Audit Report for Non Profit Organization
Thankfully, the audit is now over. You will still need to prepare a report that will be sent to the organization based on your findings. Your opinion is necessary because the organization you audited will need the report to act as a witness to their competence and integrity.
To start with, you must consider the type of organization you have audited. In this case, we are dealing with a not-for-profit organization.
Different types of Audits
There are different types of audits that help in preparing the Audit Report for Non Profit Organization.
1- Financial Audit:
This is the most common form of audit. It involves going through financial records, ledgers, etc. The records must be in keeping with the General Accepted Accounting Procedure.
2- Operational Audit:
This involves the examination of the methods through which the organization manages its resources with a goal of achieving its missions and goals.
3- Compliance Audit:
This is performed to ensure that the organization is still operating in compliance with its fore-stated goals, policies, regulation, and mission.
4- Investigative Audit:
Such an audit is performed when there is a suspected violation of laws and policies. Most times, it’s a blend of various other types of audits.
Types of Audit Opinions
There are four types of audit opinions that help in preparing the nonprofit audit report.
1- Unqualified Opinion
This is also known as a CLEAN OPINION. It is issued when the auditor finds no misrepresentation in the financial records provided by the organization. It means that the organization meets up with the General Accepted Auditing Standards (GAAS) especially in the record keeping. This is the best kind of report a company can receive.
Generally, in writing this, the title must contain the word ‘independent’ to show that the auditing was handled by an unbiased third party. The body comes next and is made up of 3 paragraphs that highlight the roles of the auditor, the purpose of the audit and the findings that were obtained. Finally, the auditor signs the document, writing the date also. The address of the auditor is included.
2- Qualified Opinion
When there are no misrepresentations or inconsistencies in the organization’s records but the records are not maintained in keeping with the GAAS, the auditor gives a qualified opinion.
The same pattern for writing an unqualified opinion is adopted, the only difference being that an extra paragraph is included to show the reason why the report is not unqualified.
3- Adverse Opinion
No organization would want this type of report. This form of the report tells that the records presented by the organization are not in keeping with GAAS. Worse still, the financial records of such company have been largely misrepresented. This is most likely due to fraud though sometimes it’s just as a result of an error. When an organization gets such a report, they must re–evaluate and correct their financial statement and be re-audited. Without this, the government and donors would not continue to support it.
4- Disclaimer of Opinion
When the auditor is unable to complete his examination, probably due to insufficient or inaccurate records, a disclaimer of opinion is issued to show that the organization’s financial status cannot be accurately determined. The organization must also update their records so as to be re-audited.
Procedures for preparing Audit Report for Non Profit Organization
Here’s a list of procedures that work in preparing an audit report for non profit organization
- Start with the title. This must contain the word ‘Independent’. As stated above, this denotes that you are an independent, unbiased third party.
- Considering that the report takes the format of a formal letter, you will address it as such. Address the letter to the right person. This could be the owner of the company or the company’s board of directors. Whatever the case might be, ensure that the letter is properly addressed.
- The form name and date must also be included in the report. This is for proper documentation.
- The next thing to write is the introduction paragraph. Take special care to state your role in the audit clearly.
- The scope paragraph comes next. This should contain all the documents that were examined, how they were examined and the purpose for the examination. Since the audit was carried out under GAAS, do well to mention this too.+
- Finally, we have the opinion paragraph. Here you state the conclusion and observation of your findings.+