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Expectations of an Executive During a Financial Audit
January 14, 2013
By: Adam Woznicki, CPA
Summary: Association executives don't do the work of a financial audit themselves, but they play a key role in providing governance information and delegating duties to staff to help ensure a smooth and successful audit process. Here's what to expect as an executive.

Due to the scope of work involved, preparing an organization for a financial audit can be a challenging time for an association executive. Your board, staff, and the accounting firm the board engaged to perform the audit have high expectations related to the process. Board members want efficient results in a timely manner. Staff will want direction on the duties you expect them to perform. The accounting firm will require a laundry list of information with supporting documentation. If you understand the tasks you need to handle yourself and those you need to delegate, the audit process will be much more efficient.

The Executive's Role

Your main responsibilities during the audit process focus on providing (and explaining) the association's organizational and governance documents. This includes all board and executive committee minutes, contracts, and bylaw changes. During this process, ask yourself: Are all minutes up to date? Are all contracts properly executed? Are all bylaw changes properly noted along with an updated clean copy? If certain documents are not available, it may change the audit opinion due to limited information. If there are significant delays in providing information, the auditors may question its reliability (which means more questions or follow-up).

The best way to ensure you have all the information you need during the audit process is to take a proactive approach throughout the year—not just when the audit begins. This way, you are not scrambling for documents when your auditor hands you a list. For example, complete minutes within a few weeks after the respective meetings. Since bylaw changes require board approval, highlight any motions that include bylaw changes as you finalize your minutes and update your clean version of the bylaws. If bylaw changes are extensive throughout the year, preparing a summary document would be preferable.

Contracts should be saved electronically whenever possible and archived so they are easy to access when someone requests the information. If you save contracts in paper form, at least maintain an electronic list in a spreadsheet or Word document so you know what to search for at the end of the year. A little extra management on the front end will save hours during the audit.

Though it may seem obvious, it is important to note that you should keep the board and finance committee involved with periodic updates during the audit process. The audit is technically an engagement between the board and the accounting firm, so it is important that those charged with governance are aware of bigger matters besides the standard perfunctory tasks as part of the process. Board members do not have to be actively involved during the entire process, but transparency adds another layer of comfort and confidence that you are conducting the proper due diligence. It could be as simple as a weekly email update letting your Treasurer and President know that staff has begun sending grant confirmation notices to donors or announcing that the auditors will be beginning their in-house fieldwork.

Delegate Tasks to Staff

When it comes to association staff involvement during the audit process, treat the audit as you would any other project. As soon as you receive your audit checklist from your accounting firm, schedule a meeting with your staff. Assign tasks based on job responsibility. Let your marketing director compile sponsorship data. Let your bookkeeper or internal accountant compile bank and investment confirmations for signature. It all depends on your staffing pattern, but delegate anything on the checklist you typically do not take on as part of your day-to-day responsibilities. Set clear deadlines for completion of all tasks so staff members clearly understand your expectations. All data should be stored (electronically if possible) in one place for final review. If you have an internal accountant dedicated solely to your organization, he should be heavily involved with the final review of all items on the initial audit checklist.

Conclusion

Always keep in mind why you are conducting the audit in the first place. Its goal is to provide the highest level of independent assurance that your organization's financials are properly stated. Besides satisfying any statutory or legal requirements, the audit provides an additional level of comfort on the general state of the organization's finances for your board, members, and donors. By being proactive during the year with your own responsibilities and defining your staff's responsibilities for the audit process, you'll find the process to be a more smooth and efficient endeavor.

Adam Woznicki, CPA is associate director of finance at Executive Director, Inc., Milwaukee. Email: awoznicki@execinc.com

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