10 audit tips for nonprofits

1. Talk often – not just at year-end – No one likes surprises. If issues come up during the year, call your auditor for advice on how to handle unusual transactions. It will save everyone time and ensure your financial statements remain accurate throughout the year, not just at year-end.
2. Involve your board in the audit process. The auditors are required to speak with the board, before and after the audit, to discuss internal controls and results of the audit. Make sure your board is aware of their responsibilities and takes them seriously.
3. Set realistic expectations and be mindful of internal and external deadlines. Nonprofits have deadlines for funding sources, financial institutions and others. Make sure your auditor is aware of all of these. Your auditor will let you know when they need information from you in order to hit those deadlines.
4. Ensure all of your account details reconcile with the trial balance. If any adjustments are needed to reconcile accounts, post them right away so the trial balance received by the engagement team is as accurate and up-to-date as possible. A best practice is to have another set of eyes, if your department structure allows, to review all reconciliations prior to providing them to your auditor.
5. Pay close attention to the PBC list – You’ll receive a prepared-by-client list before the engagement begins, with target dates and details. Make sure you hit these target dates and have all the materials available.
6. Designate a point-of-contact (POC): Your accounting team will need to work together to complete the audit and communication is key. Select an individual to serve as the POC, preventing inefficient or even chaotic communication from overwhelming the process. That person is the gatekeeper that all questions and concerns for the auditors run through.
7. Maintain effective controls year-round: As part of the audit, your internal controls will be reviewed. Make sure you have them effectively documented and that they are operating as intended. This is even more essential when you require a Yellow Book or Uniform Guidance Audit. Ensuring the accuracy of such items on an ongoing basis drastically reduces the chances of a miserable audit experience.
8. Delegate tasks, create a timeline: For each PBC item, assign responsibility to an individual or team, including a specific completion date.
9. Make documents available electronically. This is an efficient way to complete your audit and it is a good practice to maintain documents this way, with proper backup and security.
10. Know the accounting standards – be proactive with new transactions and standards before fieldwork. Reach out for help. Some new standards that may impact your organization include:
    1. FASB ASC Topic 842 Leases (https://kahnlitwin.com/blogs/mission-matters-blog/nonprofits-are-you-ready-to-implement-lease-accounting-part-1)
    2. FASB ASU 2020-07 – Gifts in Kind (https://kahnlitwin.com/blogs/mission-matters-blog/what-nonprofits-need-to-know-about-in-kind-contributions)

Thorough and early preparation can position you to get the most out of your audit experience. Your auditors can assure you that your financial information is true and fair, and they can also provide ideas and feedback on ways to improve processes, internal controls and overall efficiency. If we can be of assistance with your audit, please contact us.