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Southern Region Community Skills
Website
An Initiative
of
Rotary Club of Bunbury
Leschenault
Volunteer South
West
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WHAT TO EXPECT FROM YOUR AUDITOR Most Clubs and Associations have just undergone their annual audit prior to the AGM . This year there have been questions at several AGMs – “What does the auditor do? What do the reports mean?” . I will try to give a few pointers to help community associations better understand the audit process . Firstly , even the smallest of audits is governed by Audit Standards by which all qualified auditors must abide ; these Standards have the force of law behind them .There are four letters or reports which are required by the Standards : a letter of engagement which the auditor will ask to be signed before the audit starts.This sets out the scope of the audit and what the auditor will and will not do.The letter may say that the auditor cannot be expected to find all errors or fraud, but this is not a ‘cop out’ because the auditor always has to carry out a proper audit in accordance with Standards – more on this when we get to the Audit Report .
a letter of representation wherein you are asked to confirm , in effect , that all necessary information has given to the auditor and all relevant circumstances have been disclosed.
the Audit Report signed by the auditor , who will usually have first required two officers of the association to sign a ‘statement by the committee of management’ saying that they believe the accounts to be true and fair. There may be a qualification in the report along the lines that the association does not have a proper system of control – usually due to lack of support staff – and that this limits the effectiveness of the audit. Again, this is likely to be acceptable because the auditor is always obliged to carry out a proper audit within the confines of the particular situation. An auditor is not able to duck his or her responsibilities ! A qualification should be in a separate paragraph headed as such.
a management report which explains weaknesses in the accounting systems and makes recommendations for improvements.
All of these letters/reports may appear verbose , but that will probably be because the auditor has lifted them straight from the Standards , which is quite acceptable – and from your point of view may be preferable because you will know the auditor is then bound in to the Audit Standards. Important questions to ask the Auditor Are all your letters and reports in accordance with Audit Standards Please explain the qualification in the Audit Report (where applicable) Do you have any recommendations for improvement ? (where no management report)
STEPHEN FOSTER
Chartered Accountant / Registered Company Auditor
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