Notes from the Audit Clinic; Great Expectations
Joan M. Renner, CPA, CGMA, Director 501(c)(fit!)
Every nonprofit leader has experienced a few headaches related to their annual audit. After hearing enough about audit headaches, I decided to create a virtual “audit clinic” where we can talk about some of the more common audit headache symptoms and remedies. Let’s look in on today’s “audit clinic”…
Nonprofit (NP): “Over the past few years, our auditors just haven’t been meeting our expectations. They don’t finish the audit on time, they come up with surprise findings and the audit team is always bothering us with questions. We’d just like our auditors to have it done on time, with fair results and not be so annoying. Is that expecting too much?”
Audit Clinic (Clinic): “Where did you find these auditors?”
NP: “We did an RFP to find the firm with the lowest price. After all, an audit is an audit.”
Clinic: “Well, an audit is an audit, in that all auditors have to follow generally accepted auditing standards. But did you know that the things you are expecting aren’t even in the auditing standards?”
NP: “What do you mean?”
Clinic: “Basically, auditing standards require that the audit be effective, and include the procedures, documentation and reporting contained in professional standards. There’s nothing in the auditing standards that requires the audit to be completed on any time table, there’s no requirement that you agree with the findings and there’s no requirement that the auditors will not be annoying”.
NP: “So how do I get rid of these audit headaches?”
Clinic: “For starters, hire what you value. Ask prospective auditors about their plans for meeting your deadlines and discuss potential delays. Find out their plan for keeping you informed about audit issues and their schedule for audit communications.”
NP: “OK, what else?”
Clinic: “Hire the right fit. Select an audit firm that views your organization as an important client. If you’re a smaller nonprofit, with normal issues, a smaller firm may be a better fit for you than a bigger firm. A firm that values your relationship will give your audit higher priority.”
NP: “What about nonprofit experience?”
Clinic: “That’s a given. An audit firm that has nonprofit audit specialists who work with organizations like yours can better understand your issues and bring you solutions based on their experience.”
NP: “Is there anything else I should know?”
Clinic: “Yes, let’s be sure you’re not a carrier.”
NP: “You mean I might be causing these audit headaches?”
Clinic: “We can’t know for sure, but you may be contributing to audit headaches without realizing it. To find out, look for the following signs: difficulty preparing for the audit, false starts and big changes to your bottom line resulting from the audit. If you’re not ready, or if your accounts need fixing, you could be losing your window in the auditors’ schedule. Once your audit window passes by, the auditors have to move on and it’s hard to get back on the schedule. The best preventive for audit headaches is to be audit-ready, even if you have to seek professional help to prepare. Try these strategies and let’s talk again in six months.”
NP: “Thanks, Audit Clinic. I’ll let you know how it works out”.
What can we learn to promote a more positive audit experience?
Hire what you value. If you want timely completion and good communication, ask for it in the RFP.
Hire the right fit. Select an audit firm that views your organization as an important client.
Be audit-ready. Analyze the cause of previous delays and add resources to audit preparation if needed.
Learn more about supporting a positive audit experience in our on demand webinar, Acing Your Audit—managing your audit from start to finish:
Send us your audit headaches and we’ll try to address them (anonymously) in the audit clinic.
Learn more about controllership in our 501(c)(fit!) Financial Intensive Training seminars coming soon
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