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How to choose a not for profit auditor
“Your not for profit auditor can be a great resource for your organisation – a firm that knows the sector well and is familiar with the types of income typically seen in NFPs will be more efficient in their audit work.”
Your auditor holds an important role within your NFP organisation’s support services structure. The relationship with this external provider should be built on clear communication, trusted expertise and a deep understanding of the non profit sector.
Kirsten Forrester, Accounting For Good’s CEO, discusses what you need to think about when you are choosing your auditing team.
What traits should you look for?
One of the first things you need to consider when looking for a not for profit auditor is whether they appear to be a good fit for your organisation. What is their level of service? Do they have the capacity to take you on as a client? Will they be responsive to your needs?
You will have to have honest conversations with them and develop a good rapport. How well do you gel? They will become a trusted advisor, so keep this in mind when you first start canvassing potential service providers.
It’s also crucial that your chosen auditor has significant experience working with other not for profits. The sector has many unique requirements, and you want to make sure that they are NFP specialists. Kirsten says:
“When they have NFP knowledge, they will be able to advise on changes in accounting standards and provide an important level of rigour to the accounts when your finances are managed in-house by a small team or a single person. You should receive a completion report or management letter following each audit that identifies areas for improvement.”
If you have any doubts, have a look at their website and see if they have any testimonials you could read… or better still, do a reference check! There’s no quicker way to find out about the service they deliver than talking to one of their clients.
Not getting good value from your auditor?
“Changing auditors is not meant to be easy… if it was then we’d potentially see rogue organisations switching auditors whenever their current auditors raise concerns about the accuracy or compliance of the financial information.”
But if you feel as though you aren’t receiving a good service for a reasonable fee, then perhaps it’s time to make a change. This is where it’s important that you understand the process involved and follow the rules that apply to you. Kirsten continues:
“Your constitution may have a specific clause regarding the appointment of an auditor and also the removal of an existing auditor, which may include the type of General Meeting that has to take place and the notice period to members.”
There are also ASIC rules that you need to be familiar with. And if you are incorporated under a State or Territory Associations Act you will need to review applicable rules for your relevant location. For example, there are the NSW Fair Trading rules or the Consumer Affairs Victoria rules that apply to the removal of an auditor.
Tips for appointing a new auditor
Before you start the process of appointing a new auditor, it’s worthwhile having a candid conversation with your current audit team. Express your concerns and find out whether it’s possible to find a resolution with them rather than going through the arduous task of hiring someone new.
If this isn’t an option, then the ACNC has summarised the process into five steps:
- Start early to allow time for the reviewer or auditor to perform their work.
- Ask other charities for advice and recommendations.
- Ensure the person is independent of the organisation.
- Check they are appropriately qualified.
- Make sure you are getting value for money.
Send a request-for-proposal (RFP) to auditing firms that you believe have the appropriate traits you need will help you compare your options… but don’t send RFPs to every auditor in town. Shortlist around four to five different companies that you think are well-suited and review the proposals side by side.
We’ve seen a trend over the past ten years or so of organisations retendering their audit services every five years. Some organisations will have policy on this matter and others may have a constitutional requirement, but it is not a regulatory requirement.
If you are asked for additional information, make it easy for your potential new auditor to understand your needs. Share information about previous auditing fees and the amount of time it took to complete your audit. The more info you can provide, the more accurate their proposal will be.
Not for profit accounting
Here at Accounting For Good, we have more than two decades of experience working in the not for profit accounting space, and we have comprehensive knowledge of how non profits – charities and associations – operate.
While we do not offer auditing services, we do work closely with our clients’ auditors to provide them with all the information they need to fulfil their requirements.
If you’d like to find out more about our NFP accounting services, please contact our team today.
Read more Not For Profit Audit articles.
