Important Questions to Ask Your Nonprofit Auditors

Nonprofit AuditorsConsider asking the following questions to your nonprofit auditors, both when planning an audit and after the audit has been concluded.  The questions below are specific to external auditors, internal auditors, and accounting management, though some questions may be appropriate for both nonprofit auditors and accounting management.

When Meeting to Plan a Nonprofit Audit

Ask External Auditors:

  • Describe the planned scope of your audit.  Will all subsidiaries be examined?  What percentage of accounts receivable will be confirmed?  How will you verify accounts payable?
  • Describe how your audit can be relied upon to detect problems in internal control.
  • How will you coordinate the involvement of internal auditors with your audit?
  • What criteria do you use to access materiality?
  • What risk assessment techniques will you use?

 Ask Internal Auditors:

  • Discuss the scope and results of internal audits conducted over the last year.  Has management been responsive to the recommendations of past audits by nonprofit auditors?
  • Have your audits identified areas of concern to the overall entity environment?  Have any specific areas been identified?
  • How do you identify risks?
  • How do you prevent improprieties by monitoring the nonprofit organization’s policies and procedures?
  • How will you assist the external auditors?

Ask Accounting Management: 

  • Did any major changes happen in operations this year?
  • Were there any major changes in accounting estimates or in models used in making accounting estimates?  If so, what are the changes and the financial statement effects?
  • What problems should the audit committee be aware of?
  • What are the nonprofit organization’s revenue recognition policies?
  • What are the nonprofit organization’s policies to deter illegal acts?  How are these policies monitored?

When Meeting to Follow Up an Audit

Ask External Auditors: 

  • Did you uncover any material weaknesses, material errors, sufficient deficiencies, or illegal acts in the internal control system?
  • What is your assessment of the accounting principles used by the nonprofit organization?  What impact would alternative principles have?  Are the accounting principles in line with industry practice?
  • How do you evaluate the reasonableness of significant accruals or estimates made by management?
  • Are there any material weaknesses in the nonprofit organization’s internal controls that remain unaddressed?  What changes are being implemented?
  • Overall, what are your conclusions as to the integrity and competence of the nonprofit organization’s financial, accounting, computer, and internal audit staffs?  What improvements are recommended?

Ask Internal Auditors:

  • What was the extent of your work on the audit?  Did the scope of the audit change?
  • Did management impose any limitations on you?  Was there sufficient coordination with the external nonprofit auditors?
  • Did you encounter any significant problems?
  • Do you know of any conflicts of interest between the nonprofit organization and employees?
  • Are you aware of any suspicious payments?

Ask Accounting Management:

  • What do you think of the audit findings?
  • Did you have any disagreements with the nonprofit auditors?  How were the disagreements resolved?
  • Please explain the reasons for the financial statement variations from the prior year.
  • Discuss the significant issues raised by either internal corporate or outside council.  How are these matters reflected in the financial statements?
  • Did the audit reveal any problems or difficulties that the nonprofit organization should be informed of?