1. Financial Bootcamp – Part 6 The Audit Process

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

3. 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

4. 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

5. 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

6. 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

7. 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

8. 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.)

9. 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