When you’re running a nonprofit organization, it is important to ensure that you are in compliance with all the relevant regulations. An audit is one way to ensure that your organization is meeting all the requirements. This article provides a checklist of items that you will need to have in order for your nonprofit to successfully pass an audit. Being prepared for an audit will help ensure that the process goes smoothly and efficiently.
What Is an Audit?
An audit is a systematic review of your nonprofit’s financial statements and records. The purpose of an audit is to provide assurance that your organization is in compliance with applicable laws and regulations. Audits are conducted by independent auditors who review your organization’s financial statements and records to ensure that they are accurate and complete.
Why Do Audits Occur?
Audits occur for a variety of reasons. They may be required by law or Internal Revenue Service regulations, or they may be conducted voluntarily by your organization. Audits may also be conducted in response to concerns raised by donors or other stakeholders.
What Should you Expect During an Audit?
The audit process typically involves four steps:
- Planning: The auditor will review your organization’s financial statements and records to determine the scope of the audit.
- Testing: The auditor will test your organization’s internal controls and procedures to ensure that they are effective.
- Reporting: The auditor will issue a report detailing the findings of the audit.
- Follow-up: The auditor will follow up with your organization to ensure that corrective action has been taken, if necessary.
What Documents Should You Prepare for the Audit?
In order to successfully pass an audit without major corrections, you will need to have the following documents and records available:
– Financial statements: Your auditor will need to review your organization’s financial statements in order to assess your compliance with applicable laws and regulations.
– Accounting records: Your auditor will need to review your organization’s accounting records in order to verify the accuracy of your financial statements.
– Tax returns: Your auditor will need to review your organization’s tax returns in order to ensure that you are in compliance with tax laws and regulations.
– Policies and procedures: Your auditor will need to review your organization’s policies and procedures to ensure that they are effective.
-Operating budget: Your auditor will need to review your organization’s operating budget in order to assess your income and expenses.
-Bank statements: Your auditor will need to review your organization’s bank statements in order to verify your cash balances.
-Ledgers: Your auditor will need to review your organization’s ledgers in order to verify the accuracy of your financial statements.
-Contracts: Your auditor will need to review your organization’s contracts in order to ensure that they are valid and in compliance with applicable laws.
How to Successfully Pass an Audit
There are a few things you can do to ensure that your nonprofit organization passes an audit:
-Review your organization’s financial statements and records: Be sure that your organization’s financial statements and records are accurate and complete. Correct any errors or omissions before the audit begins.
-Develop and implement effective internal controls: Establish internal controls and procedures to ensure that your organization is in compliance with applicable laws and regulations.
-Create a plan for corrective action: If deficiencies are found during the audit, develop a plan for corrective action. Be sure to implement the corrective action plan in a timely manner.
-Communicate with the auditor: Keep the lines of communication open with the auditor. If you have any questions, be sure to ask them.
– Cooperate with the auditor: Be cooperative and responsive to the auditor’s requests. Being uncooperative may delay the audit or result in a negative report.
– Take corrective action: If the auditor identifies any deficiencies, take corrective action to address them. Do not hesitate to take corrective action; it will show that you are serious about ensuring compliance.
Conclusion
By following these tips, you can ensure that your nonprofit organization is prepared for an audit. An audit is a necessary part of operating a nonprofit, but it doesn’t have to be a stressful experience. By being prepared and cooperating with the auditor, you can ensure that the audit goes smoothly and that your organization is in compliance with all applicable laws and regulations.