Depending on the regulatory framework and the institution’s donors, a formal audit or review will be obligatory. The audit or review shall guarantee to the authorities and/or any donor that the financial means available to the institution were correctly administered.
Besides the interest of donors, supporters and members also the management of the support institution or association can gain valuable insight by the results of an audit or review. The examinations can assist to strengthen internal processes and control procedures. Furthermore an audit or review either confirms or corrects the financial reports of the institution.
Reviewing an institution’s financial management involves a limited examination of the financial statements and the accounting system as a whole. An independent and certified accountant will carry out the review.
Auditing an institution means extensive testing of accuracy and completeness of information given in the financial statements. An independent and certified accountant will examine the accounting and reporting system. Outcome of this process is the auditor’s opinion on whether the financial statements comply with the regulatory framework, accounting principals and if they represent the financial reality of the institution. The better the institution documents its accounting and reporting system the quicker and cheaper the audit services will be. It is recommended to prepare full documentation before the audit.
See attached a sample audit preparation checklist.