Your charitable organisation may need an audit, either because of a statutory or funder requirement.
The auditor will inspect the books and records for the financial year and will report their opinion on whether the accounts show a true and fair view and have been properly prepared in accordance with the applicable accounting standards.
Many people ask us what’s practically involved in the audit process, how they can prepare well and what they can expect from us as auditor. This guide aims to answer some of these questions…
How the process works…
Burton Sweet are registered to carry out audits in the UK and Ireland with the Institute of Chartered Accountants in England and Wales (ICAEW). Our experienced team will undertake audit work and procedures guided by International Statements of Auditing.
The audit process begins with the signing of an engagement letter, which outlines the respective roles and responsibilities of both parties (our team and the charity). It’s vital that everyone understands what will be involved from the offset to prevent any confusion further down the line.
Next, we’ll arrange a meeting with management and ideally at least one trustee to plan our strategy in more detail. Planning is an essential element of the audit, which determines the materiality (significance of an amount, transaction, or discrepancy, in terms of whether it would affect the decision of a user of the accounts in relying on that information) and best approach, with regard to their financial statements. This stage will include confirming logistics for work and deliverables. Documents will be requested, such as a confirmation of going concern from the trustees. Samples will be selected and communicated to prepare for the fieldwork stage. Preparation of a set of draft accounts from your final trial balance will take place (whether you prepare the accounts or you ask us to), as well as a completed disclosure questionnaire.
During the audit, evidence will be obtained through a combination of substantive tests of detail, analytical procedures and reliance on internal controls.
The extent to which each of these processes will feature depends on our assessment of risk and on the most efficient way of obtaining sufficient evidence. In our experience, performing substantive procedures is often the best approach for most charities and subsidiaries. However, we will need to review internal controls closely to ensure that our work on income recognition is robust, and so we can report on adequacy and effectiveness to the board.
The audit fieldwork can take place either exclusively on-site or a mixture of on-site and remote, dependent upon the specific circumstances.
We believe it’s important to raise critical audit issues with our clients as and when they happen, so there are no surprises at the end of the process. Therefore, we will maintain close contact with management throughout the fieldwork and completion stages.
After the conclusion of fieldwork, we evaluate, review and conclude. This process includes a closing audit meeting to cover the key findings and agree on appropriate action.
At the point the accounts are approved, we will ask the board to review and send us a representation letter confirming certain assertions and information provided to us over the course of the audit.
We can also attend a relevant meeting (such as an audit committee meeting or AGM) to present the accounts, report back on key findings, alongside answering any questions the trustees may have. A summary letter will also confirm any recommendations that we may have as a result of the audit.
Rules & regulations
As a firm, we are members of the ICAEW; our work is regulated by them. Burton Sweet are subject to regular audit quality and practice management reviews and are bound by their ethical principles both in our conduct and how we handle confidential information. In addition, we are required to comply with the revised Auditing Ethical Standard issued by the Financial Reporting Council (revised December 2019).
Our data protection policy is available on request. We operate a secure client portal for the exchange of client documents to avoid the use of communication methods such as email to transmit confidential information.
We take steps to ensure there are not threats to our independence with our clients that would affect the audit. This includes sending enquiries to our other staff members (who may not be part of the audit team), as well as considering other client relationships.
5 tips for a seamless audit
When it comes to preparing for the audit, we are sure that you will want to:
- Minimise any audit adjustments or surprises
- Make the audit process as efficient as possible
- Get more value out of the audit process
We’ve put together 5 practical actions you can follow for a seamless audit…
1. Plan
Throughout the year, be proactive in your audit approach by devoting time to documenting the appropriate information as it happens, such as asset purchases and disposals, monthly/quarterly reconciliation of control accounts, etc.
Prepare the requested details and documents that your auditor needs beforehand, so you don’t have to hunt down the information down during the audit. Agree a timetable for the audit that is practical and achievable for all parties.
2. Prepare
Ensure that the accounts are ready to be audited. Carry out an overall review of your records; ensure that all balance sheet items and funds have been reconciled and are in line with your expectations.
Get a head-start on the Trustees’ Annual Report. Drafting the report can be time consuming and often needs input from various people. It’s the auditor’s responsibility to identify any inconsistencies between the report and the financial statements. It’s also used to plan our work and give us an understanding of the key issues, and is therefore an important document to have as early in the process as possible.
3. Revisit
Have a look at previous years’ audit recommendations and audit adjustments to recall any challenges you might have experienced.
If there were any previous audit findings, make sure they have been addressed before the current audit. It will reflect far better upon your organisation if the auditor sees you have regarded previous feedback, as well as improving the way your charity functions generally.
4. Communicate
Ask questions as soon as they arise. Do not wait until the audit fieldwork if you have a question about accounting treatment.
It can be time consuming to unpick complex queries and therefore may extend the audit process, causing further disruption and potentially cost.
5. Assist
Make sure all key members of the team are present and accessible during audit fieldwork.
All of the requested working papers and schedules should be available to the auditor prior to the fieldwork, but the auditor may need to ask for further supporting documentation, explanations, and additional information as the audit progresses.
Need some guidance?
Beyond their professional roles, members of our team are trustees themselves, so understand how the audit process can affect a charity and how it vital it is. Having an audit conducted can seem like significant upheaval if ill-prepared; it’s our job to make the audit both as simple and valuable as possible.
Burton Sweet has a longstanding commitment to charities and civil society organisations, offering practical, professional and passionate support. We want to assist you, so you can deliver effectively for the communities you serve and show the good you do.
If you would like to talk to us about your audit arrangements, please contact us and we will be happy to help…
