Getting the Most Out of Your Audit
Posted on Wednesday, October 27, 2021
ShareNonprofit organizations have financial audits performed for different reasons. Many funders require organizations to have an audit in order to obtain grants from them. If the organization is an Indiana entity that receives government assistance, the state of Indiana may require an audit. Organizations that spend more than $750,000 in federal funds in a fiscal year are required to undergo a Single Audit. Or there may be an audit requirement in the organization’s bylaws. Regardless of the reason that an organization has an audit, it should use the audit as an opportunity to make improvements.
In order to get the most out of your audit, consider the following.
Involve the audit/finance committee and board. Often times the auditor will present the audit results to the audit/finance committee and or the board of directors. Take advantage of this opportunity. This allows the organization’s leadership to hear directly from the auditor and ask questions.
Share audit report. In addition to providing the audit to the audit/finance committee and board for approval, consider who else would benefit from reviewing the report. Often times the final audit is required to be submitted to oversight organizations but some organizations also choose to include their audit on their website for additional transparency. Increased transparency creates more trust in the organization.
Implement recommendations. As part of the audit, the auditor will provide a letter on any internal control material weaknesses or significant deficiencies noted. Additional recommendations that do not rise to the level of a material weakness or significant deficiency may also be communicated either in a written letter or verbally. These are often based on nonprofit best practices or areas that the organization could be more efficient. Consider implementing these recommendations to improve your organization’s operations. Discuss the recommendations with you auditor so that you understand how to put them into action.
Review journal entries. If the auditor proposes any journal entries to correct balances, make sure that they are properly recorded on the organization’s books. Also review the entries to determine the cause of the error and implement procedures to make sure they are recorded prior to next year’s audit.
Continue communication with auditor. Just because the audit is complete, does not mean you should end communication with your auditor. The audit should be seen as an opportunity for additional guidance on best practices that will help your organization long after the audit is complete. Do not be hesitant to reach out to your auditor during the year with questions that come up. It is better to address these as they occur instead of waiting until year end.
The often is seen as only looking back and historical information, which is true to some degree; however, to make the most of your audit, utilize it as an opportunity to implement changes moving forward.
Contributed by: Carrie Minnich, CPA, MAcct | Director | DWD CPAs & Advisors
Posted in Mission Minded Nonprofits
Disclaimer: The information contained in Dulin, Ward & DeWald’s blog is provided for general educational purposes only and should not be construed as financial or legal advice on any subject matter. Before taking any action based on this information, we strongly encourage you to consult competent legal, accounting or other professional advice about your specific situation. Questions on blog posts may be submitted to your DWD representative.