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.

The Ministry can begin by documenting the internal controls related to financial transactions and cycles. They should have clear, detailed procedures for each significant transaction cycle (cash receipts, disbursements, payroll and financial reporting). This could also include contribution collection procedures, fees for services, accounts payable voucher processing, debt procedures, and compliance with donor designations/restrictions. This documentation will assist the auditors in evaluating whether controls/procedures are adequate (based on the size of the Ministry) and whether they have been placed in service for the period under audit.

The Ministry should formally document the understanding and management’s measurement of risks. These risks include

> The Ministry’s strategic business risk,

> Accounting reporting risks, and

> Fraud risks within the Ministry

The Ministry should document the understanding of the above risks and steps taken by management and the board of directors to mitigate the risks identified.

Understanding the Ministry’s controls and risks will help management understand various risks that must be considered by the auditor in auditing the financial statements of the ministry.

See post #2 relating to additional documentation needed for the audit.