Not all grant audit engagements are the same. Depending on the funder, the nature of the grant, and the reporting requirements, the audit may take one of several forms:
- ISA 800/805 audits (special purpose financial statements)
- ISAE 3000 assurance engagements
- Agreed-upon procedures (AUP) report of factual findings
- These can also all be supplemented with funder specific templates and reporting formats.
These can also all be supplemented with funder specific templates and reporting formats.
ISA800/805 – Special Purpose Financial Statements
These audits are conducted under the International Standards on Auditing (ISA) framework, specifically ISA 800 or ISA 805, which apply to special purpose financial statements. These statements are typically prepared to show how grant funds were used, often at a project or programme level.
What is required:
- Preparation of financial statements in accordance with a specified framework (e.g. funder template, grant agreement)
- Audit procedures to verify completeness, accuracy, and eligibility of expenditure
- An audit opinion on whether the statements are “true and fair” within the context of the grant
ISAE 3000 Assurance Engagements – Non-Financial and Compliance Assurance
ISAE 3000 is used for assurance engagements other than audits or reviews of historical financial information. It is often applied where the funder requires assurance over compliance with grant conditions, delivery of outcomes, or performance metrics.
There are two levels of assurance:
- Reasonable Assurance: Provides a high level of confidence, requiring extensive evidence and testing. The reporting accountant expresses a positive conclusion (e.g. “in our opinion…”).
- Limited Assurance: Provides a moderate level of confidence as fewer procedures are undertaken. The reporting accountant expresses a negative conclusion (e.g. “nothing has come to our attention…”).
What is required:
- Clear definition of the subject matter (e.g. compliance with grant terms, delivery of outputs)
- Evidence gathering through interviews, documentation review, and sample testing
- An assurance report stating whether the criteria have been met, and to what level of confidence
Agreed-upon-procedures – Factual Findings
AUP engagements are not audits or assurance reports. Instead, they involve performing specific procedures agreed with the funder and reporting the factual findings without providing an opinion or conclusion.
What is required:
- A list of procedures agreed in advance (e.g. sample testing of invoices, verification of procurement compliance)
- Execution of those procedures exactly as specified
- A report detailing what was found, without interpretation or judgement
Funder-specific templates and reporting formats
Some funders further supplement the above with Terms of Reference in their own formats, which may combine financial, operational, and performance data. These templates often dictate the structure, terminology, and level of detail required.
What is required:
- Completion of funder templates with supporting documentation
- Reconciliation of grant spend to financial records
- Evidence of delivery against milestones or KPIs
The right type of engagement
Understanding which form of audit applies is critical – and often overlooked as one of the most common challenges in grant audits is late discovery of audit or assurance requirements, often buried in the grant agreement or funder terms. Understanding what is required and preparing for it early is essential to avoid delays, additional costs, or non-compliance.
Why Early Identification Matters
- Clarity on sope: Knowing whether the funder expects an audit, assurance engagement, or AUP allows you to prepare the right documentation from the outset.
- Avoiding surprises: Late identification can lead to rushed audits, missing evidence, or misalignment with funder expectations.
- Budgeting appropriately: Different audit types carry different costs and resource implications — early awareness helps with financial planning.
- Internal readiness: Teams can align internal controls, reporting systems, and procurement processes to meet audit criteria.
How we can help
At Menzies LLP, we help clients:
- Interpret funder requirements and grant agreements
- Select the appropriate audit or assurance framework
- Design and perform tailored audit procedures aligned to the funder’s expectations
- Deliver audit-ready reports with minimal disruption
If your organisation receives grant funding and now is the time to clarify what audit or assurance will be required, contact our team at Menzies LLP. We are here to help you navigate funder requirements with confidence.
Note: While we use the term “grant audit” throughout, funders may require different types of assurance – including audits, assurance engagements, or agreed-upon procedures (AUPs). We tailor our approach to meet these specific requirements.
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