By Preston Jones, CPA, Business Assurance & Advisory Services Manager | Not-for-Profit Team
As we near June 30, the majority of nonprofit organizations are beginning to plan for their upcoming year-end audit. As auditors, we know first-hand that this can lead to additional worrying and stress, as the organization’s accounting and other personnel might have to perform double duty for several weeks, balancing their day-to-day work with the extra requirements of the audit. Here are four tips for getting through this year’s audit as efficiently as possible:
- The sooner the audit can get started, the better
In most cases, the audit should start prior to an organization’s year-end with at least a day of preliminary fieldwork. This is an ideal time for the audit team to learn about processes and procedures that might have changed, or other developments, that could impact the audit. After year-end and well in advance of fieldwork, reconciliations and schedules on the audit request list can be completed and provided to the audit team. If trial balances and audit schedules arrive prior to fieldwork, they can be used by the audit team to get a head start on setting up the audit workpapers and identifying any initial red flags, which will allow the audit team to be more efficient during fieldwork.
- Proactively prepare and send confirmation letters
Confirmation letters can be used to efficiently test several audit areas common in nonprofit organizations such as cash, investments, and pledges receivable. Getting the confirmation letters in the mail early provides the opportunity to reduce testing during fieldwork, since it’s only the unreturned confirmations that will need to have “alternative procedures” performed, which most often involves pulling much more supporting documentation. Remember, auditing standards require the auditor to control the mailing of confirmation letters so they should be provided to your auditor for mailing.
- Perform an initial self-review of the organization
Most not-for-profit organizations can easily explain significant variances year-over-year, so being proactive in explaining significant variances to the audit team will create audit efficiencies. Before the audit begins, try to perform a review of anything that may have changed year-over-year and develop a short narrative to explain the change. A good way to do this would be to do a simple year-over-year comparison of the year-end trial balance as well as a budget-to-actual comparison. Have the narrative ready for your audit team upon their arrival for fieldwork or sooner (see tip #1 above).
- Prioritize the audit as much as possible, especially during fieldwork
Auditors understand how much a not-for-profit organization’s accountants and controllers are pulled in different directions, especially during an audit. However, it can’t be stressed enough how important it is to focus on the audit during fieldwork. A lot of tasks throughout the audit (either on the organization-side or the auditor-side) sound simple, but when they get delayed they become much more difficult to wrap up through a string of phone calls and email. This might mean putting in some extra time ahead of the audit to clear out a busy schedule, but I think most of us would agree that a few weeks of extra work is better than a few months of an audit hanging over everyone’s head.
An audit does not have to be laborious process if a sufficient amount of planning is performed and attention is given to the process. Engage your audit team on areas where they believe efficiencies can be gained in your audit process and share your thoughts with them. Working together for a successful audit is everyone’s goal.
Questions on this topic? Contact your Keiter representative or Email | Call: 804.747.0000
The information contained within this article is provided for informational purposes only and is current as of the date published. Online readers are advised not to act upon this information without seeking the service of a professional accountant, as this article is not a substitute for obtaining accounting, tax, or financial advice from a professional accountant.