How To Use Your Audit for Improvement

Does your organization receive an audit?  Do you check the box that is done and move on, or do you use it as an opportunity for improvement?

After your audit performs the audit, they should provide you with a draft of the audited report to review, as well as a SAS 114 and SAS 115 letters.  These letters include important communication to management regarding the audit process, controls, and their recommendations for the organization.

After receiving your organization’s audit, you should take several important steps:

• Review the audit report.   Thoroughly read through the audit report to understand the findings, conclusions, and any recommendations made by the auditors.  Ask questions if you do not understand something or if something doesn’t look right on the audit report.  Reviewing a draft of the audit before the final report is issued is important to make sure that nothing is missed or overlooked.
• Meet with the auditors. Arrange a meeting for your audit committee (or finance committee) to discuss the report in detail with the auditors. This is an opportunity to ask questions and gain clarity on any points that are unclear or require further explanation.
• Share with the board.  Distribute the audit report to the board of directors for review and approval. Have your audit committee provide a report to the full board or invite your auditor to present.  It is beneficial for the auditor to meet with the full board to not only present the audit but to answer any questions that board members may have.
• Evaluate findings and recommendations.  Assess the findings and recommendations provided by the auditors. Determine the most critical issues and prioritize them based on their impact on the organization.  If the audit results in an SAS 115 letter on controls and/or recommendations, management should write up a response letter to the recommendations.  The letter written by management can then be provided with the SAS 115 letter for review.
• Develop an action plan.  Create a detailed action plan to address the audit findings and implement the recommendations. Assign responsibilities and set timelines for each action item.  Not all of the recommendations may be able to be addressed at once but selecting at least a few to focus on will start your organization in the right direction.
• Implement changes.  Execute the action plan by making necessary policy, procedure, and control changes. Ensure that the responsible parties are following through on their assigned tasks.  Be sure to communicate any changes to all parties – management, board members, staff, volunteers, etc.
• Monitor progress. Regularly monitor the progress of the implementation plan. Keep track of completed actions and ongoing efforts to ensure all issues are addressed on time.  This way you can also communicate the changes made to your auditor in next year’s audit.

View your audit as a chance for continuous improvement.  Use the insights gained from the audit to improve overall organizational practices and strengthen internal controls. Establish a culture of continuous improvement to prevent similar issues from arising in the future.