The key reason for an audit (even if it is not required by law) is to demonstrate the organisation’s commitment to financial transparency. A not-for-profit organisation (eg. owners corporation, church charity or local club) can build its reputation for integrity, transparency, and professionalism, by having a regular independent audit conducted and making it available to stakeholders and the public.
The reason for arranging for an audit should not be misconstrued as a reflection on the treasurer (or anyone with a finance role) or executive management of the organisation.
What does an auditor do?
Some of the activities of an auditor include:
- Examining internal control procedures eg. how many signatories are required to operate a bank account and procedures for depositing cash receipts into the organisation’s bank account.
- Sighting source documents eg. invoices/receipts
- Obtaining confirmation from third parties, eg. bank confirmation.
- Reviewing financial reports and providing an opinion as to whether the organisation’s financial reports represent a true and fair view of the financial position and performance of the organisation, and whether they financial reports meet Australian Accounting Standards.
What does an auditor NOT do?
An audit is not:
- An investigation that examines every single financial transaction that occurred during the financial year.
- An investigation into the capabilities and integrity of the treasurer or executive management of the organisation.
- An interference into the organisation’s financial operations and decision-making process.
Disclaimer: This blog post has been simplified to cover some key points about an audit. This should not be construed as advice from Glint Accountants. There are many other factors to be considered and each situation is unique. Therefore, we encourage readers of this blog post to contact Glint Accountants for assistance with their specific circumstances.
Geraldine Lee is Fellow of CPA Australia and auditor since 1996. Contact us at Glint Accountants for assistance if you believe that your Owners Corporation, Church or Charity will benefit from an independent audit.