Hopefully by now you’ve completed all the year-end payroll tax filings for 2016 and you’re ready to move on to the next big task for closing out 2016 – the financial statement audit. The most important piece to having a good audit for your organization is to make sure you are fully prepared. Being prepared for the audit ahead of time has many benefits to the accounting team and the organization; there is less disruption to staff during the audit, the cost can be kept down if the auditors are not waiting for prepared items, and the audit will be finished sooner. We’ve compiled a list to get you through the dreaded preparation phase to ensure a smooth audit.
- Schedule a kick-off meeting with the auditors. Here you can establish timelines and fieldwork dates. You will also let them know your expectations for completing the audit for a board review.
- Ensure all prior year adjusting journal entries are booked. This also includes making sure the prior year trial balance matches the trial balance in your accounting system.
- Update any permanent file items if changes were made in 2016 (i.e. by-laws, internal control procedures, organization charts, new contract agreements, etc.)
- Take a look at your organization and the major changes which occured in 2016. Any new programs? Major staff changes? The auditor will want to know of these things.
Prep Items Prior to Fieldwork
- Have the bank confirmations prepared for all applicable accounts. These will be sent directly to the auditors for them to pass along to the banks.
- Reconcile all your sub-ledgers (Accounts Payable, Accounts Receivable, Fixed Assets, etc.)
- Have all requested schedules and documents completed prior to day 1.
- Pull all supporting documentation for all year-end journal entries and reconciling items.
- Have ready all detail for major balance sheet accounts (bank statements, sub-ledger detail, subsequent event transactions, etc.)
- Pull comparative financial statements and explain any major variances in specific accounts from one year to the next.
It’s good to take one last look over the PBC list prior to sending the auditor a final trial balance. Did you get everything recorded? If you think it’s ready then send that trial balance off to the auditors and let them begin the work.
Happy New Year!
Nonprofit Accounting and Finance Consultant