Getting the Most Out of Your Audit
Whether you are currently working on closing the year or in the midst of your organization’s busy time, your annual financial statement audit will be here before you know it, regardless of fiscal year-end. Many organizations struggle to get ready for their audit and often lose sight of the benefits they are receiving through the audit process.
Although cramming for an exam may have worked in high school or college, cramming for an audit is not a possibility. Organizations with consistent month-end closes typically have the easiest time preparing for an audit because they are in the habit of being timely and meeting deadlines. Getting into the habit of setting a deadline of when your books need to be closed each month gives your organization a smooth transition to close out the year and get ready for the audit. Timely month-end closes also increase the likelihood of catching a mistake sooner rather than later. By closing each month timely, you will allow your organization to work out many issues throughout the year, instead of all at once at the end. Additionally, improving on this process has benefits outside of just preparing for the audit. Having a consistent month-end close allows your board and finance committees to have the most updated financials to make decisions for the organization.
Prep in the interim
Many of the items that your auditors request during the audit can be organized during the year, not just right before they come to your office. Although audits are designed to incorporate unpredictability each year and sample selections will have some level of randomness, many items that the auditors will need can be pulled throughout the year. Board minutes, special event schedules and grant agreements are just a few items that are requested every year and can be stocked away in your “audit folder” as they become available. You do not need to wait on the auditors to start organizing documents—you can organize all year long.
Spread the fun!
Throughout the audit, the auditors will be corroborating information among many individuals in the organization. Similarly, you should spread the work out when preparing for the audit. Although the auditors may direct most inquiries to a small handful of employees, those employees do not need to be responsible for the preparation of all of the materials, nor do they need to be experts on all of the documents provided. Determine what requests can be delegated to other employees. This will not only save you time, but it will also help your staff prepare themselves for follow-up requests and inquiries. This also helps in the process of holding your staff accountable for their responsibilities.
Use all of your resources
Your auditor should be knowledgeable in any changes in the accounting standards currently or expected in the future. Utilize them for questions that your board may have on changes in standards and what to expect in the pipeline. See if they offer professional education in topics that you are interested in or that may help your organization. Additionally, your auditors likely work with a variety of other organizations that are similar to yours. Use them to educate you on how other not-for-profits are dealing with changes in the accounting standards, changes in the industry or best practices. Sometimes the reassurance that other organizations are dealing with the same issues as your organization helps your board feel better about the future. Also, getting advice from your auditors on different ways that they see other organizations cope with issues can help your organization optimize its strategy.
Whether your organization chooses to hire an accounting firm to perform an audit or it is a requirement from the government, state, lender or granting agency, preparing for and understanding the benefits of the audit is important. Although the annual audit may not be your favorite time of the year, there are various ways for your organization to get the most out of it.
For more information, contact Kevin Omahen at email@example.com or 312.670.7444. Visit ORBA.com to learn more about our Not-For-Profit Group.