Audits are expensive. Whether you see them as a useful service or necessary evil, they still take up a lot of staff time and financial resources. The more prepared your charity’s staff is, the lower the cost will be, but the auditor also has a responsibility to keep your costs down.
September is often when audit planning begins, so here are some tips to help you keep the audit on track.
Charities have specialized accounting rules. Even within the nonprofit sector, government-funded charities can have different requirements than foundations, for example. Before the audit starts, ask if the team has experience with similar organizations. Then decide in advance what to do if your staff has to explain basic charity accounting to the audit staff.
The release date for the audited financial statements is usually discussed in planning sessions, but the smaller deadlines or milestones leading up to that date can be missed. Though the audit plan may call for a specific number of weeks for field work, unless that work is tied back to the number of staff and the budgeted hours for each audit step, it is difficult to know whether enough time has been scheduled. Ask for a timeline showing when the detailed areas (e.g. banking, capital assets, donation revenue, human resources and expense analysis) are scheduled, then agree when you and the senior field auditor will monitor progress. This information will also help you schedule the charity’s staff.
After the audit team have finished your audit, they are typically scheduled to go to another client. If the field work is incomplete at that time, the audit can turn into an expensive game of email tag. Even if the audit tests are complete, the format of the financial statements and the wording of the notes can take a lot of unscheduled time. These steps need to be built into the plan and the progress meetings, with the goal of having draft financial statements by the end of the scheduled time, whether onsite or back at the office.
Auditors are people too
The audit team may know their accounting, but have little experience running a project. They may feel uncomfortable asking for help. They may get so involved in one area that they lose track of other work. And they may be short-staffed or overloaded with other client work. Sometimes just asking, “Is there something I can help you with?” will break the log jam and keep the audit moving.
Finally, the audit will progress more smoothly if everyone takes responsibility for issuing accurate, objectively verifiable financial statements. After all, they are your statements, not the auditors’.Bill Kennedy is a Toronto based Chartered Accountant with Energized Accounting, focusing on financial and reporting systems in the charitable sector. He blogs at www.EnergizedAccounting.ca/blog/. Find out more at www.EnergizedAccounting.ca or follow him on Twitter.