Audits provide the transparency that donors and members need. An audit builds trust, which leads to developing these relationships. It also ensures to a nonprofit board, directors, and staff that their accounting and finances are being handled professionally.
However, audits can be stressful and time-consuming for all involved. To ensure that your audit goes smoothly, we’ve prepared this audit checklist. You can print it out and use it to get the people, processes, and items ready for your next audit.
Pre-Audit
- Prepare for the Audit
Ensure that you have set up access to the accounting program for your auditors and that their permissions enable them to do their job. Gather relevant records and update the accounting system. If you have paper-based records, some document scanners and system tools (such as those with MIP Fund Accounting) enable you to scan paper records into the system where they are uploaded.
- Reconcile Accounts
Reconcile bank, credit card, and other financial accounts. Choose a cutoff date and make sure that everything is in the system by that date.
- Check Restricted and Unrestricted Net Assets and Activities
Using your accounting system, check restricted and unrestricted net assets and activities.
- Review Grant Reports
Ensure that all grant information has been entered into the system. Enter activities and costs to the appropriate grant lines and funds.
- View the Accounting System
Review the entire accounting system. Run reports and check figures to ensure there are no surprise findings in the audit. You may not catch every error, but you can prevent wasted time by fixing simple mistakes before the auditors begin their work.
- Communicate with Your Team
Alert your team that an audit is coming and share the dates with them so they can prepare. Make sure you have space assigned to the auditors if they are coming on-site and that they have the appropriate access to the systems and files they need. Also, be sure to share the information with the Board or Audit Committee that an audit is forthcoming.
- Review Variances
If you find any variances in the accounts, sit down with your finance team and discuss them so you have a clear explanation for the auditors.
The Audit
- Meet with the Auditors
If this is the first time your organization is conducting an audit, plan to sit with the auditors and go through the information with them to familiarize them with your organization, its accounting and finance structure, grants, and so forth.
- Clarify Any Questions
If you aren’t sure what the auditors are asking for, ask clarifying questions. Minimize back and forth with the auditors by providing them with complete access to the required information.
- Ensure Full Support
Be sure to let your team know it is fine to reschedule meetings to take time to work with the auditors as needed. They should feel free to set aside other projects to meet with the auditors.
- Trust the Auditors
You’ve hired an auditing firm for a reason. Presumably, you have done your due diligence and researched the auditing firm thoroughly so you can trust their professionalism and judgment and let them do their work.
Post-Audit
- Check-In
Check in with your auditors to ensure that everything is underway and that they aren’t waiting for more information. Provide assistance and support, if needed, to help them complete their task. Be sure to let them know of any deadlines, such as upcoming board meetings or publication deadlines, which are waiting for their work.
- Communicate Updates
Communicate updates on the audit status to your team, the board, finance committees, and anyone else who may be involved in the work. Keep them apprised of the audit progress as well as any requests from your auditors for further information.
- Present the Results
Present the audit results in a clear, concise, and honest manner. Prepare for the presentation by reviewing the audit findings and discussing any outstanding questions with the auditors. You may wish to have the auditor there while presenting to your board to ensure they can answer questions directly. If so, ask your auditors well in advance of any upcoming meetings so they have time to schedule and prepare too.
- Review Internal Controls, Policies, and Processes
This is an opportune moment to review internal controls. Do you have adequate internal controls in place, or do they need to be updated? If you do update the internal controls, check and ensure that your Policy Manual is also updated.
And finally, how did the audit process go? Did you feel that the process went smoothly, or does it need adjustment? Make notes and take steps now to prepare for your next audit by adjusting any areas of the process to remove roadblocks.
Welter Consulting
Welter Consulting bridges people and technology together for effective solutions for nonprofit organizations. We offer software and services that can help you with your accounting needs. Please contact us for more information.
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