6 Methods to Strengthen Your Relationship with Your Audit Agency

In recent times, relationships between nonprofit organizations and their auditors have seen constructive change. Auditors are seen much less by nonprofits as once-a-year guests and extra as year-round trusted advisors.

Your auditor’s year-end work will stay important to make sure the monetary integrity of your nonprofit’s books and data and compliance with ever-changing laws. Audit corporations have now, nonetheless, transitioned to long-term companions, notably for nonprofits considering transformative system or operational adjustments.

The Audit Relationship: Then and Now

Change administration has not traditionally been an space the place nonprofits consulted their auditor. Nonprofits would typically modify or overhaul their techniques and controls with out partaking their auditors. Audit groups would then be caught off guard, unaware of both newly applied accounting techniques, new chart of accounts, or adjustments in processes and administration roles. As a result of the groups weren’t ready on the year-end audit for these kind of vital adjustments, there have been usually points that required auditors to spend further time in discussions with administration or to doc their understanding of the adjustments.

Six Finest Practices for a Stronger Audit Relationship

Now, nonetheless, nonprofits and auditing corporations usually tend to share and leverage their various experiences to higher collaborate with each other. Listed below are six finest practices your nonprofit group ought to undertake to extend collaboration and improve its relationship along with your audit agency.

1. Set and Perceive Expectations

On the outset, each your nonprofit group and audit workforce ought to agree on the scope, goals and timeline of the audit course of and who’s answerable for every activity. By setting expectations early, your group and audit workforce can each adequately put together for, tackle and streamline not simply the audit course of, but additionally any concern or query that will come up in the course of the 12 months.

These questions could possibly be centered round a big contribution that the group acquired that they weren’t anticipating, and if the group is correctly recording it. Perhaps the group wants further assist understanding new accounting steering that’s efficient and the impacts on its monetary data. Or presumably the group is updating their inside controls and desires to ensure their adjustments are enough and cheap.

I encountered a scenario the place a nonprofit group would repeatedly file the contributions it acquired incorrectly. To alleviate the necessity for adjusting entries in the course of the audit, we devised a plan to work with the finance and growth departments of the group at any time when a considerable contribution was acquired to make sure it was recorded appropriately within the group’s normal ledger. After a handful of discussions, the group understood the errors and had been in a position to correctly file the contributions with out our help. It’s vital that the nonprofit and audit workforce have these discussions all year long so there aren’t any surprises in the course of the audit.

2. Create Clear Channels of Communication

Efficient communication is the muse of any profitable relationship. Your nonprofit ought to set up clear channels of communication with its audit workforce earlier than the audit begins.

With most audit work being carried out remotely or with a hybrid schedule, clear communication takes on higher significance. As audit groups mix onsite with distant visits when performing audits, your group ought to maintain routine standing conferences and have open strains for dialogue and questions.

Clear and frequent communication channels will assist make sure that your audit is progressing easily. Many nonprofits have shifted to common quarterly check-ins with their auditor, typically even month-to-month. This has allowed for smoother and extra environment friendly audits.

One nonprofit we labored with was struggling to satisfy its monetary reporting deadlines and its audit would sadly lag behind the agreed upon timelines. The chief director and audit accomplice mentioned what could possibly be accomplished to enhance the method. They applied weekly check-ins in the course of the audit so each groups may talk about and collaborate on tips on how to obtain the widespread purpose of finishing the audit. This new type of communication between group and audit agency allowed for the audit to be accomplished inside the agreed upon timeframe for the primary time in years and has solely change into extra environment friendly via the years.

3. Proactively Have interaction

Auditors are actually extra concerned in discussions with administration concerning system revisions, know-how upgrades, or vital organizational adjustments. Proactively partaking along with your auditor on these issues can present constructive enter on potential implications, dangers, and obligatory changes which may not have been thought of in any other case. Being proactive also can result in strengthening controls recognized as potential weaknesses throughout your audit. You may also discover alternatives to regulate a recorded transaction that was beforehand misunderstood.

