Best Practices

5 Smart Ways Associations Can Prepare for an Audit or Review

Callie Hinman
Aug 28, 2019

Preparing for a financial audit probably isn’t high on the list of things you enjoy about managing an association. But a year-end audit or review is actually a remarkably valuable exercise that can provide insight into the financial health of the organization. Plus, audit preparation activities can help you uncover ways to improve other aspects of the association.

You don’t need to get overwhelmed at the thought of an upcoming audit. Just follow the five tips below and your next audit or review preparation should be less stressful.

Organize Financial Documents

Until the CPA sends the Prepared by Client (PBC) list, you won’t know for certain which specific financial statements, schedules, or documents you’ll need to provide. However, if you proactively consolidate all eligible financial documents into a centralized location it will be much easier to find the requested files once you receive the PBC list.

The National Council of Nonprofits recommends consolidating the following into one place: tax returns (Form 990, 990-EZ, or 990-T), any IRS Form 1099s for independent contractors, payroll records, and general ledger for the fiscal year being audited as well as bank statements, canceled checks, credit card receipts, and paid bills/invoices. Having these files organized in advance will allow you to provide the requested paperwork more quickly, which will enable the CPA to get started sooner and, in turn, shorten the time spent conducting the audit.

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Arrange and Review Supporting Documentation

Along with consolidating financial documents, you should ensure your supporting documentation is easily accessible. These files don’t necessarily have to all be in the same place, but they should at least be organized/indexed in a way that allows you and the auditor to find them quickly. Some examples include the following: - Asset purchase and lease agreements - Correspondence with donors and vendors - Credit card transaction detail backups - Debt agreements - Grant proposals and funding contracts - Insurance policies - Property leases - Letters of commitment - Minutes from board/committee meetings - Pledge agreements - Vendor contracts

Another important set of support documentation to keep readily accessible is any paperwork related to complex or unusual transactions. For example, if your association received an exceptionally large one-time donation or made an abnormally large cash disbursement, you’ll need to be able to show the auditor documentation that proves the legitimacy of the transaction.

You should also take this opportunity to confirm all your personnel files are up to date. Ensure every employee file contains an accurate job description, the employee’s tax paperwork, their eligibility verification form, and documentation for changes in salary. In addition, you should have a current organizational chart and list of employees.

Prepare and Analyze Transaction Reports

Once your association has completed reconciliation, there are a series of reports you should prepare in advance of the audit. These include the accounts receivable schedule, accounts payable schedule, depreciation schedules, investment summary, fixed asset additions and dispositions, and the trial balance, which lists the ending balance in each account and is used to confirm total debits equal the total credits. Together these reports will have the details of every transaction the association conducted throughout the year. In many cases, all of these reports can be found in your accounting software.

After all expenses have posted and these documents have been created, you’ll need to perform a thorough review of the collected schedules and workpapers to ensure the amounts agree. Additionally, you should examine any variations between prior year statements and current year statements.

If any line items have significant year-over-year increases or decreases, the auditor will likely ask for an explanation. That’s why it’s also important to read through the footnote disclosures on your financial statements and confirm you’ve included all of the required information.

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Hold a Pre-Audit Meeting

Three to four weeks before the auditors begin fieldwork, schedule a pre-audit meeting between the auditors and the members of your association who will be working with them. At the meeting, your staff and the audit team can review the list of documents the auditors will need and the anticipated timeline together. This gives your team the chance to talk through the process and ask questions about unclear items prior to the start of the audit to avoid delays.

During the meeting, share any major updates the association made during the year, since these changes can impact the scope of the audit. This includes things like starting or ending programs, engaging in new non-dues revenue-generating activities, or making revisions to your internal controls. You should also take time to discuss last year’s audit, including what went well and where there are opportunities for improvement.

Be sure to establish the preferred communication method(s) between the association and the auditors. Will there be a single point person at your association who will field requests and delegate them? Or is the expectation the auditor will send one request to the entire team and whoever is available will take care of it? Getting everyone on the same page early will help you avoid issues once the audit is officially underway.

Pro Tip: While most of the financial statements, schedules, or workpapers will be requested in advance, the auditors will still ask for additional information and supporting documentation throughout the process. Therefore, you must take into consideration both the schedules and workloads of your staff who will be involved in the audit. Work with your team to ensure there are no scheduling conflicts and that they can effectively incorporate audit assistance into their day without negatively impacting their productivity.

Treat Audit Preparation as a Year-Round Process

While there are certain elements of audit preparation that cannot be done too far in advance, there are plenty of actions you can take throughout the year to make the audit easier come year-end. For example, at the beginning of the year, create a designated folder on the network for all the files you anticipate the auditor will request. If any documents will be updated throughout the year, just put shortcuts to those files in the folder instead of saving copies of the documents to ensure the most up-to-date versions are used.

When it’s time for the audit, remove the shortcuts to files the auditor didn’t request. Not only will this help streamline the current year’s audit but it will also make future audits easier since you’ll have a better idea of which documents the auditors will likely request.

Don’t be afraid to ask questions before the pre-audit meeting. If you encounter a new or unusual situation, reach out to the auditor and ask for guidance on how to properly record the transaction. The auditor will help you make sure everything is logged correctly the first time, and you won’t have to delay the audit to work backwards to find supporting documentation months later.


There may be dozens of other things you’d rather do than prepare for an audit, but getting ready for an audit doesn’t have to be an ordeal—especially if you take advantage of AffiniPay for Association’s dashboard and reporting features. You’ll have instant access to valuable business insights and comprehensive transaction information that can make audit preparation a snap.

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