Holiday parties; family gatherings; golden turkey and all those other edible goodies – some things just make you look forward to this most wonderful time of the year.
But you know it is looming. Out there, in the not too distant future. Waiting.
Here’s the truth – your end of year audit isn’t going to disappear anytime soon. Taking the right steps now in getting prepared will not only save you time and money, but also a great deal of frustration.
And whether or not you think of it as merely a necessary (or unnecessary) evil, be assured that the annual audit does in fact have its benefits.
You see, an audit is a great opportunity for taking stock of your nonprofit organization; to come face to face with its true financial condition, and to gain a better understanding of how well it’s using its resources.
Inquiries will come from your auditor regarding your accounting processes and internal controls. It may not be the easiest of conversations to have, but it is a terrific opportunity to improve upon those processes and controls.
The discussion with your auditor will also help your organization better protect itself against fraud and theft, while your board and your donors will gain confidence in the reliability of your financial reports.
Take Action Now
Here’s a few suggestions that should make this year-end process go more smoothly.
- Have a sit down meeting with your auditor in advance of your fiscal year end. Let’s face it, sometimes there is no replacement for a face to face conversation. This is the ideal time to address any problems that were encountered in the prior year and talk about how they can be avoided during the audit coming up. Also, it’s the time to give your auditor a heads up for any changes or new developments that might have an impact on the audit process.
- Read the engagement letter that you receive from your auditor. That letter will outline what the audit is and isn’t about, and define your responsibilities, as well as those of the auditor.
- Request that your auditor send you, in advance of the start of fieldwork, a list of the documents and information that you will need to assemble for their use and review. Also ask them to specify the items they will need before fieldwork starts to do their pre-audit planning.
- Organize the requested documents for their use and review. Typically the auditors will want to see the following documentation:
- Bank statements and monthly reconciliations;
- Investment summary showing year end balances, annual investment activity, and income;
- Documentation in support of donor pledges, donated securities and property, and grant funds received;
- Fixed asset and depreciation schedules;
- Accounts payable and receivable aging statements at year-end; and
- Copies of lease and debt agreements.
Coordination Is Key
To make sure the audit goes ahead with the least amount of disruption to your nonprofit, coordinate the auditors schedule with yours and that of your staff.
It’s best to schedule the audit fieldwork for a time when it will be the least disturbing to your office routine, and when you and your staff can devote the necessary attention to the audit.
What’s more, it’s crucial that the year end closing of your books has been done properly, and that all cash and balance sheet accounts have been reconciled, fixed asset and depreciation schedules have been updated, and that adjusting entries have been booked to give effect to any required
accruals and deferrals.
And it’s important to remember the more efficient and organized you are in preparing for the audit and assisting with the auditors, the less time they will spend in your office. Since many firms bill on an hourly basis when performing audit services, the less time they spend on the audit, the less they will bill your organization upon its completion.
So keep this simple equation in mind:
Greater preparedness = Greater Efficiency = Reduced Fees.
We’re Here to Help
If you’re feeling a bit overwhelmed with the organization and preparation of your records prior to the end of year audit, we can help.
Simply contact us today to speak with one of our friendly advisers.