October is the month of all things scary and spooky. But if your nonprofit audit is one of the things sending shivers down your spine, we’re here to tell you it doesn’t have to be that way! With proper preparation, your annual audit can be a rewarding and enjoyable experience. Here are a few tips to help make your next audit less frightening:
Be Proactive About Communication
The secret to a smooth audit is great communication. Before your fiscal year-end, reach out to your auditor to discuss a timeline for field work. It can be tricky to plan field work around staff schedules, vacations, and organizational events – so the earlier you start planning, the better. This is also a great time to raise any questions or concerns you may have about the upcoming audit. Field work will go more quickly if your auditors are made aware of any potential issues in advance.
It’s also important to communicate with your organizational staff. Audits can be intimidating to new staff members, so let them know what to expect. (And if it’s your first audit too, ask the audit firm! We’re happy to walk you through the audit process if that avoids confusions or delays down the road.) Ask your staff to be as honest and forthcoming as possible. An auditor’s job is not to embarrass or criticize your organization; we’re here to help you improve. Sweeping problems under the rug won’t help anyone, and will only make your audit longer and more expensive.
Prepare, Prepare, Prepare
The most painful audits come from lack of preparation. Before field work begins, your auditor should provide you with a list of items they will need. (If they have not provided a list, don’t be shy about asking them!) Ask questions if any of the auditor’s requests are unclear. Have these items completed and ready for the auditor at least several days before the audit is to occur.
To keep your audit as short and streamlined as possible, try to think like an auditor. Review your financials and compare current account balances to prior year numbers. If there are any major fluctuations, ask yourself why that might have happened. Make sure your balance sheet items have supporting documents and that they tie to the trial balance. Keep clear records of approvals and payments so you can easily demonstrate that you are following organizational policy.
Keep An Open Mind
The word “audit” comes from the Latin “auditus,” an act of hearing. Most people don’t think of audits as a conversation, but ideally that is what they should be. Each party should listen to each other, and work together to get results. An audit is not an inquisition – it’s a discussion on how to improve your nonprofit organization.
Many people think auditors are just out to get you; but although the “scary auditor” might be a popular Halloween costume among accountants, this misconception is far from the truth. We certainly take our roles seriously and are thorough in our work, but most auditors truly want to help your organization by offering insight and ideas on ways to perform better. If you think of us as a partner rather than an adversary, you might find that audit season isn’t so scary after all!