Your Guide to a Successful Financial Audit (for Non-Profits)

Published by John Holmes at May 5, 2022

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Audits are the bane of every business professional. We provide some common-sense approaches to make the process much less painful.

Independent audits can be tedious, and if the federal or state government required you to conduct one at your non-profit organization, it can be even more daunting. 

Fortunately, an independent financial audit at your non-profit doesn’t have to be stressful. The team at Fricke & Associates has worked with many companies and organizations to help them navigate the financial audit process. Below we offer a few common-sense approaches to make this process straightforward and painless. 

Know The Ins and Outs of Non-profit Audit Requirements 

Before starting the audit process, it’s helpful to know the expectations and who may require the audit once complete. For example, if you’re applying for a grant, they may have some specific requirements for an audit. They may even have a thorough list of financial documentation that they need before accepting your application and potentially approving it for funding. Also, your non-profit organization’s founders may have detailed specific actions that need to happen in your audit, even down to how often they should be performed, so check your organization’s bylaws for this information. 

Create a Timeline and Checklist 

One of the ways to overcome the stress associated with an independent audit is to create a timeline and corresponding checklist to ensure you have the time to gather all the necessary documentation and make any required adjustments needed during the process. 

For example, you need to set aside time to find an auditor, gather all the information, perform the audit, and then consider any recommendations that the auditing company makes. 

As you go along and create this timeline, you can add to-do lists and assign tasks to various individuals on your team so that everyone knows what they need to gather and how they can help with the overall process. 

Find an Auditing Firm That’s Experienced in Working with Non-profit Organizations 

One of the first steps on your timeline and checklist should be to find an experienced auditing firm. Make sure you don’t go with the first firm you see. Take time to research firms and look for qualities like: 

  • A seasoned and trained staff with the adequate experience needed for an audit. 
  • A detailed history of working with non-profit organizations. 
  • The capacity to offer time estimations and deadlines for the entire auditing process. 
  • An ability to provide reasonably accurate cost information that aligns with your budget. 

Before committing to a firm, have each one go through a request for proposal (RFP) process so that you can adequately compare them to see if they are a fit for your auditing needs. 

Prepare for the Audit 

This process may seem overwhelming, but it doesn’t have to be if you have a well-crafted checklist. This is where most of the documentation gathering will occur. Here are things you want to ensure you’ve completed: 

  • Record every expense and transaction.
  • Check financial reports for accuracy. 
  • Reconcile all financial accounts, including checking, savings, and investment accounts.
  • Gather relevant financial reports. For example, you would likely include evidence of any grant awards in the data gathering. 
  • Properly record prepaid expenses and any purchases you are paying for overtime.

This will also be the time to sit down with your auditing firm and ask them any questions to ensure you have provided them with all the information they need. 

Manage Recommendations After the Audit 

Once the audit is complete, members of the auditing committee (if you have one), the non-profit’s leaders, and any financial staff will go through the auditor’s report and compile any questions for the firm. They will then note any recommendations and create a report to show to the board. 

This step is a great time to note any potential inefficiencies in your financial reporting process and develop strategies to improve. For example, you may discover that you need to allow for more frequent reviews by financial staff to catch errors, which can be included in the report to the board.

Keep Audits in Mind Throughout the Year 

One of the best ways to get through an audit is to prioritize financial reporting and monitoring throughout the year. Whether by keeping a closer eye on grant award information, tracking bank reconciliations, or keeping data better organized, you can ensure you don’t get derailed by an audit by staying prepared for it. 

A great way to do this is to work with a company like Fricke & Associates. We have skilled and trained CPAs and financial pros who can work with you to ensure the independent audit process is straightforward and stress-free. To get started on preparing for an audit or better organizing your financial activities, give us a call at 770-285-5198. 

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