Inyathelo’s Finance Director, Soraya Joonas, shares her insights in completing an external non-profit audit. Here are 3 points to consider as you gear up for the process:
1. Be prepared with your documentation
A key part in contributing to a smooth audit is being prepared. Help to instill a culture throughout your organisation of diligent record keeping. While this is driven by the finance office, all employees who requisition payments must play a role. Each transaction should be backed by necessary documentation, from a request for purchase, to invoicing, to authorisation of signatures and complete information on financial allocations in the budget for each income and expense. It is important to keep a trail of each and every transaction both in and out of the bank account, and to have supporting documents. Each transaction package should not get a final signature, unless all documents applicable (including accurate and complete VAT invoices,) are attached. If you are consistent about this throughout the year, and conduct monthly internal audits, you will avoid scrambling at audit crunch time. You will also find that if you are clear in explaining the reasons for this diligence to employees, they will assist you in maintaining a systematic approach.
This consistency would also include ensuring that your accounts are reconciled on a monthly basis and that your accounting software systems are updated on a continual basis.
2. Meet your audit manager beforehand
This may sound like a given, but it is important to set up a face to face meeting with your audit manager beforehand. This will be the person dedicated to manage the audit job and lead a team of auditors during the onsite process. A letter of engagement will need to be signed and a quote obtained.
It is also advisable to set out a calendar schedule with your auditors regarding the plan and document due dates for review. The auditors may be physically present at your offices for one week, but there will be several weeks on either end of this in preparation of the final statements.
3. Obtain a client assistant list
Prior to the audit, it is helpful to obtain a ‘Client Assistant List’ which will outline key information that the auditors require you to collate i.e. service provider contracts, bank statements, fixed asset register, employment contracts, Board minutes and resolutions etc.
- Grants, donations and other income
- Schedule leave day liability balance calculations
- Future income and expenditure budget
- Monthly Fixed Cost Assessment
- Debtors and Creditors Lists
- Statement about your sustainability strategy and entity as a going concern
To continue with this series, see the follow up resources:
- The External Financial Audit Process Part 2: What to expect onsite
- The External Financial Audit Part 3: Be part of the discussion
- The External Audit Part 4: Report and Implementation
Author: Soraya Joonas, Finance Director at Inyathelo. Extract from the article first posted on the Inyathelo Blogspot on 6 June 2016.