Having an audit committee can provide governance that may be lacking in a non-profit organization. The committee can ensure management is clearly communicating to all employees that financial misreporting is unacceptable. The audit committee members have the responsibility to ask tough questions and be skeptical causing management to stay accountable to provide answers. They take preventive measures for the future.
What if you are a small organization? Do you still benefit from having an audit committee? Large or small non-profit organizations could use the extra governance from qualified members on an audit committee. Some organizations use their finance committee in a dual role as the finance and audit committees. Try to include a financial expert on the audit committee that has knowledge of the function of the committee as well as knowledge regarding accounting principles and internal controls.
Audit committees should focus on the conduct and integrity of the financial reporting of the organization. Risk management, internal accounting and disclosure controls should be a top priority for the audit committee. The committee should communicate with independent auditors internally and externally. Above all, the members of the audit committee should have the best interest of the organization in mind and strive to encourage honesty and integrity within the business.
If you are interested in more information about starting an audit committee, talk to your organization’s auditor/accountant. They should be able to assist and guide you in the importance and structure of the committee.
Posted by Danielle Arnold