audit preparation, your organization’s financial statements and … management... ·...
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Audit Preparation, Your Organization’s Financial Statements and Internal Controls
Presented by: Mark Payne, CPA – PartnerRae Kerr, CPA – Senior Manager
March 5, 2014
What Is An Independent External Audit?
In general, an audit consists of an evaluation of a subject matter with a view to express an opinion on whether subject matter is fairly presented. There are different types of audits that can be performed depending on the subject matter under consideration, for example:• Audit of Financial Statements• Audit of Internal Control over Financial Reporting• Compliance AuditWho requires an organization to have an audit? • Board of Directors and Management• Grantors (Federal, State or local agencies)• United Way
Types Of Audits
Financial Statement Audit – During the audit, the auditor will review the Organization’s financial statements to determine whether they adhere to “generally accepted accounting principles” (commonly referred to as GAAP). The accounting principles the auditors are addressing are created by the Financial Accounting Standards Board.
Audit of Internal Control over Financial Reporting – For many of you this is an audit performed in accordance with General Accounting Office’s Generally Accepted Government Auditing Standards, known as the “Yellow Book.”
Compliance Audit – For many of you this is an audit performed in accordance with the requirements of OMB Circular A-133 , Audits of States, Local Governments, and Non-Profit Organizations and Section 215.97, Florida Statutes, Florida Single Audit Act.
Circumstances That Might Trigger The Requirement For An Independent Audit
• Federal, state, and local governments may require an audit.• Nonprofits that expend $500,000 or more in federal funds in a year are
subject to special audit requirements (the $500,000 limit is current law, but will be raised to $750,000 in 2015). (OMB Circular A-133)
• Nonprofits that expend $500,000 or more in state financial assistance are subject to special audit requirements. (Section 215.97, Florida Statutes)
• Some contracts with governments may require an audit.• Some banks require an audit as a condition of issuing a loan.• Private foundations may request an audit in order to provide the
organization funding.
Why You Might Want An AuditEven If The Law Does Not Require It
• To demonstrate that the charitable organization is committed to financial transparency.
• Required by many public and private foundations in order to be eligible for funding.
Remember: A nonprofit can build its reputation for integrity, transparency and professionalism, by having a regular independent audit conducted and making it available to the stakeholder and the public.
How Do I Prepare For An Audit?
Get An Engagement Letter
This will represent the basic terms of the audit. The Ietter should address the following:
a. A description of services to be performed.
b. Organization’s responsibilities.c. Auditor’s responsibilities.d. Fees charged and related
work.e. Estimated start and
completion date of the audit.
Sample Engagement Letter
Keep Your Accounting RecordsUp-To-Date, Accurate & Organized
Request To Have A Planning MeetingWith The Auditor
Schedule The Audit
Obtain The Auditor Client Request
Prepare An Audit Package For The AuditorWith Items From The Request List
Review Your Grants
• Review your grant reports to ensure actual reimbursable expenses compare to budget.
• Be cognizant of any special conditions required by the grantor agency and communicate those to your auditor.
Other Suggestions ForPreparing For An Audit
• If you find out you will not be ready for the auditor on your initially scheduled date, contact them and be upfront with them. Typically they would rather you reschedule than not be prepared.
• Ensure that all key staff are available during the audit week. This is not the week to take vacation. Your auditor will need to have access to finance staff, grant staff (if applicable) and key management, so ensure when you schedule the audit that these staff members will be available.
Understanding Financial Statements
Understanding Financial Statements
Understanding Financial Statements
Understanding Financial Statements
Understanding Financial Statements
Understanding Financial Statements
Understanding Financial Statements
Understanding Financial Statements
Red Flags To Indicate Financial Problems
1. Continued losses year after year.2. Payroll tax deposits not being made timely.3. Sales tax deposits not being made timely.4. Management trying to say things are better
than the financial statements say they are.5. Concentrations from one
grantor/contributor.6. High turnover in the accounting department.7. Board is unable to speak with the CFO and
all conversations must go through the Executive Director.
Red Flags To Indicate Financial Problems
8. Accounts payable continue to grow each month.
9. Financial statements coming from an excel spreadsheet and not out of the accounting software package.
10. Delayed audit reports.11. Last minute financial information
provided on the day of the board meeting.
12. Line of credit being tapped out.13. Continual debt restructuring.14. Credit cards not being paid off at the
end of each month.
Red Flags To Indicate Financial Problems
15. Board asking questions and the responses seem vague or no response at all.
16. Board members assuming the treasurer has everything “under control.”
17.CPA continues to have the same finding year after year and issues never seem to get corrected.
18.Bank statement shows negative balance.19.Lack of working capital. 20.Receivables are showing as 90 days plus
past due.
Stay Connected
Mark Payne, CPAPartnerJames Moore, [email protected] ext. 308
http://www.linkedin.com/pub/ mark-payne-cpa/63/8ab/b2a
Rae Kerr, CPACertified, Lean Six SigmaSenior ManagerJames Moore, [email protected] ext. 307
http://www.linkedin.com/pub/ rae-kerr/64/155/1a