Audit Issues

Preparing for the Audit (1 of 2)

Churches/Ministries can do a lot of things to prepare for an audit. This preparation can greatly decrease audit time and therefore decrease the related audit fees.

Basis of Accounting for Non-Profit Entities - (1 of 4)

Small non-public entities prepare financial statements for a variety of reasons. Usually, it is done at the request of third parties (banks, potential investors or other interested parties) or simply for internal monitoring purposes. The basis of accounting that an entity uses to prepare its financial statements generally is determined by the needs of the users.

Risk Standards - (1 of 6)

Just when you thought you knew exactly what your auditors needed, the American Institute of Certified Public Accountants decided to change the documentation requirements. The AICPA issued 8 new auditing standards that are designed to:

> improve the quality and effectiveness of an audit. In short, the standards force auditors to develop a more in-depth understanding of the client and its environment (including internal controls)

> provide for a more rigorous assessment of the risk of material misstatement of the financial statements and finally

Materiality

If your organization is being audited by an external (independent) auditor, you have probably heard them use phrases like “that’s material” or “that’s not material.” This posting attempts to clarify how auditors make that determination as it relates to your business.

Asset Defined

Straight from FASB's Norwalk Connecticut Headquarters:

The Financial Accounting Standards Board (FASB) and the International Accounting Standards Board (IASB) approved a revised definition of what constitutes an asset on October 22, 2007, the first day of their two-day joint meeting.

Typical Content of a Management Representation Letter

In prior postings, we discussed the reasons an external independent auditor would request their client to sign a management representation letter as well as who should sign the letter. In this post, we will discuss the typical content of the letter.

The letter itself, including the written representations, should be addressed to the auditor. Because the auditor is concerned with events occurring through the date of his or her report, the representations should be made as of the date of the auditor’s report.

Temporarily Restricted Net Assets

As I began preparing for the Church's 2007 audit, I encountered some difficulties in calculating the activity for the temporarily restricted contributions. Over the past year our Church has launched a building campaign and we are tracking the donor contributions, expenses that have been incurred and the related third party debt that has been obtained to help finance the early phase of the construction.

Mega-Church Issues (2 of 6)

During the NACBA conference I briefly attended a session facilitated by Glenn Woods and Bill Gruenewald that discussed issues relating to Mega-Churches. One of the key issues for churches of all sizes is record retention.

Management Representation Letter (2 of 3)

In a financial statement audit performed in accordance with generally accepted auditing standards, the auditors are required to obtain a written letter from management that includes certain representations. In a July post, we discussed the reasons an external independent auditor would request their client to sign a management representation letter. In this posting, we discuss who should sign the letter.

New Attestation Standard

Hot of the AICPA wireservice...

The AICPA’s Accounting and Review Services Committee has issued Statement on Standards for Accounting and Review Services (SSARS) No. 15, Elimination of Certain References to Statements on Auditing Standards and Incorporation of Appropriate Guidance Into Statements on Standards for Accounting and Review Services (Product No. 060653).