Audits are a daunting part of business but they happen for a good reason.
Charities aren’t exempt from this process and it isn’t always easy to understand how it all works.
Knowing how to prepare for an audit and what to expect is important. This article will explain auditing procedures for charities.
Why charities get audited
When a charity has a gross income over £1million it will be required to undergo an audit. If a charity has an income below £1m but has assets valued over £3.26m it must also have an audit.
Any charities with an income between £250,000 and £1m must be independently examined, which is a different process.
A charity has an obligation to comply with the regulations set out by The Charity Commission.
Trustees, supporters, beneficiaries and the public will know that the money being raised is being used for the purposes intended as well as giving the charity peace of mind in knowing it’s following good practice.
This also provides accountability, – if something isn’t being done as it should be it allows the auditor to find out why and suggest improvements in controls and processes.
If your charity is looking for funding, an audit will help demonstrate the financial position of the organisation, provide assurance over it’s record keeping and financial processes which may boost your chances of being accepted.
Auditing process
An audit will put the accounts under scrutiny and the auditor will be looking for evidence that shows accounts can be described as ‘true and fair’.
The process is fairly straightforward, your auditor will make it as easy as they can for you.
You’ll be asked to gather all of the details you need for the audit. This will include the income and expenditure of your charity including receipts and invoices.
By having everything collected ahead of time, you’ll be able to save plenty of time when the audit begins.
Once the audit is complete you’ll receive a report of the findings. If there are any issues you’ll be able to ask any questions of the auditor and your accountant so you can clear things up.
Benefits of an audit
The main take away from going through an audit is the knowledge your charity is doing everything as it should. Being compliant with the Charity Commission regulations is incredibly important.
Having an external audit of your charity’s finances can also help you understand how to make decisions confidently.
If everything is above board, the audited statements can show stakeholders and donors you’re running things well, and could improve donations. Being open and honest about your fundraising and spending, will give people more confidence in your charity.
Should the auditor find areas that need improvement, you can use the extra insight to tighten your current systems and address any weaknesses which may hinder you later.
Get in touch
Our expert team at Nicholas Peters and Co can help you prepare for your charity’s audit. We can talk you through the initial steps and support you along the way.