Just after the passage of Sarbanes-Oxley (SOX), audit committees happen to be receiving a whole lot of interest in each for-profit and nonprofit organizations . Inside the nonprofit planet, these committees are accountable for reviewing an organization’s accounting and audit practices. One particular distinct function of your audit committee should be to build a buffer amongst the many people that manage the nonprofit plus the auditors and accountants who verify the activities of management. So, most authorities agree that the committee will need to consist completely of directors who aren’t involved inside the management of your nonprofit.
Other typical functions of a nonprofit audit committee comprise of the following:
- Hiring the audit or accounting firm: The audit committee will need to make confident that the firm it hires is zero cost of any conflicts. And, if suitable, the committee requires to confirm that the audit firm is not reviewing its personal accounting operate (which would not surprisingly be a conflict of interests).
- Reviewing the audit and accounting policies of your organization: Countless reporting challenges can arise. These challenges can influence the accuracy and presentation of your economic statements. It is the audit committee’s function, then, to completely vet these challenges.
- Resolving challenges that arise amongst the organization’s management plus the auditors: Considering that a part of the auditors’ activity should be to verify the actions of management and determine the presence of any probable error or fraud, management and auditors will need to be independent from every single other. This suggests that the board could possibly must step in to resolve any challenges that arise as an alternative to permitting management to negotiate together with the auditors (therefore compromising the auditors’ independence).
- Reviewing the organization’s internal controls: The audit committee ought to resolve challenges relating for the controls inside a nonprofit organization. If these kinds of challenges aren’t resolved, the reliability and integrity of the knowledge that seems on its economic statements will be affected.
