As a small nonprofit organization in New Zealand, you may be wondering if you need to conduct an audit of your financial statements. The answer is yes, if your organization meets certain criteria. This comprehensive guide is designed to help small nonprofit organizations in New Zealand understand the benefits and requirements of audits and the steps to follow to ensure compliance and transparency. Whether you’re looking to conduct an audit yourself or hire an auditor, this guide will provide you with the knowledge and tools you need to get your nonprofit audited and ensure that you’re meeting all of the necessary requirements.

Understanding the Benefits and Requirements of Audits

What is an audit?

An audit is an independent examination of an organization’s financial statements and records to ensure that they are accurate and comply with accepted accounting principles (GAAP) and other legal requirements. The purpose of an audit is to provide assurance to stakeholders, such as donors, funders, and the public, that the organization’s financial statements are reliable and trustworthy.

Why are audits important for small nonprofits?

Audits are important for small nonprofits for several reasons. First, they help to ensure that the organization’s financial statements are accurate and comply with legal requirements. This can help to build trust with stakeholders and increase the organization’s credibility. Second, audits can help identify weaknesses in the organization’s financial management and internal controls, which can be addressed to improve the organization’s operations. Finally, audits are often required by funders, such as government agencies and foundations, as a condition of funding.

What are the legal requirements for audits in New Zealand?

In New Zealand, small nonprofit organizations are not required by law to conduct an audit unless they meet certain criteria. According to the National Council of Nonprofits, nonprofits in New Zealand must conduct an audit if they have annual operating expenses of NZD $500,000 or more or if they receive government funding of NZD $10,000 or more. However, even if your organization is not required to conduct an audit, it may still be beneficial to do so for the reasons outlined above.

Conducting an Audit Yourself

Steps to follow to conduct an audit yourself

If you decide to conduct an audit yourself, there are several steps you should follow:

1. Familiarize yourself with accepted accounting principles (GAAP) and other legal requirements for financial reporting in New Zealand.
2. Review your organization’s financial statements and records for the fiscal year being audited.
3. Develop an audit plan, including a timeline and a checklist of procedures to be followed.
4. Conduct the audit, following your plan and checklist.
5. Prepare an audit report, summarizing your findings and conclusions.

Tools and resources to help you conduct an audit

There are several tools and resources available to help you conduct an audit yourself, including:

• Audit templates and checklists, which can be found online or through professional organizations,
• Accounting software, which can help you organize and analyze financial data.
• Professional development courses and workshops can help you develop the skills and knowledge needed to conduct an audit.

Common mistakes to avoid when conducting an audit

When conducting an audit yourself, it’s important to avoid common mistakes that can compromise the integrity of the audit. These include:

• Failing to follow accepted accounting principles (GAAP) and other legal requirements.
• Failing to maintain independence and objectivity.
• Failing to adequately document procedures and findings.
• Failing to communicate findings and conclusions clearly and effectively.

Hiring an Auditor

How to find a reputable auditor?

If you decide to hire an auditor, it’s important to find a reputable and qualified professional. Some tips for finding an auditor include:

• Asking for recommendations from other nonprofit organizations or professional associations.
• Checking the auditor’s credentials, such as their certification as a Certified Public Accountant (CPA).
• Reviewing the auditor’s experience and track record with nonprofit organizations.

Questions to ask before hiring an auditor

Before hiring an auditor, it’s important to ask the right questions to ensure that they are a good fit for your organization. Some questions to ask include:

• What is your experience with nonprofit organizations?
• What is your approach to conducting audits?
• What is your fee structure?
• What is your timeline for completing the audit?

What to expect during an audit?

During an audit, the auditor will review your organization’s financial statements and records and may conduct interviews with staff and board members. The auditor will then prepare an audit report, summarizing their findings and conclusions. It’s important to be prepared for an audit by having all necessary documentation organized and available, and by being responsive to the auditor’s requests for information.

Ensuring Compliance and Transparency

Tips for maintaining compliance with legal requirements

To ensure compliance with legal requirements, it’s important to:

• Stay up-to-date with changes in accepted management accounting principles (GAAP) and other legal requirements.
• Maintain accurate and complete financial records.
• Follow internal controls and procedures to prevent fraud and errors.
• Seek professional advice when needed.

Best practices for transparency in financial reporting

To promote transparency in financial reporting, it’s important to:

• Provide clear and concise financial statements that are easy to understand.
• Disclose all sources of revenue and expenses.
• Provide context and explanation for significant changes in financial performance.
• Make financial statements available to stakeholders, such as donors and funders.

How to use audit results to improve your nonprofit’s operations?

The results of an audit can be used to identify weaknesses in your organization’s financial management and internal controls, and to develop strategies for improvement. Some ways to use audit results include:

• Developing a plan to address any findings or recommendations in the audit report
• Reviewing and updating internal controls and procedures.
• Providing training and professional development opportunities for staff and board members.

Conclusion

In conclusion, audits are an important tool for small nonprofit organizations in New Zealand to ensure compliance and transparency in financial reporting. Whether you decide to conduct an audit yourself or visit ASMA to hire an auditor, it’s important to follow accepted accounting principles (GAAP) and other legal requirements and to use the results of the audit to improve your organization’s operations. By doing so, you can build trust with stakeholders and increase your organization’s credibility.