AuditCommittee2 - The Audit Committee The Board of...

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The Audit Committee The Board of Directors of Nonprofit Organisations and the Independent Auditor We perceive the institution of audit committees for nonprofit organizations to be a growing one that will in coming years attract a great deal of attention. This has been given impetus by the pending legislation on nonprofit organizations and the growing belief amongst the public and other concerned regulatory agencies that such committees can improve the quality as well as the general acceptance of financial reporting for such organizations. While the ultimate responsibility for approval of financial reports rests with the entire board, a committee of the board, patterned after the now common practice of establishing such committees for publicly-held commercial organizations, can often serve as a better means of dealing with this increasingly complex and sophisticated area. A properly functioning audit committee goes a long way towards demonstrating that the board of directors has taken prudent steps to fulfil its responsibilities associated with the organization's financial reporting. Every nonprofit organization that derives all or part of its funding from government or public sources should establish and maintain an audit committee. For most effective operation, audit committees should be composed of three to five directors, with the majority (including the chairman) being directors other than employees. For other "private" nonprofit organizations it may be impractical to have committees as envisaged above. In such cases, the organisation's independent auditors should have the right to attend the meeting of the board of directors at which the financial statements are approved, and to requisition a board meeting at other times. Audit committees should be responsible for the nomination of the independent auditors and for discussion of their work with them. Audit committees should be responsible for the review and evaluation of reports prepared by the independent auditor which describe weaknesses in the organization's internal accounting and management controls and which contain recommendations for improvements in such controls. Audit committees should also determine if management has taken appropriate action on these recommendations. Audit committees should review all press and other releases to the public (example, appeals for donations containing financial information) and communications with government and regulatory agencies which have a financial impact. Audit committees should be delegated the
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This note was uploaded on 02/18/2012 for the course ACCT 4650 taught by Professor Jemery during the Spring '12 term at Kwantlen Polytechnic University.

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AuditCommittee2 - The Audit Committee The Board of...

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