Nonprofit Year-End Financial Statement Audit (or Review) process in a Nutshell
Nonprofit Year-End Financial Statement Audit (or Review) process in a Nutshell
Links to the Five Part Series of Blog Posts
Part II: Different Roles in the Audit Process
Part III: Deliverables and Outputs of the Audit Process
JV CPA PLLC is transitioning to a virtual/remote work environment
Due to the new dynamics of today's business environment and to have the best life-work situation for our staff, we are transitioning 100% virtual offices. After 22 years, we are closing our physical office and our staff will be working remoting. The last few years have proved that it is a more efficient model for us and will not affect our quality client services in the slightest. Most of our physical meetings already take place at client locations; but otherwise we will arrange convenient locations for other in-person meetings. Please use the below address for all physical mail or delivery services (FedEx , UPS, messengers etc.) and we will receive it promptly.
To ensure timely delivery, please use the following new mailing address:
John Vazzana CPA PLLC
Ste 164
6904 Colonial Road
Brooklyn New York 11209
NYS Charities Bureau Guidance (and Extensions) due to COVID-19
The Charities Bureau currently grants to all registered charities an automatic six-month extension of the deadline for filing an annual financial report. Therefore, for example, organizations whose year-end was June 30, 2019 are required to file their annual financial reports by May 15, 2020. However, any organization whose filing deadline, including the automatic six-month extension, falls after February 15, 2020 will be given an additional six-month extension to file its annual financial reports.
COVID-19 Due Date Chart
What Is the Difference Between a Compilation, a Review and an Audit? A Comparative Overview (updated)
Compilation and review engagements are similar to audit engagements in a few ways. In all three types of engagements, the CPA performs certain procedures in accordance with professional standards before issuing a report on a set of client financial statements. The major difference between those engagements is the level of assurance the CPA provides in the report.
An audit provides the highest level of assurance. In an audit engagement the CPA will carry out procedures to obtain an understanding of internal controls, and perform substantive tests of transactions. They will also use analytical procedures on financial data and perform tests of details on account balances. In order to get this understanding of internal controls, the auditor will examine the organization’s operations. That would include documenting control procedures (e.g. cash receipts, cash disbursements, payroll), the approval process, accounting procedures and governance. An audit extends the work beyond the numbers on the financial statements. You can consider an audit as half financial and half operational. Most audits would require onsite visits and inspections, interviews with staff and governance, and confirmations with outside parties. These intense procedures are what makes the Audit Report on the financial statements such a higher level of assurance. Additionally, the auditor is required to report certain types of deficiencies in the organization’s internal controls in letter format (to management and the board). This letter, known as a management letter or internal control letter, is not part of the Audit Report attached to the financial statements , but is often requested by funders and other interested parties. Some states (currently not New York) require any written communications from the auditor to be submitted annually, this would include the management letter. All the audit procedures , including those mentioned above, have to be documented in detail. Auditors are also audited in a process called “Peer Review”. During a Peer Review, the Auditor’s workpapers are examined to make sure all procedures are done and documented correctly. The high assurance stakeholders get from an audit comes at a high cost. The service is time intensive and requires specialized skills which adds up to ever increasing fees for the organization needing such a service. Being in a specialized industry, such as Nonprofit, only adds to the cost.
A Review Report expresses limited assurance that there are no material modifications that should be made to a set of financial statements in order for them to be in conformity with a particular basis of accounting. A Review Report provides less assurance than an Audit Report, but also requires less work by the CPA, which results in a lower fee. In a review engagement, the CPA will use analytical and other procedures on the financial data.
A Compilation Report does not express an opinion or provide any assurance about the fairness of a set of financial statements. In this type of engagement, the CPA merely submits client information in the form of financial statements, and is not required to perform any verification procedures.
Not For Profit Organizations are often required to have a CPA Audit or Review because of state requirement or at the request of funders.
We have useful guide to understanding the different levels of service the Certified Public Accountant performs.