Tame the Beast: Prepare for the Year-End Audit Now– December 09, 2014

With year-end soon rearing its ugly head, not-for-profits have a lot on their plates. For calendar-year-end organizations, preparing now for the audit that inevitably ensues after December 31st is the best way to ensure a smooth engagement, a quality product and less stress on an organization’s financial staff. Here are a few tips.

Schedule a Planning Meeting
Meet with the audit team to communicate expectations regarding timing of draft financial statements, audit fieldwork and board presentations. Communicate any significant events or transactions that affect the organization. Consider having members from the governing bodies (board of directors, finance committee and/or audit committee) present, giving them the opportunity to discuss any specific focus areas.

Schedule a Planning Day
A planning day allows auditors to be onsite prior to fieldwork so they can perform their annual risk assessment, offering a great opportunity to resolve some questions in advance. Providing interim financial statements will give the auditors a chance to complete their variance analysis, and determine the scope and extent of testing. Providing documentation, such as invoices, contracts and grant agreements, will also help reduce both the amount of information needed and the time spent onsite during the audit. Additionally, this day can be used to complete other planning documents, such as confirmations, and to address various inquiries required by auditing standards.

Follow Auditor Guidance
Auditors should send an information request list: if not, request one. Attempt to provide all of the requested documentation prior to fieldwork. If there are questions about the relevance of certain items, reach out to the audit team for guidance. When providing a trial balance, ensure the books are closed and the final trial balance is prepared with all adjusting entries posted before fieldwork begins. Review the prior year’s audit adjustments before closing the books; there may be recurring adjustments to record. Doing so can save significant time during the audit and reduce the amount of proposed adjustments, which are generally looked upon unfavorably by management and governing bodies. Below are items typically requested:

  • Copies of award letter and checks for new grants and/or pledges
  • Copies of any new contracts or leases
  • Invoices/copies of checks for significant fixed-asset additions or repair and maintenance costs
  • List of all governing body members
  • Minutes of governing bodies
  • List of non-cash donations
  • Schedule of grant and/or pledge receivables
  • Detailed accounts payable aging
  • Bank reconciliations
  • Payroll reports
  • G/L detail

Before auditors wrap up their onsite fieldwork, communicate how open items should be addressed. Reducing and organizing follow-up requests will save significant time and effort.

Adhering to these basic guidelines should help deliver a timely, quality product for all stakeholders in the organization. Looking ahead to 2015, remember to communicate throughout the year to stay in touch with the audit team and to tap into their expertise as significant events and transactions occur. This can save considerable time at year-end, resulting in a smoother, more efficient audit experience.

We want to hear from you! We encourage you to comment below on this blog post, share it on social media or contact Justin Nockengust at jnockengust@cohencpa.com or a member of your service team for further discussion.

 

This communication is published by Cohen & Company for our clients and professional associates. Cohen & Company is not rendering legal, accounting or other professional advice. Any action taken based on information in this publication should be taken only after a detailed review of the specific facts and circumstances.