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Preparing for an Audit

Definition: An audit is an examination of an organization’s financial statements by an independent certified public accountant (CPA).

Who’s Required To Have An Audit: Nonprofits audit requirements vary by state. For example, Nonprofits with charitable contributions greater than $300,000 are required to submit audited financial statements to the Pennsylvania Bureau of Charitable Organizations within 135 days after the end of their fiscal year.

Preparation: To be well prepared for an audit, you should:

  1. Review the auditor’s prior year recommendations to ensure any significant weaknesses have been addressed. Also review the auditor’s prior year adjusting entries to see if any corresponding adjusting entries need to be made for the current year.
  2. Ask your auditors for a list of reports and documents they’ll need for the audit, which will probably require you to assemble:

    • Trial Balance and/or General Ledger Bank confirmation requests
    • Bank statements and reconciliations
    • Reconciliation of activity in balance sheet (and sometimes income statement) accounts
    • Board meeting minutes
    • Updates to internal control procedures
    • Grant acceptance letters
    • New contracts and leases
    • Bills for fixed asset additions
    • Lists of vendor bills and customer invoices (including outstanding A/P and A/R) to enable the auditor to select items for review or confirmation
    • Reports of transactions subsequent to year end up until the audit report date
    • Bank statements and reconciliations subsequent to year end up until the audit report date
    • Draft financial statements, footnote disclosures, and/or Statement of Functional Expenses
  3. Be prepared to discuss:

    • Changes in governance, management, ownership, and personnel
    • Changes in operations and technology
      Economic/industry developments and their impact on your operations
    • Estimates used in the financial statements, such as allowance for uncollectible accounts
    • Significant variances versus budget and prior year Non-compliance with credit agreement covenants

Regulatory or legal actions Independence: To maintain independence, your auditor is not allowed to prepare these documents. If your organization is unable to prepare the documents internally, then it may be prudent to hire outside an accountant (like Bookminders) to assist in the audit preparation.

Financial Record Security

You might think that your small organization is not a target for malicious hackers. But, a Hai survey by the Small Business Technology Institute reported that more than half of all small businesses wholesale NFL jerseys in the U.S. experienced a security breach in the past year. Here are the steps you should take to provide basic security for your financial records.

  1. Protect Your Systems—Equip all PCs and servers with a) an un-interruptible power supply to prevent corruption of data, b) virus detection software, adware/spyware detection and cheap MLB jerseys removal Food tools, and c) a firewall on all computers that connect to the Internet.
  2. Create Backups—Make regular backup copies of all your important 2016 data. Store a copy away from your office.
  3. Use Effective Passwords—Encourage non-obvious passwords and change them every three months. Use password protection for folders and files containing accounting information.
  4. Keep Software Up To Date—Without updates, your anti-virus, anti-spyware and firewall software will not wholesale jerseys protect you against new cyber threats.
  5. Lock Your Records—Lock file cabinets and access to computers that contain financial information. Block all unauthorized access to the QuickBooks data file.
  6. Be Prepared For Emergencies—Create a contingency plan for your organization so you can recover if you experience an emergency. Test your plan annually.
  7. Use A Payroll Service—Use a payroll service and keep employee names and detailed payroll information separate from the accounting system.
  8. Audit Trail—Make sure that your accounting software’s audit trail is turned on, allowing unauthorized cheap NFL jerseys changes in data to be investigated.
  9. Computer Checks—Generate bill payment checks directly from the accounting system to reduce dance the risk of check alteration and duplicate bill payment.
  10.  Educate Your Staff About Security—Develop a “culture of security” in your employees and in Launches your business. You might think that your small organization is not a target for malicious hackers.