Audit Season – TMG’s Version of March Madness

Posted by TMG on April 3, 2013 3:43:00 AM

I typically love when March rolls around each year. It signals spring has arrived and along with it, warmer weather, the start of baseball season, and of course March Madness with the NCAA Final Four Tournament. However, there is another type madness that occurs during this time – audit season! Here at Talley Management Group, we facilitate and manage over 19 audits between the months of February and April.   Through the years and many audits, we have become experts at preparing for this process and ensuring that it is a smooth one leading to minimal, if any adjustments, clean opinions and reduced costs. Similar to preparing for our NCAA bracket picks through research and thorough preparation, we have come up with some tips and tricks to prepare for the auditors visit which may help to make this process a bit less stressful.
The key to any successful audit is being prepared, organized and proactive.  Internally be sure that you have the following information prepared and ready for review:
Final yearend financial statements
Internal policy and procedures
Changes to any corporate documents
Account reconciliations for all Balance Sheet accounts – Bank Recs, Aging Reports, Depreciation Schedules and Deferred Revenue just to name a few
Board minutes
Supporting grant documentation
This is only a sample of some of the items that the auditors will review, but hits on some of the major areas.
Always reach out to your auditor in advance and request a listing of all documents that will be needed during fieldwork.  This is usually referred to as a Client Assistance Letter or PBC Listing.  We have found that if we can provide the majority of that information in advance it not only makes the week of fieldwork run smoothly, but also in most cases shortens the duration of the time that the auditors will need to remain onsite.
Quick Tip – When preparing the requested files, provide all files virtually following the same naming convention used in the client assistance letter provided by the auditors.  This helps to keep the files organized and easily identifiable to any audit team.  When at all possible, provide these files in excel so that the auditors can extract the data to pull the necessary sample selections.  Most audit firms now maintain all of their files digitally, so that is typically the preferred format.  In those cases in which hard copies are requested, provide a detailed and organized binder in which they can easily trace to the requested documents.
Remaining proactive and prepared reduces the risk of being faced with unexpected requests or results.  The last thing you want is to feel like your tournament winner selection was just upset by the #15 seed (see Duke 2012)!
Also keep in mind that it is much easier to prepare the files needed for the 990 at the same time that the audit is taking place rather than waiting until months later when the audit may be finalized.  There are some standard files that will be needed, but check with your auditor for a complete listing:
Sponsorship and contributions in excess of $5,000
Board lists
Description of organization and programs
Keep in mind that the 990 is a public document.  It is a great place to showcase the accomplishments of your organization by utilizing detailed descriptions of your programs and services.
We would recommend that you maintain most of this information throughout the year rather than trying to compile it all at year end.  You should make it a standard practice to maintain files for all contracts, by-laws, polices/procedures and grant support.  Also, be sure to keep the Executive Director and Audit Chair involved and updated throughout the process.
These are just a few thoughts and tips I start thinking about as March Madness rolls around each year.  Using these tips has helped to make our audits less stressful, more efficient and much easier than  winning the NCAA office tournament pool!

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