![]() ![]() Were there any serious disputes or difficulties encountered by the auditors during the audit?.Were there any significant changes to the audit plan that occurred during the course of the audit?.Did the auditors provide a written opinion about the quality and acceptability of the nonprofit’s accounting principles?.Did the auditors find that the organization’s internal financial controls were adequate?.Were there any conflicts of interest between the auditors and the organization? If so, how were they handled?. ![]() Were there any legal and regulatory matters that would impact the organization’s financial statements?.Did the staff cooperate with the auditors? Was there a healthy flow of information between the staff and auditors?.What factors did the auditors consider when determining the scope of the audit?.Did the auditors note any limitations on the scope or nature of the audit procedures?.Questions for the audit committee to discuss with the auditor(s) when reviewing the draft of the management letter and the audited financial statements: Management may also identify for the auditor areas that may need further, independent corroboration in order for the board to fully appreciate the ramifications of their decisions. If the auditor agrees that initiatives suggested by management may strengthen operations, the auditor may choose to include management's ideas in the management letter. In addition to acting on suggestions provided by the auditor, management/the audit committee can also use the opportunity of an annual audit to enlist the support of the auditor to undertake new initiatives. However, first there should be a discussion with the audit committee and management. The insights shared by the auditors should be presented formally and in-person by the auditor to the board of directors or the audit committee at the conclusion of the audit process. What is the role of the audit committee (or the board) after the audit? The auditor’s letter to management may also point out operating procedures that are inefficient or unnecessary. Sometimes it takes an independent or outsider’s eye to identify inefficiencies that could be improved or new technologies that will improve operations. Operating inefficiencies: Management letters may identify issues that are, or could become red flags, and propose improvements to resolve problems and strengthen operations.The auditors will point out any material internal control issues in the management letter so that the nonprofit can address those issues before the next audit. Correcting the issues will provide additional integrity to the financial statements and may help to reduce audit costs in the future. Strong internal controls (e.g., early detection and correction) serve to highlight errors and irregularities in financial operations. Material internal control issues: Issues that auditors would identify include any weaknesses in the processes, systems, and internal procedures that help to ensure that all financial transactions are recorded properly.Issues that auditors may point out in the client representation letter typically fall into two categories: The accounting standards require the auditors to report to the board any "material weaknesses" and significant deficiencies. The audit committee or staff often asks to review a draft of the management letter just to make sure that the letter is accurate before the final version goes to the board of directors, since the board is likely to be concerned about any deficiencies or even less serious concerns that the auditors identify in the letter. Since auditors work with a variety of organizations, they often are aware of "best practices" or - at the very least - "better practices" that they can point out in the letter to management. What is the client representation "letter to management”? This letter, sometimes referred to simply as the "management letter" serves to identify areas of operations or procedures that the nonprofit may want to improve or redesign. After the audit, the audit committee, executive director, and senior financial staff are responsible for reviewing the draft audit report, asking questions about the auditors' findings, and evaluating any recommendations before they are presented to the board in the final report. ![]()
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