The Treasury

Material Related to the Annual Reporting and Audit Time Frames Extensions Legislation Bill Information Release August 2021

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2 July 2021 John Ryan

Hon Grant Robertson Mr Andrew Bayly MP Minister of Finance Opposition Finance Spokesperson Parliament Buildings Parliament Buildings Wellington Wellington

Tēnā kōrua Minister and Mr Bayly

Shortage of auditors

Thank you for indicating your support for legislative change to address the current shortage of auditors. Adjusting statutory reporting deadlines for 30 June 2021 balance dates, for a subset of public entities, will help ensure that audit quality is not compromised and the integrity of statutory deadlines is maintained.

We have identified which audits will be completed within the current statutory reporting deadlines. These include:

• The Financial Statements of Government and all key components. This will include all government departments, the Reserve Bank of New Zealand, New Zealand Superannuation Fund, State-owned enterprises, mixed ownership model companies, Air New Zealand Limited, and large Crown entities such as the Accident Compensation Corporation, Kainga Ora, Waka Kotahi, and larger district health boards.

• All Financial Markets Conduct reporting entities (those covered by the Financial Markets Conduct Act 2013) and their significant components (for example, Council, Auckland Transport, Watercare Services, and Ports of Auckland).

• Larger councils (for example Christchurch City, Tauranga City, Wellington City, Dunedin City, and others, including significant council-controlled organisations).

Any outstanding audits of councils’ long-term plans 2021-31 will also be a priority, as well as any remaining audits of significant entities with a 31 March 2021 balance date.

We are unable to complete audits within the current statutory reporting deadlines for:

• small to medium-sized councils and smaller council-controlled organisations;

• some smaller district health boards; and

• smaller Crown entities and trusts.

I intend to publish the criteria for sequencing my audit work and will communicate directly with affected public entities once Parliament has considered the amending legislation. I will also provide this information to the Finance and Expenditure Committee. This sequencing is similar to that we applied for 30 June 2020 audits affected by Covid-19 restrictions.

As always, final priorities will depend to some extent on entity readiness for audit.

We are also actively working to minimise any future disruption to statutory reporting timeframes. While I am hopeful that improved capacity (for example, the three-yearly council long-term plan audits will not be required next year) will mean statutory reporting deadlines can be largely met for 30 June 2022 audits, there remains a real possibility that this auditor shortage will continue at least to the end of calendar 2022. For this reason, providing for extended deadlines this year and next year will allow certainty of planning for public entities and for my audit service providers. Rebuilding capacity across Audit New Zealand and the audit profession more generally will take time.

Please do not hesitate to contact me if you would like to discuss any matter in this letter.

Nāku noa, nā

John Ryan Controller and Auditor-General

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