By Jewell Cochran
An external audit is a formal process to obtain evidence about the amounts and disclosures in your financial statements. The auditor will express an opinion on the financial statements with reasonable assurance that they are free of material misstatement. An audit is required to ensure continued funding. It also evaluates the appropriateness of accounting policies and procedures based on the size of your nonprofit. A review of your current auditor should be done every five years to ensure competitive pricing and continued high quality of service.
Preparing for the audit can be time consuming. Proactive planning by your accounting department ensures that the scope of work is done efficiently and mitigates additional cost of audit time. The best rule of thumb is to provide only what is asked for. Most often, the Finance Committee oversees the annual audit process, including auditor engagement letters and fees, monitoring of audit results, and review of the auditor’s performance.