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Nonprofit Insights New Auditing Standards And Your Audit Report On The National Single Audit Sampling Project The Boomers Are Coming! Are You Ready?
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NONPROFIT INSIGHTS New Auditing Standards And Your Audit The drive for improved financial accountability in the public and nonpublic sectors has resulted in an unprecedented level of regulation affecting auditors and their clients. In early 2006, the American Institute of Certified Public Accountants (AICPA) issued a series of new auditing standards, Statements on Auditing Standards Nos. 104-111. These new standards are designed to improve the audit process by requiring auditors to perform specific risk assessments for each client and then tailor audit procedures to address those risks. They are generally effective for audits of financial statements for periods beginning on or after December 15, 2006. How Your Audit Will Be Impacted As you might expect, there will be major changes to how CPAs perform your audit. Changes that you could see as the new standards are implemented include: • Stronger focus on internal controls. The standards require auditors to obtain a thorough knowledge of five distinct elements of internal control, and evaluate if the controls are appropriately designed and implemented. In certain instances, the auditor may be required to further test the controls. • Identification of significant risks. For areas of significant
risk, auditors will generally be required to perform more work, as
analytical and substantive procedures by themselves will no longer
be adequate. Naturally, implementing the procedures called for in these new standards
will require additional work and may impact your audit fee. But proactive
nonprofits can take steps to ensure an efficient and cost-effective
audit. For example, be sure to have clear and concise documentation
of your internal control structure in place. Other proactive steps
include: Contact our office today to discuss how you and your auditor can work together to minimize the impact of these recent changes on your organization. Report On The National Single Audit Sampling Project Each year, the federal government spends billions of dollars on federal awards to state and local government entities and non-profit organizations. To ensure that these monies are being used for their intended purpose, the Single Audit Act requires all nonfederal entities that receive and expend $500,000 or more in federal awards in a year to obtain an annual “single audit.” Described in OMB Circular A-133, this type of audit is typically referred to as an A-133 audit. The State of A-133 Audits Overall, compliance with federal regulations appears to be high. But one study indicates that smaller nonprofits, those that are new to government grants, and those with prior audit findings have a significantly higher rate of adverse audit findings. The study opines that, perhaps for cost or other reasons, these nonprofits are being audited by less experienced auditors. Another report, The National Single Audit Sampling Project, utilized Quality Control Reviews (QCRs) to develop a statistically based measure of audit quality and recommend changes to improve the quality of single audits. QCRs were conducted on a statistical sample randomly selected from a universe of over 38,000 audits. The population was split into two categories: Level I included audits of entities that expended $50 million or more of federal awards, while Level II included audits of entities that expended at least $500,000 but less than $50 million of federal awards. What Was Found Of the 208 audits reviewed, the statistical sample showed that a sizeable percentage contained some type of deficiency. There was a noticeable difference in quality between the two levels, with a higher percentage of unacceptable audits for Level II. The most prevalent deficiencies included: • Not documenting the understanding of internal controls over
compliance requirements Recommendations The Audit Committee of the President’s Council on Integrity
and Efficiency (PCIE) noted that the number of audits in the acceptable
group indicates that, with the application of due professional care,
proper single audits can be performed. That said, the • Revising and improving single audit standards, criteria and guidance. • Establishing minimum requirements for training on performing single audits. • Reviewing and enhancing processes to address unacceptable single audits. Ensuring Compliance Organizations should take all necessary measures to ensure that they are complying with single audit criteria. In requesting proposals for audit services, the objectives and scope of the audit should be made clear. Factors to be considered in evaluating each proposal for audit services include: • The responsiveness to the request for proposal Questions about an A-133 audit? You can count on our qualified CPAs
to provide guidance. The Boomers Are Coming! Are You Ready? The Chronicle of Philanthropy forecasts an "involvement boom"
in the coming years as Baby Boomers retire. The good news is that
Boomer donors, in particular, offer larger gifts, better retention
and more upgrade potential. But they also offer some unique challenges. They’ll demand more connection. Boomers require more information and involvement from the nonprofits they support (they also have the ability to research for themselves about you). They’re giving for different reasons. The donors of previous generations gave out of duty. Boomer donors give for self-directed reasons. If their gift doesn't "work" (i.e., if they don't see credible evidence that you used their gift to change the world) they'll go elsewhere. They require a different fundraising approach. As Boomers take over, you’re likely to see some real differences in what's effective in fundraising, including the need for higher levels of relevance, choice, specificity and proof of effectiveness. What You Can Do:
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