What To Expect During A Financial Audit

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An audit has been scheduled, and you’re thinking, now what? What should we expect? What will the auditors need from me, and when? Before the audit begins, your auditor should provide you with a list of requests to help facilitate the audit. But to make everything easy, we’ve outlined the process with what to expect checklists.

The Audit

An audit can be broken down into three main phases: Planning, Fieldwork, and Completion.

Planning

Timeline: 1–2 days

During the planning phase, the auditors will begin the information gathering and inquiry process.

What To Expect

• A meeting between your auditor’s team and your management team to learn about any changes during the year, answer any preliminary questions, and address pertinent matters for the upcoming audit.

• The auditor will walk through and review your organization’s policies and key transaction cycles (receipts, disbursements, and payroll). Auditors do this to understand and document their understanding of your organization’s processes and internal controls.

• If applicable, a test of internal controls will be performed.

• A review of the documented governance meeting minutes. (Meeting minutes from Board of Directors, Finance Committee, etc.)

Documents That May Be Needed

• Historical documents

  • Articles of Incorporation

  • By-Laws

  • IRS Tax Exemption Letter

• Documented policies and procedures

  • Financial

  • Personnel

  • Accounting

• Commitments

  • Loans

  • Leases

  • Employee benefit plans

Fieldwork

Timeline: 4–5 days

During the fieldwork phase, the auditors will be working on the account balance and transaction testing.

What To Expect

• The auditor will calculate materiality and determine which accounts will require further testing.

• They will generate analytics on the account balances, including comparisons on the current year vs. prior year and current year vs. budget.

• The auditor will review and test to support documentation provided for year-end account balances.

• They will select transactions within certain accounts for in-depth testing, for accounts where a more substantive approach is determined necessary.

• The auditor will make inquiries of your organization as needed.

• They will propose and discuss adjustments to accounts as they determine it is necessary

Completion

Timeline: 2–3 weeks

During the completion phase, the auditors will be drafting financial statements and reports on the audit.

What To Expect

• They will draft the financial statements and render an opinion. Then your auditor will meet with you to review the draft statements and make adjustments, if necessary.

• Your auditor will draft and provide other written reports. The reports will include any material weaknesses or significant deficiencies noted during the audit.

• They may also provide a Management Letter that notes areas where your organization can improve with suggestions and recommendations.

• If needed, they will present to those charged with governance.

• If engaged, they will prepare the required tax returns (Form 990).

Still, feeling lost or overwhelmed? Contact us; we will be glad to help you understand what is happening and what will happen.