Connections for Success



Why Preparing for Your Annual Not-For-Profit Audit is Like Planning a BBQ
James Quaid

With the Cubs and White Sox playing ball, kids looking forward to summer break and the weather warming up outside, we know that BBQ season has arrived.  Summer is also the time when most not-for-profit organizations begin planning for their annual audits.  In the spirit of summer, this blog is devoted to two of my favorite topics and the similarities that they share.

The secret to a successful BBQ is making sure that your guests have a great time and good food.  Where to start?  You will need a date, a plan and an effective way to communicate with your guests.  The same goes for your annual audit.  You’ll need to create a plan, set dates and communicate effectively with your auditor about the audit process.

You would never wait until the last minute to send out invitations to your backyard BBQ.  Similarly, in planning an audit, you should work with the audit team to have dates set well in advance for things such as:  An entrance conference, interim work, audit fieldwork, an exit conference and report due dates.  Having a timeline with specific deadlines established is a necessary first step towards the successful completion of an audit.

A good host knows that you can’t leave it up to your guests to bring whatever they want.  What if everyone brings the same dish – 15 different fruit salads – boring.  Rather, suggest to guests what they can bring.  In the same way, communication with your audit team is critically important.  Communicating expectations includes:  Who will prepare the required audit schedules, which organization’s personnel will be the primary audit contact and how should auditors communicate questions and open points?  Effective communication for an audit includes timely communication throughout the year on important changes in personnel or processes at the organization.  Keep the audit team informed about the organization by sending them copies of board and audit/finance committee meeting minutes.

What do you do when you invite a guest that has special dietary needs?  Do you assume your guest will bring a dish that can be eaten or are you expected to make special accommodations?  A lack of communication and improperly managing expectations may lead to disappointment on both sides.  Likewise, providing an engagement letter and having an entrance conference or meeting are good tools to help manage expectations at the start of the audit.

If the big BBQ day is Saturday, do you wait until the last minute to start your house cleaning, yard work and grocery shopping?  Not unless you want to be really frazzled for the BBQ.  Similarly, you should not wait until the last minute to prepare for the audit.  Review financial results on a regular basis and clearly document variances, including current period to prior period and actual-to-budget, so that you are well prepared for questions from the audit team.  Address all items on the Prepared By Client (PBC) list and send the trial balance and work papers to the audit team in advance of fieldwork.  That way, the team can review the information and advise the client on changes or additional information that may be necessary.  Typically, the more advance planning that can be done prior to the audit, the auditors can focus their  time during fieldwork, and likely, spend less time at your office.

Preparing in advance will also allow you to be a more active participant during the audit.  If you spend the entire afternoon manning the grill, you will not have time to visit with guests.  In the same way, be engaged with the audit.  Be available during fieldwork for questions.  Ask your audit team how things are going, including their open points and questions, and how you can help address them. At the end of audit fieldwork, meet with the audit team and review open points so everyone knows who is responsible for clearing each item.  Follow-up with the audit team on a regular basis so that expectations are managed and timelines are kept.

When the party is over, do you trust that everyone had a good time or do you ask if they enjoyed the event?  A follow-up review of the audit process is crucial to maintaining a great professional relationship. Keep open and timely communication throughout the year.  Like a well-planned BBQ, having a strategic plan for your next audit ensures it will be successful.

To learn more about practical tools for ensuring a successful and efficient audit and how you can become a more effective financial leader within your organization, please join Jenny Ryan and me at an upcoming ORBA seminar, How to Successfully Prepare for Your Annual Not-For-Profit Audit.  This seminar will be held on May 30 at the University of Chicago, Gleacher Center, Room 308, 450 North Cityfront Plaza Drive, Chicago, IL 60611. There is no charge to attend. Seats are limited. Please REGISTER on or before May 29. Participants are eligible to receive 1.0 hour of CPE Credit.

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