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Three Tips for a Smooth Audit

by | Feb 9, 2021 | PKF Texas - The Entrepreneur's Playbook®, Tax and Accounting Desk

Jen: This is The PKF Texas – Entrepreneur’s Playbook®. I’m Jen Lemanski, and I’m back again with Nicole Riley, a Director on our audit team and one of the faces of PKF Texas’ not-for-profit team. Nicole, welcome back to The Playbook.

Nicole: Thanks. Glad to be here.

Jen: So, audits. You know, it’s the beginning of the year, people are starting to get things pulled together for their audit process. What could a not-for-profit organization do to make that process smoother when it comes time?

Nicole: Yes, because it’s always a painful process and, you know, and you want to get it as smooth as you can. So, I really have like three main tips I’ll give to those getting ready, and the first is: have all those initial requests done way before the audit team even gets to your office.

So, the audit team is going to give you a whole list of things that they want. They want to see your accounts payable listing, they want your trial balance, they want your accounts receivable listing. Have those ready and done and submit it to them before they get there, because then when they get there you can focus on their additional requests, you can answer their questions and you’re not scrambling just to keep up with them.

The second thing I always recommend is before you give those reconciliations to us, take a look at them.

Jen: Know what’s there.

Nicole: Does it make sense? I mean, if you look at your accounts payable listing, and you see positive numbers and negative numbers and really big ones both ways, that’s probably an issue you need to take a look at before you give it to us. So, if you take care of some of those easy things, clean up items, before the audit team gets there, again, you cut out questions that they’ll have, you don’t have to waste time on answering stuff that doesn’t need to be dealt with. You can clean it up ahead of time.

And then the third item is really, take a second and look at the activity of what’s happened since your year end. And just kind of glancing through it, and is there something there that should be in last year that you missed? You know, is payroll there, and part of that payroll is the last year’s expense, and you need to accrue that. Or, did you receive a big check from a donor that, you know, the letter on it says, ‘As we communicated to you in November, here is the first check of your grant award.’ Well, then you need to make sure that you got that into your receivables so that we don’t find that in our testing. And those are some really easy things that you can kind of do ahead of time and just be ready before we get there.

Jen: Perfect, sounds great. Well, we’ll get you back to talk a little bit more about what not-for-profit organizations can do. Sound good?

Nicole: Sounds great.

Jen: For more information about this topic, visit www.PKFTexas.com/NotForProfit. This has been another Thought Leadership production brought to you by PKF Texas – The Entrepreneur’s Playbook®. Tune in next week for another chapter.

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