Not-for-profit organizations are not required to submit audited financial statements. However, audited statements are typically required when an organization applies for a bank loan and are more likely to reassure large donors and grant creators of the organization’s financial stability.
When you elect to have a CPA audit the statements, the auditor is accountable for expressing an opinion and obtaining reasonable assurance that the statements are free of material misstatements. However, the subsequent suggestions are designed to improve the process.
The establishment, maintenance, and monitoring of internal controls are indispensable. It is necessary to generate estimates. It is imperative to establish accounting policies that are effective. The implementation of these items is not the responsibility of auditors, although they may provide recommendations.
It is the responsibility of your audit to determine whether the internal controls, accounting policies, and estimated are sufficient to prevent or detect errors or fraud that could result in material misstatements. The ultimate responsibility for all decisions made by your nonprofit organization, however, must be borne by you, so keep that in mind.
It is not uncommon for certain non-profit organizations to disregard the board’s involvement in the compilation of their annual financial statements. It is essential that you discontinue this conduct if you have been engaging in it. As part of its overarching fiduciary obligation, your board should assume a strategic and oversight role in the process. The board can also serve as a valuable resource for specific technical issues, provided that the members possess the requisite professional credentials.
A diverse array of financial statement items can be employed to clarify the performance of your nonprofit. Consequently, it is imperative that the financial team of your organization ensures that the statements are as user-friendly as feasible during the preparation process.
One of the most straightforward methods for achieving this is to compare the financial statements generated during an annual audit, your budget, and the financial statements generated internally at the conclusion of the year. The efficacy of this endeavor can be enhanced by ensuring that the format of your audited financial statements is consistent with that of your internal financial statements and budgets.
If the format of the former is different from that of the latter, it may be necessary to establish a connection between internally generated reports and audited financial statements, potentially through the use of an internal memo.
It is imperative to maintain open communication and provide the auditor with all pertinent documentation during their initial engagement to generate financial statements.
