Completing a financial audit successfully and in a timely and cost-efficient manner requires proper preparation, which should be an ongoing process throughout the year. Below are several key steps that should be taken during the year to prepare for the audit.
The steps I am recommending are those that I undertook in preparing for the financial audits at several nonprofits and as a consultant helping my clients with the process. Taking these steps can reduce audit cost and help to ensure that the audit is completed in a timely manner.
Key Steps to Prepare Throughout the Year
DOCUMENT MAINTENANCE
- Maintain copies of all organizational documents throughout the year in an internal, online audit shared drive. Clients I have worked with have these documents; however, they are not easily accessible when requested by the auditors.
- Maintain in a central location electronic copies of all executed contracts and agreements entered into during the year.
PROCEDURES MANUAL UPDATE
- Maintain copies of all organizational documents throughout the year in an internal, online audit shared drive. Clients I have worked with have these documents; however, they are not easily accessible when requested by the auditors.
- Maintain in a central location electronic copies of all executed contracts and agreements entered into during the year.
PROCEDURES MANUAL UPDATE
- Update your Accounting Policies and Procedures Manual. The Manual should be reviewed throughout the year and updated at least annually with approved changes.
- The policies and procedures should be reviewed for proper internal controls and best practices. I work with clients to review their policies and procedures and recommend implementation of internal controls where they do not exist.
ACCOUNT RECONCILIATIONS
- General Ledger account reconciliations should be performed monthly or quarterly. However, many clients I work with wait until year-end to reconcile these accounts. This can result in inaccurate financial reporting throughout the year.
- An electronic filing system for the monthly or quarterly reconciliations should be maintained for easy access.
SUPPORTING DOCUMENTATION
- Auditors request supporting documentation for substantial transactions that occur during the year. This documentation should be maintained in an online shared drive as the transactions occur for easy access when requested by the auditors.
Do You Need Help With the Audit Readiness Process? I Can Help!
Roberta Katz Consulting is working with many nonprofits in improving the operations of their finance function. Schedule a complimentary consultation today to discuss how I can provide your organization with an impartial evaluation of its finance department.
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