How Non-Profits Can Prepare for an Audit
Many nonprofits need an audit or review periodically to secure grants and report to their board or stakeholders. Audits can be challenging to prepare for, but with the right approach, you can make the process smoother. Here are some tips to help your nonprofit get ready for an audit.
- Maintain Accurate Bookkeeping Throughout the Year
Audits are not just a one-week preparation task; they require year-round diligence. Ensure your bookkeeper is entering all transactions correctly and closing the books on a timely basis every month. This includes making sure every account on the balance sheet and the statement of financial position is accurate. Regular and accurate bookkeeping is crucial for small businesses and nonprofits alike.
- Conduct a Pre-Audit Review
Before the auditors arrive, do a complete review of your financial information. Use a checklist to ensure everything is in order, such as uncleared transactions. This pre-audit review can help you catch and correct any discrepancies early on. Use this link for our checklist: Quick_Audit_Check_List.pdf
- Organize Financial Documents
Throughout the year, maintain files of all bank statements and reconciliations so they can be easily shared with the auditor. Keep a cash receipts and disbursement journal if you maintain petty cash. Additionally, keep a list or file of supporting documents for any fixed assets purchased during the year.
- Verify Payroll Entries
Make sure all payroll entries match your 941 reports. This step is essential to ensure that your payroll records are accurate and complete.
- Match Beginning and Ending Balances
Ensure the beginning balance in your financial information matches the ending balance on your 990 or prior audit. This helps to confirm that no transactions were accidentally omitted during the audit year.
- Update Financial Policies and Procedures
Keep your financial policies and procedures manual up to date. This document is crucial for guiding your financial practices and ensuring consistency.
- Maintain Insurance Records
Keep copies of all your casualty, liability, and health insurance policies issued during the audit year. These documents are often required during an audit.
Conclusion
Preparing for an audit can seem daunting, but by keeping these tips in mind throughout the year, you can save time and reduce stress when the audit is being conducted. If you need help passing an audit or preparing for one, consider seeking professional accounting services for small businesses. Outsourced bookkeeping services, such as QuickBooks bookkeeping, can also be a valuable resource for maintaining accurate financial records.
By following these steps, your nonprofit can be well-prepared for an audit and ensure a smooth and successful process. If you need a bookkeeper who can help prepare you for an audit. Contact us today!
