Audit committee and external auditor
The audit committee and external auditors
Audit plan meeting
Prior to the audit field work, the audit committee meets with the external auditors for audit plan and risk assessment. An audit plan details the audit strategy, focused areas, and timing of audit. Audit committee members shall review the audit plan with the external auditors in light of the prior year’s audit issues, current year issues in financial statement areas as well as the internal control issues. The audit committee shall inform the external auditors of the steps that management has taken , if any, to resolve those issues. The committee should seek the external auditor’s opinion of those solutions. External auditors’ audit plan shall include those issues raised by the audit committee. The audit committee should meet separately with the external auditors, management and on their own and keep meeting minutes if any significant matters are decided.
Audit finding meeting
The audit finding meeting is held after the external auditor have completed their fieldwork. At this meeting, external auditors will present to the audit committee their audit results including draft report, supplemental financial information and related audit reports for review and discussion. During this meeting, the external auditors must explain to the audit committee that an audit is designed to deliver reasonable, not absolute, assurance that the financial statements are presented fairly and in accordance with the applicable generally accepted accounting standard framework. For Canadian not-for-profit organizations, it is Accounting Standards for Not-for-profit Organizations (ASNPO); for Private Enterprises , it is Accounting Standards for Private Enterprise (ASPE); for Public Sector, it is Public Sector Accounting Standards (PSAS); for Pension Plans, it is Accounting Standards for Pension Plans (ASPP); or International Financial Reporting Standards (IFRS). The external auditors shall inform the audit committee about the selection of, changes in or application of significant accounting principles and financial reporting practices and policies during the period being audited. Discussions should include the effects of these practices and policies on the financial statements. The external auditors shall also review with the audit committee about accounting estimates, significant audit adjustments, major issues discussed with the management, difficulties encountered in performing the audit, and other matters.
Evaluation of the external auditors
A part of the audit committee’s responsibility is to evaluate the work of external auditors:
- Timeline of service
- Ability to address issues unique to your organization’s risk profile
- General industry knowledge
- Specific industry accounting and reporting expertise
- Experience with tax requirements pertinent to not-for-profit organizations