According to Auditing Firms in Dubai Freezones preparing for an annual external audit can be stressful and time-consuming. Whether your organization is a significant charity with years of experience with external auditors or a small nonprofit preparing for its first external audit, the preparation obstacles might be comparable. Continue reading for suggestions on how to increase the efficiency and accuracy of the audit preparation process.
Suggestions for Continuous Implementation Throughout the Year
Throughout the year, Auditing Firms in Dubai Freezones collect pledges and contributions. Similarly, they enter into contracts, such as grants, all year. Instead of receiving the documents at the end of the year in preparation for the audit, the accounting and finance department should receive them as completed. The accounting department can check the documentation to ensure that correct accounting is applied. It must, for example, examine any restrictions, conditions, or other specific accounting treatments that may use.
If this evaluation is completed throughout the year, the year-end audit prep work for these income streams is significantly reduced. Furthermore, the accounting department has access to any supporting papers requested by the auditors.
Consider storing critical documents in a donor management system so multiple people can access the information as needed. This will also ease the stress of providing an urgent request list to the development department during the audit, with a request for a speedy turnaround. Furthermore, any questions or missing papers will be investigated while the contract is still in effect.
Examine Operational Expenses and Constrained Income Allocations
Nonprofits must allocate expenses to functional areas during an annual external audit (program, general and administrative, and fundraising). Many NGOs undertake this task at the end of the fiscal year, just in time for the auditors to come. To determine classes, a person count, staff time, and square foot analysis, as well as an assessment of personal expenses, are frequently used.
There are, however, ways to alleviate the time-consuming nature of this year-end practice. A nonprofit, for example, can use the accounting software’s class or dimension functionality to give classifications to expenses as they are recorded. At the end of the fiscal year, the organisation can run a report that will serve as the foundation for its functional expense statement. Furthermore, a nonprofit can conduct annual employee time analysis, such as quarterly, several times.
Grants and other compliance reporting may necessitate additional funding. Constantly monitoring those classifications may also save time when creating essential reports.
Suggestions For Year-End Audit Preparation
During an audit, a nonprofit will supply the external auditor with several documents for inspection. It is usual for audit help to be requested over months, beginning before the end of the fiscal year and continuing until the audit is issued. It can be beneficial for a nonprofit to keep a repository of the documents submitted to the auditor, such as an electronic folder.
Consider indexing or renaming the files to correspond with the auditor’s request list. Reviewing this file throughout the following year’s preparation may save time and uncertainty on what to submit to the auditors. The auditor’s request list may occasionally refer to a file with an unusual name. Still, this allows the accounting team to refer back to what was provided the previous year and generate a file with consistent formatting and pertinent content.
When Preparing for The Audit, Review The Cutoff
A thorough audit preparation will include examining expenses and the time in which they are recorded. One way to accomplish this is to analyse a report of payments made after the end of the fiscal year and identify any invoices for services or items received before the end of the fiscal year. Such bills should be accrued in accounts payable after the fiscal year or documented in another liabilities account. This review will necessitate the examination of physical statements to determine the correct timeframe. Payroll (including payroll taxes and benefits), professional services, utilities, and unreimbursed employee travel expenses are all common accruals for which to keep an eye out.
Prepaid expenses should be treated in the same way. To do so, go over your annual costs and look for any that pertain to services or items obtained after the end of the fiscal year. A separate schedule of prepaid expenses should be kept, and an audit request should be anticipated. Rent, postage, unique event venue and speaker charges, and some utilities are examples of common prepaid.
Determine an Audit Timeline
It’s typical to be unsure of the following steps during any audit stage. It is especially unclear after auditors have completed on-site work but still need to complete the audit report. It is vital to agree on a timeframe with the auditors, beginning with planning and ending with audit issuance. The timeline should include, at a minimum, the following steps: planning fieldwork. Audit fieldwork, draught audit report, and audit issuance target date. At each checkpoint, confirm with the auditor that they are still on schedule or if any changes are required. Also, having monthly check-in meetings with the auditor to set a time to address issues and ensure everyone is on the same page may be beneficial.
Audit preparation for a nonprofit organisation can be daunting and time-consuming, especially if this is your first audit. Many of the year’s issues can be avoided with careful planning, project management, and applying the principles above.
Audit preparation services our Nonprofit Consulting Services provide include generating auditor-requested schedules, resolving auditor queries, and preparing draught financials. We can also help you evaluate and improve your audit prep process to save time in the future.