6 Steps to Prepare for Your Next Financial Audit

6 Steps to Prepare for Your Next Financial Audit

Audits can be a stressful time for any organisation. Even if your records are completely blemish-free, the experience can still be taxing. This is heightened if you’re a charitable non-profit and your future funding depends on it…

So, how can you prepare for your next financial audit and what should you expect from it?

What is a financial audit?

An external financial audit is carried out by an auditor/certified public accountant (CPA) not employed by the organisation they are auditing. The audit itself is an examination of an organisation’s financial accounts, records, transactions, accounting practices and controls.

The auditor carries out this examination to check whether the financial statements prepared by the organisation meet the ‘Generally Accepted Accounting Practices’ in the UK (UK GAAP). These accounting principles are statutory as defined by the UK Taxes Acts.

Does your non-profit need an audit?

It is not always necessary for charitable non-profits to carry out an audit. In some cases, an independent examination may be acceptable instead. However, situations where an external audit might be required are:

If your organisation’s gross income exceeds £1,000,000
If your organisation’s gross income exceeds £250,000 and its gross assets exceed £3,260,000
If the charity commission requires an audit
If your charity’s governing document requires an audit
If trustees wish to have financial statements audited
If a funder asks to see your audited financial statements
In certain cases where a non-profit is not legally required to conduct an audit, they may choose to do so anyway. One of the main reasons for this is demonstrating a commitment to financial transparency. Furthermore, funding – in many instances – is dependent on conducting audits, as are ratings by charity watchdogs.

Preparing for your financial audit and what to expect

1. Define who will have responsibility for the process

One of the first tasks is to define exactly who will carry the responsibility for the audit process. The trustees of a non-profit have responsibility for the oversight of the conduct related to any external auditor hired. They also have the power to delegate this responsibility to an audit committee if they so choose. Nonetheless, those designated responsible must be familiar with the scope of the end-to-end process and be a member of one of the accepted professional bodies in the UK.

To read the full Charity Financials article click here.

Source: Charity Financials

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