Is your first audit coming up and are you wondering what you’ll need to do to prepare for it? Audits can feel daunting without proper preparation, and the key to a successful audit is through advance planning which typically starts 6-12 months ahead of your year end.
It’s important to find an experienced auditor who understands the charity sector, as well as preparing all accounts and financial information well in advance to keep the process running smoothly and ensuring your charity is robust and accountable, maintaining your reputation with public trust.
Confirming your audit requirements
Financial thresholds are in place to ensure a high level of transparency and accountability for charities with a significant public footprint or financial turnover. A statutory audit is different from an independent examination, which may be required for smaller charities with a lower income.
You can usually determine if your charity meets the criteria for a statutory audit when any of the following applies:
- Income exceeds £1 million*, or
- Income exceeds £250,000 and gross assets exceed £3.26 million*, or
- The charity’s governing document requires it, or
- The trustees request one.
*These figures are correct at the time of publication, official guidance can be found with The Charity Commission for England and Wales, as set out in the Charities Act 2011
Preparation checklist
To make the process run as smoothly as possible, it’s a good idea to prepare a checklist for your first audit.
Hire an experienced auditor. Choose an auditor with a proven track record of working with non-profits and charities. Look for professionals who not only understand the financial side, but also the unique operational challenges and regulatory environment of the charity sector.
Organise financial records. Get your financial records in order by maintaining and completing all documentation throughout the year. This includes all income statements, expense reports, balance sheets and other relevant financial documents. Having everything organised and easily accessible will make the audit process much more efficient and less stressful.
Review internal controls. Take the time to document your internal controls and procedures for critical areas like cash handling, expenses and procurement. Strong internal controls demonstrate good financial governance and can simplify the audit by showing how your organisation manages and mitigates risk.
Conduct a ‘mock audit’. Consider performing a ‘mock audit’ to identify and address any potential weaknesses or gaps in your financial records or controls before the official audit begins. This proactive step can highlight areas that need attention, allowing you to fix issues early and prepare with greater confidence.
Communicate regularly with your auditor. Establish a clear line of communication early on. Plan regular meetings, document key information and aim to start this dialogue at least six months in advance of the audit. Inform your auditor of any significant changes such as new funding streams, changes in key staff or any unusual transactions well in advance. This collaborative approach ensures that everyone is on the same page and helps avoid any last minute surprises.
Involve your team. Ensure board members are aware of the process, brief staff on what to expect and make sure everyone understands their role and responsibilities during the audit. This collective effort streamlines the process and builds a culture of accountability.
Post-audit review. After the audit is complete, review the findings with the trustees and act on any recommendations made by the auditor. This is a crucial opportunity to learn from the process, improve your systems and strengthen the charity’s financial governance for the future.
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