What can an audit do for your not-for-profit organisation? Understanding what an audit can bring to your NFP is often misunderstood. It can be seen as simply providing independent verification of financial statements and notes, and whilst this is the primary function, significantly more value can be obtained.
The right auditor should be someone who is able to discuss difficult issues with you and who feels free to give insights into a number of issues. This way an audit can provide you with insight on topics not just of a financial nature.
An audit of your NFP can lead to significant value including:
- Helping you understand what other NFPs are reporting and what constitutes best practice from a reporting perspective
- Providing technical advice in respect of non-recurring transactions ensuring they are being correctly accounted for. Auditors can help you get critical advice before entering the transaction that saves substantial time and money
- Identifying operational areas that can be made more efficient or tailored towards the organisations goals
- Suggesting enhancements seen at other organisations such as IT programs/reporting structures that help with disseminating information
- Attending the AGM and being available to meet with members who may have questions around the financial statements
- Benchmarking of information from other similar organisations
- Identifying financial efficiencies that may lead to future savings and efficiencies
- Providing insights on key sector developments that may impact the organisation broadly including the approach to business and financial management
- Identifying the impact of changing accounting standards within the NFP environment and their impact on financial reporting
In order to achieve such value, it is essential that the board/audit and finance committees engage with the auditor and set the framework for such conversations to take place. There needs to be a forum established for open and frank communication to take place without fear or favour.
It is also expected that a board select the right auditor who is able to deliver such value. It is essential that an auditor is able to achieve the following as a minimum:
- Complete the audit in a timely and professional manner
- Provide staff well versed in NFP issues
- Be available to attend all meetings requested
- Have experience with other NFP organisations
- Ability to discuss strategic, operational and cultural issues that the auditor identifies
- Inform management of changing business models and ensure change and evolution is recognised
A quality audit goes beyond the provision of an audit report and has the potential to identify areas which could significantly improve the operation of your organisation. To benefit from an auditor’s experience and broader industry analysis, look to engage someone with vast experience across the NFP sector.
Key things to consider...
- Look for the right auditor who can offer insights and discuss difficult issues.
- The board should engage an auditor and set the framework for open and frank discussions.
- An audit can lead to significant value in a number of areas.
Contributed by: Scott Phillips, Partner - Assurance at Moore Stephens
The opinions in this article do not necessarily represent the views of the Australian Institute of Company Directors. Every effort has been made to ensure accuracy, but no responsibility is accepted for errors.
NFP Thought Leadership Program
We remain committed to assisting the NFP sector in achieving its goals through good and appropriate governance. As part of this commitment we have launched our national NFP Thought Leadership Program. This program, utilising the insights of many leaders across the NFP sector, will provide a range of resources and content which can be accessed online or in person at our various events. Moore Stephens are proud to support our national NFP Thought Leadership Program as a valued program partner.
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