The Role Of The Audit

Do you rely on your auditor to pick up every little error? You could be in for some problems. Many committees assume that once an audit has been completed and the auditor’s report indicates that everything appears to be in order, there is nothing to worry about. What if you were wrong?

The role of the audit is to provide an independent review of the financial reports of the organisation. This usually includes the income statement, balance sheet, statement of changes in equity, cash flow statement, notes relating to the accounting policies and other additional information to help explain the figures. From all this information the auditor’s form an opinion as to whether the financial reports reflect the financial position of the organisation at the date the report was prepared.

An audit does not check every figure and it doesn’t check every transaction. Only samples of the transactions are reviewed. An audit does not review all of the internal and risk management controls. So while an audit may pick up on fraudulent activity it is not the responsibility of the auditor to hunt for it.

The visit of the auditor can be very valuable to your organisation if you use it strategically. The committee of management may ask to auditors to have a more detailed look into certain aspects of the operations of the organisation. This may occur as part of the end of year audit or during the year as part of the half year or interim audit. For example, you might ask the auditors have a more detailed look into the payroll and salary packaging arrangement to check that the correct pay rates are being paid and that you are in compliance with the FBT and PAYG taxation laws. The following year you may focus on the management of grants, unspent funds and compliance with funding agreements. The intention is that over several years the key parts of the operations are examined in more detail.

Remember, it is the responsibility of all the members of the committee of management to ensure financial viability of the organisation so at the completion of the audit you should ask the auditor attend your meeting to discuss the audit and its findings.