Like it or not, your organization will be audited from time to time. This can be an intimidating process, but it doesn’t have to be so bad depending on who you choose and how you communicate with your auditor. Beck and Company’s Certified Public Accountants and Business Advisors are trained to help with nonprofit audits and would be happy to assist you with yours as auditors. Learn more about our audit services here.
As auditors, we know firsthand what makes audits run smoothly for both the nonprofit and the auditor. Let’s take a look at some tips for communicating effectively with your auditor so you know what is needed and expected. In addition, let’s dig deeper into what an auditor will be asking for from you as an organization.
How should you communicate with the auditor during the audit?
Because of the pressure brought on by audits and their results, auditors understand that you may be feeling overwhelmed and nervous. The auditor wants the best for your organization just like you do, but this person can only help if you are open and candid with them. You may be asked about questionable accounting practices or pressures, fraud risk factors, and known deficiencies in accounting systems. Your honesty and genuineness can help the auditor gain a better understanding of what is truly going on with the hopes that they can help you get things resolved. Therefore, you’ll need to be real so everyone can get to the real heart of the matter and work to find solutions. Be open with the auditor about difficult areas you’ve encountered, concerns, questions, and recommendations you may have.
The auditor needs as much information as possible, and the audit process is made easier if this information is shared directly instead of an auditor needing to infer this information from documents. Alert the auditor to any outside consultants, regulatory agency inquiries or future plans, and provide related reports and correspondence. The auditor may ask you to explain significant actual-to-budget and prior-year variances. Be prepared to discuss the results of the year based on your expectations going into the year.
Don’t be afraid to ask the auditor questions. In fact, asking questions is encouraged because it helps you to truly understand the process and be better prepared for future audits. Ask why a particular schedule is requested if you don’t know. You may have a better source for that information, it may already exist in an alternative format, or you may learn a better way to organize your routine tasks as a result.
What information will an auditor ask for that you’ll need to supply?
Ultimately, auditors express an opinion on the broad financial statements. Because of this, most of the detailed schedules they request are merely items your company should have as part of its normal accounting procedures.
The auditor systematically obtains and evaluates evidence about the basic financial statement assertions contained in your numbers including:
- Existence or occurrence
- Completeness
- Rights
- Obligations
- Valuation
- Allocation
- Presentation
- Disclosure
In addition, you may be asked about any changes in the following and will need evidence. These changes include:
- Governance, management, and ownership information
- Operations
- Technology
- Personnel relations
- Economic/industry developments and their impact
In summary, your nonprofit financial audit will involve interactions with an auditor. To be successful in communicating with the auditor, you’ll need to be honest and open. You will also need to disclose as much information and as many explanations as possible to what they ask you about. Don’t be afraid to also ask questions of them to truly understand the process. In addition, be ready to supply a variety of financial statements and to address any changes that have occurred since the last audit. These tips for communication and what to supply your auditor will make the audit process more successful and smooth. To find the right auditor for your organization and to use the many audit services Beck and Company CPAs provide, contact us.