Educational Institution and Nonprofit Audits Fast Approaching for June 30 Fiscals
Understanding the Educational Institution and Nonprofit Audit Landscape
June 30, the day on which many educational institutions and nonprofits end their fiscal year, is fast approaching. This brings "joy" to many internal accountants because they know that an annual visit fr om the auditors is just around the corner.
While it is our experience that auditors are not always greeted with open arms by an organization's staff, we have seen an evolution in these relationships over the past few years. In previous years, auditors were frequently seen as a necessary evil, but now the disdain has diminished. Audits and auditors are now viewed less and less as a commodity or a frustrating interruption to the regular work schedule. Instead, we are more often than not viewed as professionals handling an independent confirmation of the organization's financials. It has also become a common perception that auditors seek solutions that can help an educational institution or nonprofit improve policies and procedures.
Through the years, accounting and audit technologies have improved, which in turn has bettered audit efficiencies and lowered costs. In an era when enrollment, funding, government grants, and other forms of income are down, hiring an established and proven independent audit firm that provides fair fees (as perceived by the staff and board) is imperative.
Audit efficiency comes from different areas, such as technologies, documentation, analytical analysis, secondary reviews, and advance preparation. Understanding how to maximize on these efficiencies can cut down significantly on the costs to an organization.
Documentation: A best practice for audit efficiency is documentation. Documenting the whats, whys, and whens associated with accounts or procedures incurs less work for those charged with reviewing the financial data – inevitably reducing the amount of work handled by an auditor. Generally, auditors find that things are done properly but are lacking documentation. It is important to reinforce documentation procedures with your staff because it will save time and money in the long run.
Analytical Analysis: Another preferred practice is to have a member of the auditee perform the analytical work that the audit firm will be doing. This will help in several ways: the analytics will highlight the results that were not expected and/or expected, but had a large variance with a previous period; and the analytics "force" the analyzers to learn more about the organization's financials.
Issues that arise can be reviewed and discussed internally prior to the auditors' arrival. Having done the analytical analysis in advance will equip the organization with the answers the auditors will be seeking. This will increase the efficiency connected with the audit, along with providing the staff and other parties with fiduciary duties to the organization more knowledge about its financials.
Secondary Review: Another step that can be taken is to have someone in the organization look at the final financial analysis schedules that were internally prepared. As we know, mistakes happen. A second set of eyes to review the final work product prior to sending it off to the auditors lim its mistakes found in schedules, enhances efficiency, and decreases the time an auditor spends at your office.
Advance Preparation: All organizations know when their audits are coming and dread the audit request list. Rather than responding reactively, take a proactive attitude by preparing in advance. Then, respond to the audit request list as completely as possible – keeping the information in the same chronological order as requested.
Leaving a few unanswered requests can really slow down the auditors' work. Not only does efficiency go out the window, but the final report date gets later and later. The quicker the auditors receive the information, the quicker they will get started. The more time an organization spends on preparing a "tight" package for the auditors, the less time the auditors need to spend on the audit. This equates to lower auditing fees and earlier delivery dates.
Everybody wins when the organization incorporates efficiency into its audit preparation.
- AJ BELL Replaces KPMG with BDO as its New External Auditor
- AIM-listed Mining Company GoldStone Switches Auditor
- New Study Reveals 55% of Public Believe Auditors’ could Prevent Company failures’
- FRC Hands KPMG a £5m Fine over Co-Operative Bank’s Audit Failings
- IAASB Consults on Simplifying Auditing Standards for Small Entities with Less Complexities
- Anglo American Replaces Deloitte with PwC as its External Auditor
- SEC uncovers $20m Accounting Fraud at Celadon Group