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How can charities facilitate a smooth audit process?

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

 How can charities facilitate a smooth audit process?

I always recommend that audits are treated as projects, with a system and processes in place to ensure that deadlines are met, audit fees are carefully managed (and don’t escalate), that the process is as smooth as possible and that 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 that includes all of the key deadlines spanning the 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, the start of the fieldwork, the clearance meeting, the board and sub-committee meetings to approve the financial statements, the submissions to Companies House and the Charity Commission etc.

Managers need to think carefully about the time frame, work backwards from the deadlines and be realistic about the amount of work and 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.

Learning from experience

Any organisation who has undertaken an audit can learn from their own experience. What were the pressure points? How long did the process take? What were the key challenges? Are there any processes that can now be automated?

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

Including auditors in your planning 

It's always helpful to plan for an audit with the auditors themselves. This planning process could include reviewing the auditors’ information from the previous year, discussing the information required and areas where you or the auditors could do better this time around. 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 process, and the information, training and support they might need from finance.

Key parties to involve are the budget holders throughout your organisation, the senior management team, who must take ownership of the financial statements and any issues raised by the auditors 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. 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 will need information from them and 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.

Finally, it is important to engage staff outside of finance with your audit processes and results. This could be done by presenting the annual report to staff or preparing frequently asked questions they can access.

Create a 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 and key roles, responsibilities and deadlines included. 

It’s about being organised and automating tasks where possible. Other time saving tips are ensuring that accounts are updated monthly, delegating responsibilities to key people and carrying out internal reviews to ensure any 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.

It's important to remember that a smooth audit is the result of careful planning and project management and a very detailed to do list.