Audits

An audit is a series of tests to help an accountant determine how effectively a chapter’s financial records are maintained and how reliable the internal controls are. Benefits of an audit Provides assurance that financial statements are not materially misstated Provides assurance that financial statements conform to generally accepted accounting principles Provides general business advice that may be useful to the board of directors for planning and control purposes Gives bankers and other creditors credible information to help reduce uncertainties Establishing an internal audit committee This committee conducts audits of the chapter’s books and records during the year. It may include reconciliation of bank balances and reviews of chapter expenditures. Individuals who are not involved with the treasurer’s function may perform the audit. Procedures may include: Reviewing chapter financial records of receipts and disbursements at least every six months to ensure that proper records are being maintained and regulatory reports are filed Reviewing internal control procedures to ensure compliance. These should be documented in the chapter’s policies and procedures manual Reporting findings and recommendations for improvement to the chapter president and/or board Hiring an independent auditor to review the chapter’s financial statements, books and records annually Hiring a professional auditor A certified public audit is conducted by a certified public accountant (CPA). The CPA reviews a number of chapter transactions and related internal controls, then forms an opinion on the fairness of the presentation of the financial statements for the period. Establishing a finance committee If your chapter elects to establish a finance committee, this body may oversee, review and guide the accounting practices of the chapter. This group should have a solid understanding of business and finance issues. Duties include establishing financial policies and procedures for the board’s approval, reviewing the chapter’s financial performance and drafting the budget for board review and approval. Conflict of interest policy This can help the chapter’s leaders understand their fiduciary responsibilities and protect them from ethical dilemmas.