For instance, a brand new government director joined a company we labored with. This government director wished to develop the income sources of the group to incorporate federal grants. This was one thing that the group had not accomplished beforehand. Earlier than they began making use of, the chief director reached out to us to schedule a name to debate this new strategy and to inquire about any adjustments the group may have to make in its techniques, software program, and most significantly inside controls. We had been in a position to talk about the varied intricacies and compliance laws that organizations should adhere to when receiving federal funding, and the nonprofit was in a position to make the suitable adjustments internally to be higher geared up for these funds. It was this proactive communication that enabled this group to keep away from surprises and different roadblocks that generally happen when organizations begin working in new ventures with out taking the mandatory steps to equip their group to take action.

4. Collaborate

Audits are a workforce sport! Consider your auditors as trusted advisors to help your group in reaching its targets. Auditors possess priceless insights and experience that may lengthen far past the presentation of your monetary statements. You’ll be able to make the most of your auditors to make sure your nonprofit is following its monetary practices, has satisfactory and environment friendly inside controls, and has recognized numerous potential dangers. The sort of collaboration must be occurring all year long. Whereas this may appear to be an amazing thought, working collectively along with your auditors to overview these areas can usually result in enhancements in operational efficiencies and assist strengthen your nonprofit.

5. Educate

Your nonprofit group ought to put money into coaching and persevering with training for employees members as usually as potential. This might help make sure that your nonprofit stays compliant with not simply present or future accounting requirements, but additionally with relevant regulatory necessities, corresponding to:

• Donor restrictions on contributions
• Federal compliance inside the Uniform Steering necessities imposed on grants supplied by the federal authorities
• Updates to your fund accounting software program which may change the best way you pull stories or monitor your tasks

Auditing corporations usually provide academic workshops, seminars, webinars, and newsletters to assist their purchasers and the nonprofit group acquire readability on these points. As well as, a nonprofit ought to perceive the choices its know-how vendor provides for ongoing coaching. Very often, these distributors provide sources to assist nonprofits perceive higher methods to make the most of their software program to the perfect of its capabilities.

With how options are continuously evolving, this coaching must be checked out as ongoing and never one-and-done. Because the workers evolves so does the system, and your nonprofit ought to reap the benefits of these studying alternatives.

6. Consider Put up Audit and Attempt for Steady Enchancment

As soon as your audit is full, your nonprofit ought to conduct a post-audit analysis each internally and with their auditors. Use this analysis to evaluate the effectiveness and effectivity of the audit, establish areas for enchancment, and mirror on the audit course of to higher put together for future audit engagements.

As a part of this analysis, overview and talk about at size the administration letter issued by the audit agency, each internally and with the audit agency. That is particularly vital if there are audit findings. Whereas this letter can typically be perceived as important in nature or critiquing a company’s administration, the intent of the letter is to supply help and enhance the group. The suggestions supplied on this letter shall be integral in serving to your nonprofit repeatedly enhance its operations and monetary administration.

Administration ought to tackle the findings with clear, concise, documented corrective actions plans. As well as, I’ve discovered that typically administration has used the findings in these letters as reinforcement to substantiate the issues that they’ve addressed earlier with the Board.

Higher Relationships Imply Higher Enterprise Choices and Higher Outcomes for Your Trigger

It’s important on your nonprofit group to construct a robust relationship with its auditors, particularly one constructed on belief. Discover an audit agency that can present the same old audit or tax companies and change into a trusted advisor year-round.

Having an audit agency that not solely understands how your group operates but additionally the mission of the group is essential. This understanding of a company’s mission ought to lengthen into the audit in order that the agency can present steering and finest practices, and the group’s operations are optimized for achievement. This relationship is a crucial part of success for any group—and one which its audit agency would genuinely welcome.

Searching for extra sources that can assist you set your group up for audit success? Take a look at our audit toolkit with finest practices and a guidelines that can assist you use your know-how to streamline your audit.