5 Steps to Prepare for a Successful Not-for-Profit Audit
Year-end financial statement audits can be a daunting process for not-for-profit organizations. With some planning and preparation, the not-for-profit finance committee or accounting employees can ensure a smooth and successful audit. Listed below are a few steps to take to help the process before the auditor arrives.
1. Complete all reconciliations, monthly close and analyze changes in balances.
Complete reconciliations on all balance sheet accounts to ensure all activity has been recorded. This will point out any significant year-over-year changes prior to the auditors’ arrival. Staying up to date with these processes will alleviate pressure and rushing at the end of the year to locate proper documentation.
When auditors come to your office for fieldwork after your year-end, they will request plenty of documentation and support for various transactions, leases, contributions, etc. This documentation could be check copies, deposit slips or signed agreements, but could also be email correspondence and support for journal entries. It is always better to have too much documentation than not enough.
2. Make sure your policies and procedures are updated and accurate before year-end.
The auditor will need to know if there have been any changes to the company that affect financial reporting and accounting functions. This can be anything from adding a new employee to changing your internal controls. Keeping these up to date throughout the year will reduce the amount of preparation at the end of the year.
3. Be prepared for your auditors to do interim work and inventory counts.
Having the audit team come out before year-end is beneficial to all. The auditors may walk through key internal controls with you, perform inventory counts and other planning procedures. This will reduce the amount of work to do during fieldwork and help the audit go smoothly.
4. Expect a prepared-by-client (PBC) listing from the auditor prior to their arrival.
A PBC list can often be intimidating and long, but will allow you to gather everything that the auditors will need before their arrival. Labeling everything and matching each item to the number on the PBC list is a trick to help everything run smoothly. This can eliminate duplicates or any confusion on if an item has been sent.
5. Communication is key.
A good relationship and proper communication between you and your auditor is vital to a smooth audit. A lack thereof makes everything extremely complicated, if not impossible, for both parties. If any questions arise in preparation of the audit or during fieldwork, always ask your auditor. If there are open lines of communications, the audit experience will significantly improve.
If you execute these five steps, your organization’s audit will be as smooth and stress-free as can be. Learn more about our Not-for-Profit Group, Audit and Advisory Services, or contact an Anders advisor to find out how we can help your organization.