Charity audits are important in ensuring transparency and accountability in the charitable sector. At P B Syddall & Co., we understand that the prospect of an audit can be daunting. However, your charity can achieve a smooth and efficient audit process with the right preparation.
In this post, we’ll outline key steps to help you prepare effectively.
Understand audit requirements
The first step in preparing for a charity audit is understanding your organisation’s specific requirements and standards. Charities in the UK must adhere to the regulations set by the Charity Commission and, if applicable, the Office of the Scottish Charity Regulator (OSCR). Familiarise yourself with the legal thresholds and audit requirements to ensure your charity is compliant. For instance, charities with an income over £1 million or gross assets over £3.26m and an income over £250,000 must have their accounts audited.
Organise financial records
Having well-organised financial records is essential for a smooth audit. Ensure that all financial documents, including bank statements, receipts, and invoices, are up-to-date and easily accessible. Use reliable accounting software like Xero or Quickbooks to maintain accurate yearly records. This will not only help during the audit but also aid in efficiently managing your charity’s finances.
Review internal controls
Strong internal controls are the backbone of any organisation. Review your charity’s internal controls to identify any weaknesses or areas for improvement. Effective internal controls help prevent fraud, ensure the accuracy of financial reporting, and promote operational efficiency. Consider conducting internal audits periodically to assess the effectiveness of your controls and make necessary adjustments.
Prepare documentation
An auditor will require various documents to conduct a thorough review. Prepare the following documents in advance to facilitate the audit process:
- Annual financial statements
- Bank reconciliations
- Fixed asset register
- List of donors and donations
- Payroll records
- Contracts and agreements
- Governance documents (e.g., meeting minutes, policies)
Having these documents ready will save time and reduce stress during the audit.
Communicate with your auditor
Open communication with your auditor is vital. Schedule a meeting with your auditor to discuss the audit timeline, key areas of focus, and any potential issues. This proactive approach allows you to address concerns early and ensures that both parties are on the same page. Additionally, ask your auditor for a list of required documents and any specific information they may need. This will help you prioritise and prepare accordingly.
Train your staff
Your staff play a significant role in the audit process. Ensure that they know their responsibilities and understand the importance of the audit. Provide training to relevant staff members on preparing and presenting financial information. This includes understanding the financial reporting framework, recognising potential audit risks, and maintaining accurate records. A well-prepared team will contribute to a smoother audit experience.
Conduct a pre-audit review
Conducting a pre-audit review is a proactive step to identify potential issues before the official audit begins. This involves reviewing your financial statements, internal controls, and compliance with relevant regulations. A pre-audit review allows you to rectify any discrepancies or gaps, ensuring that your charity is in the best possible position for the audit.
Learn from the audit
An audit provides valuable insights into your charity’s financial health and operational efficiency. Use the audit findings to improve financial management practices and strengthen internal controls. Promptly address any recommendations made by the auditor and incorporate best practices to enhance your charity’s overall performance.
Get help
A well-prepared charity audit ensures compliance with regulatory requirements and enhances stakeholder trust and transparency.
By understanding the audit requirements, organising financial records, reviewing internal controls, preparing documentation, communicating with your auditor, training staff, and conducting a pre-audit review, your charity can achieve a smooth and successful audit process.
At the end of the day, preparation is key. Our specialists here at P B Syddall & Co. support you every step of the way, ensuring that your charity is audit-ready and compliant with all relevant regulations.
Contact us to learn more about how we can assist you in preparing for your next charity audit.