investments or regulatory decision
Features of Transnational Audits

• In the globalised business environment, many audits are clearly transnational and this produces a number of problems which can limit the reliability of the audited financial statements.
• Regulatory and oversight of audit differs from country to country
• Differences in auditing standards from country to country
• Variability of audits in different countries

Actions needed to prepare the firm to enter the transnational audit market of international charitable organisation.
Since our firm is very small we need to build our capacity and muscle for such audits. Actions needed include:

• Arrangement to merge with other firms to increase our size and capacity.
• Joining the Forum of Firms. This is an international grouping of the big firms founded by the following network BDO, Deloitte, EY, Grant Thornton, KPMG and PWC. These firms have a voluntary agreement to meet certain requirements that are set out in their constitution namely:
• Promoting the use of high quality audit practises including the use of ISAs
• Maintaining quality control standards in accordance with international standards on Quality Control issued by the IAASB and conducting globally internal quality assurance review.

The Transnational Auditor’s Committee: The IAASB has set up the Transnational Auditor’s Committee (TAC) to provide guidance to the members of the Forum of Firms. Our membership of the Forum of Firms will enable us to benefit from the services of the committee.