A Guide for Preparing for an Audit of Your Nonprofit
By Eva Webb, CPA, Principal
Thursday, July 22, 2021 – Whether your nonprofit is required to have an independent audit or you are conducting an audit for some other reason, preparing for an audit requires a lot of work–a significant endeavor. Not only is it a significant expense, but it also requires a lot of preparation. To make things go more smoothly for everyone involved in the audit process, it is a good idea to have a plan in place for every step, from determining where the auditor’s workspace will be (if you elect for an in-person audit) to understanding the timeframe you and the auditor anticipate.
The following four steps will help ensure that everything the auditor asks for in advance will be ready when the audit starts and that any other requests will be answered as timely as possible:
Step 1: Hold a pre-audit meeting (aka the “Planning Meeting”) between the auditors and management.
This meeting will set the timeline for the audit including fieldwork dates and establish when the drafts will be ready for review by the Board of Directors. The auditor will want to know about any major operational changes during the year, any pending or threatened litigation, any new loans or leases, etc. They will also ask about your internal control procedures and whether they have changed from the prior year.
Step 2: Understand what documentation you will need.
The auditors will examine your nonprofit’s financial transactions by testing them. Part of the process is to review underlying documentation. The auditor will provide management with a list of documents they will need in order to perform the audit. There will also be a separate list of receipts and invoices that the auditors will want to examine once the audit begins.
Step 3: Prepare the documents.
Ensure that all documents are prepared/gathered and placed in the audit portal prior to the first day of fieldwork. Also, don’t forget to keep copies of all documents given to the auditor for your records. This is important as the audit portal is only a temporary storage facility and not permanent record storage.
Step 4: Ensure availability.
The member of management responsible for the audit should be available during fieldwork to respond to questions and to gather any additional requested documents. Being available and responsive during your assigned fieldwork dates ensures that the audit will be prepared in accordance with the timeline outlined during the planning meeting.
For additional guidance on preparing for your audit or to set up your planning meeting, contact us today.
Eva Webb, CPA, is an audit principal and heads up LSWG’s Rockville office. She has over 20 years of public accounting experience and specializes in audits of closely-held businesses, local governments, trade associations, and not-for-profit organizations in Frederick and Montgomery counties and the DC metropolitan area. You can reach Eva at 301.662.9200, or by email at email@example.com.