How can charities facilitate a smooth audit process? Farrah Kitabi, Senior Manager, Sayer Vincent, offers advice

Written by Farrah Kitabi

Running an audit can be challenging for charity finance managers, particularly as audits need to be fitted around the day job.

Finance professionals in the sector have had to be incredibly agile over the past couple of years and, with many financial challenges head, the need for agility is here to stay.

Managers need to ensure business as usual, but also plan effectively to ensure deadlines are met and the whole audit process is as stress free as possible.

I always recommend audits should be treated as projects, with a system and processes in place to ensure deadlines are met, audit fees are carefully managed and don’t escalate, the process is smooth, and a quality document is produced on time.

There are three components of a good project – the planning, the resourcing and the action plan.

Planning

The first step is to create a timetable, which should include key deadlines spanning the entire project. These would include planning meetings with auditors, the date of the year-end close down of the finance system, when the first draft of the accounts will be sent to the auditors and senior management team, the start of the audit fieldwork, the clearance meeting with the auditors to review key audit issues, draft management letter and draft financial statements, the board and sub-committee meetings to approve the financial statements and finally, the submissions to Companies House and the Charity Commission.

Managers need to think carefully about the time frame, work backwards from the deadlines and be realistic about the amount of work and the resources needed. Other considerations are the people who will be involved in the process and the time needed for them and others to review the accounts and information given to the auditors. This is especially important with many staff teams working on a more flexible basis.

Learning from experience

Any organisation who has done a previous audit can learn from the experience. What were the pressure points? How long did the process take? What were the key challenges? Are there any processes that can automated this time?

It’s a good idea for organisations to establish a timetable as soon as possible after the previous year end so lessons learned from this experience could be incorporated. For example, could the time between the audit and final circulation of accounts be extended if needed or shortened to have the audit completed sooner? Another recommendation is for charities to organise a debrief with their auditors following their audit to see what worked well and where improvements could be made for next time.

Planning with auditors

It is a good idea to plan with the auditors. This could include reviewing the auditors’ information from the previous year, discussing the information required and areas where you or the auditors could do better. The planning meeting with the auditors is also the place to discuss any issues, as the audit will be far smoother if there are no surprises.

Resources

Other considerations are who needs to be involved in the audit process and the information, training and support they might need from finance.

Key parties to involve are the budget holders throughout the organisation, the senior management team – who must take ownership of the financial statements and the board of trustees – it is their report and accounts.

Other staff include the communications team, who may be able to use the statutory accounts as a communication tool, and they will be involved in developing the trustees’ report. HR and facilities also need to provide information for the notes in the statutory accounts and the auditors may want to talk to them during the audit.

There are also third parties to consider including bankers, outsourced accountants, legal advisers, actuaries and investment managers.

It is important to engage staff outside of finance with the audit and this could be done by presenting the annual report to staff or preparing frequently asked questions they can access.

Detailed task list

Having a detailed action plan and to do list will help to ensure the smooth running of the project, with tasks listed, key roles and responsibilities and deadlines included.

It’s about being organised and automating tasks where possible. Other time saving tips are ensuring that key nominal ledger accounts are reconciled throughout the year, delegating responsibilities to key people and carrying out internal reviews to ensure and problems are resolved prior to the audit.

Auditors will always ask certain questions about variances in figures year on year, they will want to see staff contracts that match costs in the accounts, bank statements, breakdowns of all balance sheet items, trial balances that reconciles to the accounts and third party information to support the figures.

At the end of the day, a smooth audit is the result of careful planning and project management and a very detailed to do list.

About Editor 2611 Articles
Lisa Baker is the Editor of International Business News. As the Owner of Need to See IT Publishing, Lisa is an experienced business and technology journalist and publisher.