Year end Audit stress and how to be prepared for it
Posted on 03 October, 2022 at 16:12
By Rutendo Chinzou
“It is just about time”, says Sindi as she got up to put back a file on the shelf. I grin in agreement as I start to look around for any litter around my desk ready to head home after a long day at the office. I turn to Sindi whilst trying to pack up my laptop bag, “It’s about time, I’m picking up the kids today. At least we catch a break from this audit, I have never had such a…” and before I could finish that sentence, our boss, Tambirai walked in. This could not be a good sign at 5p.m.
“Ladies, sorry to say but you cannot be heading home just as yet” as he handed us both a printed list of outstanding vouchers that had to be pulled out of the files. In my head I’m thinking, why do these audits have to be such a pain all the time every year. I was frowning in my heart but I politely nodded and took a quick glance at the list, pretty long!
Relatable? Getting audited is no fun sometimes. I mean your hands are already full with your day-to-day tasks, (which unfortunately do not stop because an audit has come up) but you also need to cater to the auditors’ requests, from vouchers, to payroll, to bank statements, to suppliers, the list is quite lengthy. It all has to balance. But what can be done to ease the pressure?
As your organisation approaches year end, audits are likely to come into play and trust me you do not want to be in Sindi or my shoes, or if you happen to be, you obviously want to be in a better space. So, let’s talk about how your organisation can prepare for an audit.
Before the audit
There is a lot your organisation can do to prepare for the audit that will result in a smooth audit for both staff, and the auditors. Having documentation ready for the auditors will save time (and money) and will result in less distraction for staff during the audit process. The engagement letter (or Request for Proposal) can be considered a roadmap of what to expect during the audit the engagement letter and/or proposal will usually include the following basic terms:
n A description of services to be performed
n What the organisation’s staff will be responsible for
n Start date and completion date for the audit
Is your documentation ready?
There are a number of steps your organisation can take in advance to prepare for the audit. It seems obvious but the most important preparation for the audit is for the organisation’s accounting records to be up-to-date, accurate, and organized. The auditors will review financial transactions by testing a variety of them, and may ask you to produce documentation to support any number of them. You will want to be ready to provide the auditors with documentation of any financial transaction made during the fiscal year, if asked, without searching through numerous computer or paper files to find what you are looking for.
Place all the documents that the auditors review in a single electronic folder. You can do this in advance, anticipating what they may want to review, but you can also do it during the audit. This will help you have a record of what the auditors reviewed and if you put shortcuts to various documents in the folder throughout the year, it will also make it easier to find what you anticipate the auditors will want to review.
The audit firm may provide your organisation with an audit prep packet that describes what the auditors will ask to review. Auditors that are new to your organisation may have more questions in advance of the audit than those who have conducted your organisation's audits in the past. Tip: Ask the auditors to let you know what format they want to receive the requested documentation in (e.g., electronic files) since having those documents ready in advance, in the right format, will help reduce the auditors' time, and thereby save your organisation costs.
The audit oversight group, including staff who will be working with the auditor, should meet with the auditors before the audit (often called the “pre-audit meeting”) to;
i. develop a timeline that explains which documents the staff will need to submit to the auditors by when, and
ii. ask for guidance on all the various documents that the auditors will ask to review. Typically the list of documents the auditors will want to review is quite long, but luckily it remains relatively consistent from one year to the next, unless the nonprofit’s programs significantly change.
Who attends? Staff who will be responsible for standing ready to assist auditors during their field work, and representatives from the board (or the audit committee) will usually attend. It's helpful if the Chair of the audit committee/Chair of the Board attends.
Audits are not always a nightmare if well prepared for. They do not always mean putting long hours at work or burying your head in files looking requested documents. You just need to prepare for them well!
Success depends upon previous preparation, and without such preparation, there is sure to be distress and chaos!