How to Prepare for an Audit Year-Round
In this blog, we will discuss how to make the auditing process a year-round endeavor
We have been adamant about the idea that the auditing process is truly a year-round procedure. Just because the auditors have handed in their final reviews and management letters does not mean that you should take your foot off the gas. After each audit, the process should become simpler for both your organization and the auditors. As you should take the feedback given to you seriously and implement internal controls and processes to ensure that any problems you faced now will not be a roadblock in the future.
Aside from the assessment from the auditors, there are courses of action your organization can take throughout the span of a year that will smoothen the auditing process the next time it comes around for all parties involved. Here are some of them:
There are a plethora of different kinds of documents that your organization has to manage. Whether it be business receipts, invoices, vendor agreements, etc., your organization should keep strong tabs on all of them over the course of the year. Put controls in place that helps your employees and or volunteers know where to store specific documents. Set aside folders to hold different forms of documentation, whether it be physical copies or virtual.
To take this step even further and be as organized as possible, you can also try to categorize documents to your liking. Yes, you can have a folder that holds contracts, but how about then creating a subfolder for specific types of contracts? See where we’re going with this? It is up to you how you want to categorize documents, if you want to at all, so be sure that your specific organizing system will be beneficial to your organization as this is not a one size fits all tool. Design the system to be tailored to your needs, as at the end of the day, it will be you and your people utilizing it.
Reconciling Your Books
Auditors do not want to see inaccuracies when they do an audit, which can raise a red flag on your organization. Consistency in the data is vital not only for the auditors but for you. Be sure to input information that is accurate and that has been cross-referenced. Your financial statements should match those of the external source, such as your credit card company.
Reconciliation should not be done in the weeks leading up to an audit. It is a year-round process and should be done with every item that comes your organization’s way. If you wait too long, many items or documents can get lost in translation or sneak through the cracks. Once there is something that should be reconciled it should be reconciled as soon as possible. Delaying only heightens the possibility of inaccuracy and something going unaccounted for. Being on top of reconciliation over the entirety of a year will make those weeks leading up to your audit that much easier.
Reviewing Internal Controls
Every organization has a set of internal controls in place to keep operations running efficiently and for the most effectiveness. After an audit is complete, you can pinpoint where you can improve operationally, which is why it is key to have a closing meeting with your accountants to address any changes that should be made. However, that is not enough.
Over the span of a year it is crucial to keep a eye on all of your internal controls to see how it is running. Ignoring it and just waiting to see hear from auditors is simply not enough to ensure that your organization is operating at the best of its ability. Set aside time throughout the year to meet with decision makers and review how your internal controls are performing. Are there areas for improvement? Should we change this control entirely? These are some of the questions you should ask over the course of the year. That way you are always finding channels to operate better which is a win for your organization and its mission.
Stay Up to Date on Laws and Regulations
There will always be new laws and regulations that are implemented, it is your job to know what they are and when they take effect. New regulations can severely impact your organization in a variety of ways. Whether you have to change the process of some internal controls or the way you have to report donations, it can alter the way things are done.
A great way to be up to date on the latest changes made to the law or regulations you have to follow is to periodically check in with your accounting firm to give you a rundown on any updates. Your organization is focused on its mission, not the latest regulations coming in, that is what accountants zero in on. They can also relay the information back to you clearly and give you insight on the next steps that need to be taken.
The auditing process is not just the days and weeks leading up to the actual audit, it should be a year-round process with controls and procedures in place for your organization to ensure that you will not run into issues come time for the actual audit to begin. It will simplify the process for the auditors and make things easier for you operationally. Having these steps in place will not just benefit your organization when it comes to the audit, but it will also impact how smoothly your organization runs and that means more time to focus on what really matters.
If you have any questions or if MBSATA can help you in any manner, reach out to us at firstname.lastname@example.org.