Written by Jon Griffin
Your auditor holds a very special position in the operations of your organisation. Strong robust organisations tend to undertake strong company audits, financial audits and performance audits, using auditors who not only carry out their statutory duty but often question management decisions and provide advice and suggestions on how management can be improved. So how do you know what are the key audit matters and what you should be asking your auditor about? We have the top 5 questions for your auditor.
The auditor’s position is unique as he or she is independent of management, the committee and members and is required to have access to all records and staff.
The independence of the auditor together with the understanding of the organisation whole business process and by comparing activity and results over a number of periods allows the auditor to see changes in patterns of activity, market movements before management which may be engulfed in day to day operations.
The auditor is required to form an opinion on whether the financial information presented to members and others is correct and free from material misstatements. By ensuring the financial information is correct members and management can make informed financial decisions.
Under Australian auditing standards which are now backed by federal legislation the auditor is now required to look for fraud.
Also auditors are required to check that the organization passes the “going concern” test. The going concern(solvency) test means that over the next 12 months the organisation will be able to pay its bills as and when they fall due.
Due to cost/time constraints the auditor cannot check every transaction therefore the auditor will review compliance with internal control systems and sample transactions. The auditor will where possible confirm assets and liabilities as at 30th June with external third parties.
Although the auditor reviews systems, transactions and the financial statements the primary responsibility for the financial statements being accurate and not misleading rests with the committee of management.
Committee members may be held personally liable for unpaid debts of an organisation where the organization continues to trade on while insolvent. An incorrect clear audit report may not protect the members from being personally liable where debts remain unpaid.
Five things you should ask your auditor:
Have you looked for fraud? Please list the main areas of internal control weaknesses in the organisation
Are there any assets on the balance sheet which can be made more secure?
Do you have experience in auditing/advising other not for profit organisations and how would you rate managements performance? How would you rate the committee’s performance? (5 being excellent - 1 being deplorable)|
Is the organizations risk register suitable and does the committee spend an appropriate amount of time on risk issues?
Have we provided all the information you requested and can we provide more information to you next year to make the audit easier and can the audit fee be reduced?
About the Author: Jon Griffin is a member of the Institute of Chartered Accountants in Australia and has been advising not for profit organisations for the previous 20 years. He is also a registered company auditor, registered self managed superannuation fund auditor and a registered tax agent.