Planning

36. The Appointed Auditor must consider their conclusions on:
    1. The entity's management control environment and the way the entity manages and reports performance;
    2. The adequacy of the forecast non-financial performance report; and
    3. Specifically, the appropriateness of the forecast service performance report when planning the audit of the service performance report.

Materiality

37. The Appointed Auditor must determine the material outputs and performance measures for the purpose of audit testing. (Ref: Para. A16 and A45-A46)
38. The Appointed Auditor must establish a basis and level for determining planning materiality that will be applied in the determination of those outputs that are of audit interest. The Appointed Auditor is required to establish a planning materiality level for performance measures associated with material outputs. The level determined is to reflect the level of misstatement that would be accepted by the Appointed Auditor before they consider that the users' judgement would be impaired. The level should be expressed in terms of the appropriate unit of measurement and be documented.

Fieldwork

Obtaining Audit Evidence

39. The Appointed Auditor must obtain sufficient, appropriate audit evidence in relation to all material outputs and performance measures in accordance with ISA (NZ) 500: Audit Evidence. (Ref: Para. A47-A50)

Changes in Material Outputs, Performance Measures, or Targets

40. The Appointed Auditor must check whether there have been any changes to material outputs, performance measures, or targets reported against during the reporting period from those presented in the forecast service performance report.
41. Where the selection of material outputs has been altered or material performance measures or targets have been amended during the reporting period, the Appointed Auditor must ensure that the changes have been approved and adequately explained within the service performance report. (Ref: Para. A51-A56)

Management Commentary

42. Where management commentary is included within the service performance report, the Appointed Auditor must evaluate such management commentary to determine the relevance of the commentary to the audited service performance information and its reliability.
43. Professional judgement is to be exercised as to the level of assurance required over the management commentary.
44. Where there are material reported variances between forecast and historical service performance, the Appointed Auditor must consider the explanations given for those variances and assess their reasonableness. If no explanation is given, then the Appointed Auditor must determine whether the absence of explanation is likely to materially affect the users' ability to make an informed assessment of entity performance.
45. Where the Appointed Auditor considers that the management commentary is misleading or inconsistent with information contained in the service performance report or other parts of the annual report, they must request management to justify their commentary or reconcile, remedy, or remove the misleading or inconsistent statements, as appropriate. (Ref: Para. A57-A61)

Allocation of Costs

46. The auditor must obtain reasonable assurance that costs have been appropriately allocated to each material output or output class. The cost allocation method, and the application of that method, should result in the service performance report presenting a fair reflection of the cost of each output or output class. (Ref: Para. A62-A63)

Reporting

Fieldwork Conclusion

47. The Appointed Auditor must consider the (forecast and historical) non-financial performance reports as a whole, together with any other relevant financial and non-financial information, for the purpose of determining the appropriateness of the service performance report. The Appointed Auditor's determination will be based on their conclusion about whether the service performance report complies with GAAP and fairly reflects the entity's service performance for the year. Specific regard should be given to the appropriateness of the outputs selected by the entity for reporting, the performance measures attached to those outputs, the performance targets set, and the historical results reported. (Ref: Para. A64-A65)
48. The Appointed Auditor will have drawn conclusions on the appropriateness of the service performance report when evaluating the forecast service performance report. The Appointed Auditor must therefore take into account any significant differences between the forecast and historical service performance reports for the period.
49. The Appointed Auditor must also consider any of the matters referred to in paragraphs 40 to 45 as well as any other matters arising during the course of the audit that may affect their opinion on the appropriateness of the service performance report.
50. If the Appointed Auditor has serious concerns about the service performance report, whether it is about the appropriateness of the content selected for reporting or the verification of that content, then the Appointed Auditor must notify the OAG at the earliest opportunity.
51. If the Appointed Auditor has grounds for concern about the service performance report but is in doubt as to the seriousness of those concerns, then the Appointed Auditor must confer with the OAG before forming their audit opinion or otherwise reporting such matters to entity management.

The Audit Report

52. The Appointed Auditor must form an opinion on whether the service performance report:
    1. Complies with GAAP in New Zealand; and
    2. Fairly reflects the entity's service performance for the year, including:
       1. Its performance achieved as compared with the forecast targets outlined in the forecast service performance report for the financial year; and
       2. Its revenue earned and output expenses incurred as compared with the forecast revenues and output expenses outlined in the forecast service performance report for the financial year. (Ref: Para. A66)
53. The Appointed Auditor must consider modifying the audit report if the errors or specific circumstances identified, individually or collectively, are material. (Ref: Para. A67)
54. The Appointed Auditor must consider the impact on the audit report of non-compliance with laws and regulations by applying both this Standard and the Auditor-General's Statements.
55. If the Appointed Auditor at any stage seriously considers modification of the service performance report for a fundamental reason that could result in an adverse opinion or disclaimer, the Appointed Auditor must make a submission to the OAG Opinions Review Committee in accordance with the applicable Auditor-General's Statements and Standards.

Reporting to Entity Management

56. The Appointed Auditor must include in their management report(s) commentary on modifications made and on any other matters that were substantive but did not result in modification, including matters identified or reported to management at earlier stages of the audit. (Ref: Para. A67)