Keeping Your Audit Costs Down

Keeping Your Audit Costs Down

Keeping Your Audit Costs DownPresented By: W. Andrew Powell, CPAPrincipal Halt, Buzas & Powell, Ltd.

What does an audit really meanDo you need an auditWho hires the auditorRequest for proposalEngagement LetterAudit timelineAuditor’s information request

Introduction

Governmental funding Donors State charitable registration Paid fundraiser Board of Directors

Other types of service◦Compilation◦Review◦Agreed upon procedures◦Program specific services

Is an audit required?

Process for testing the accuracy and completeness of information

Allows a CPA to issue an opinion Includes:◦Cover letter signed by the auditor◦Financial statements◦Notes to the financial statements

What is an Audit?

StaffExecutive DirectorAudit committeeBoard of Directors

Who hires the auditor?

Information the Organization should include:◦ Background of the organization◦ Services to be performed◦ Personnel to contact for more information◦ Timing for completion◦ Prior financial statements and management letter

Responses from CPA firms should include:◦ Experience with not-for-profit organizations◦ Experience with related entities◦ Staff continuity and turnover experience ◦ Identify the engagement team◦ Audit approach◦ Fee◦ Standard billing rates◦ References◦ Differences from competition

Request for Proposal

Scope of work Timetable Estimate of fees Process for change in scope of workPayment termsAssistance to be provided by

organization personnel

Engagement Letter

Schedule interim procedures Completion of confirmations Develop list of schedules for preparation Provide examples of schedules Schedule year end fieldwork Date for providing drafts◦Financial statements◦Management letter◦Communication with audit committee

Process for approval of audit

Audit Timeline

Information usually requested◦Trial balance◦Schedules to support all balance sheet accounts◦Copies of contracts◦Legal representation letters◦Fundraising appeals◦Grant documentation◦Restricted contribution documentation◦Sample of cash receipts and disbursements

Auditor’s information request

Requested schedules not prepared Search for unrecorded liabilities Expense accruals Amounts released from restriction Adjustments◦Organization◦Auditor Proposed Waived

Audit Assistance

Do’s◦Engagement letter◦Provide requested

schedules in advance◦Receive daily updates on

progress◦Provide in writing required

date of completion◦Ask what services would

be considered above audit scope

◦Request an exit conference

Do’s and Don’ts Don’ts◦No engagement letter◦Assemble information day

before auditors arrive◦Assume everything is

progressing well◦Contact auditor day

before board of directors meeting

◦Accept any bill for services from auditor as correct

Request a multi-year price quote Prepare your own financial statements Prepare your own footnotes Prepare all audit schedules Provide key personnel for questions Maintain a file with copies of important documents:

◦ Board of director minutes◦ Leases◦ Notes

Accounting issues Contributions – restricted vs. unrestricted Organization’s policies and procedures Adjusting entries Functional allocation – last step

Ways to Reduce Audit Costs

Questions