Financial Bootcamp – Part 6 The Audit Process

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Presentation transcript:

Financial Bootcamp – Part 6 The Audit Process

Objectives Introduce and explain the typical audit process for affiliates Identify common issues for affiliates regarding audits Recommend best practices for a productive audit

Why Audits Exist To provide external, impartial financial oversight To assist affiliates in achieving financial accountability To provide recommendations on how to improve financial accountability To reduce the risk of fraud, embezzlement, or other illegal activities

Requirements HFHI Requirements* <$25,000 in revenue or <$250,000 in assets External financial review by Certified Public Account (CPA) >$250,000 in revenue or >$500,000 in assets Formal external audit by CPA *Georgia laws for nonprofit audits are less strict than HFHI, therefore complying with HFHI requirements will result in compliance with Georgia law

Review vs. Audit Financial Review Financial Audit Informal Formal Limited assurance obtained High assurance obtained Aware of no material financial modifications being necessary Provided opinion about condition of financial statements No understanding of financial controls Thorough understanding of financial controls No verification of procedures Verification of procedures Lower cost Higher cost

Audit Bidding An affiliate’s annual audit should be competitively bid by two or more accounting firms All conflicts of interest should be disclosed to the Board of Directors prior to the bid process Only a certified public account should perform the annual audit

Recommendations Review the previous year’s audit before commencing the current year’s audit Have a list of questions, disclosures, etc. prepared ahead of time Answer all questions and requests for information in a timely and thorough manner When in doubt: give more than is requested and disclose everything

Providing Information The auditor will require access to all record of all financial transactions for multiple years of operation The auditor will likely conduct interviews with staff and Board members who handle finances The auditor will need to know everything about your affiliate (policies and procedures, budgets, account statements, etc.)

Cooperation Cooperation is the key to a successful audit Answer all questions in a timely and friendly manner and encourage others to do the same Provide any information that is requested of you without hesitation