Blog and News

Quick Prep Guide for Audit Fieldwork

Posted Nov 19, 2014

Share Online:



The purpose of an independent audit is to provide financial statement users with an opinion on whether the financial statements are fairly stated, in all material respects, with the applicable financial reporting framework. To successfully issue the audit report, auditors must gather, analyze and evaluate sufficient, appropriate evidence as directed by the audit procedures. While part of the evidence-gathering process can be done electronically, our teams do spend a fair amount of time with our clients at their place of business examining documents, observing operations, and conducting compliance testing, if required. We refer to this part of the engagement when we are at the clients’ places of business as fieldwork.

Time spent on fieldwork varies depending on the organization’s size and nature of activities. During fieldwork, our auditors request supporting documents, including bank statements and invoices. They then prepare schedules and confirmations in order to substantiate the financials. Fieldwork can be time-consuming and has the potential to create some disruption which can ultimately delay the audit if the necessary documents are not readily available. Thorough preparation and open communication for fieldwork can help alleviate stress and also allows the auditors to spend time on identified focus areas while simultaneously minimizing the chance of misunderstandings or miscommunications.

Below is a list of the most common documents we request during fieldwork:

  • Cash: All original bank reconciliations and bank statements with cancelled check images attached. Confirmations of all bank account values at year-end.
  • Investment: Schedules of investment activity, including purchases, sales, gain/loss calculations using mark-to-market method, interest and dividend income, and donated securities, plus all investment account statements during the year.
  • Accounts Receivable: Period-end aging detail. Billings for all grants and contracts. Confirmations for significant grants/contracts. Complete schedule of pledges by donor, including the future payments expected.
  • Prepaid: Prepaid schedule that ties to your general ledger. Support for significant rent and insurance prepayments.
  • Fixed Assets: Support for significant asset additions/disposals. Depreciation schedules for the current year. Amortization schedules, if applicable. Detailed list of repairs and maintenance expense.
  • Accounts Payable: Detailed payables aging schedule. Check register for all subsequent months. All unpaid invoices should be available for review.
  • Accrued Expenses: Supporting schedules for calculation of accrued payroll and paid time off.
  • Debt: Confirmations of all debts or year-end bank or leasing company statements.
  • Revenues: Detail of revenues and contributions received.
  • Expenses: All legal invoices. Detail of all leases. Functional expense schedule. Form 941 quarterly payroll reports.
  • Net assets:  Schedules of net assets, by classification, including a roll forward of restricted net assets, if any.

In addition to the above, we recommend that accounting staff not schedule any major activities, such as offsite training or vacations during fieldwork. Staying in close communication with the audit team helps keep the audit progressing smoothly. Additionally, we recommend a discussion of all proposed adjustments to ensure agreement and answer any questions. If there are significant findings during fieldwork, we suggest forwarding the matters to the necessary level of management or the audit committee in a timely manner in order to create an action plan to correct any such deficiencies in the following year.

Sources:

http://www.councilofnonprofits.org/nonprofit-audit-guide/

http://www.audits.uillinois.edu/audit_resources/audit_manual/





Posts You Might Also Like:

2023 Arizona Tax Credits

2022 Arizona Tax Credits