Home > Chapters > Chapter Management > Chapter Handbook > Chapter Auditing

Chapter Auditing

This chapter is adapted from a publication by the Association of Government Accountants with permission.

An audit of the records should be performed at the year-end in addition to an audit of the year-end financial statements. The Executive Committee should appoint a member of the chapter who is a Certified Public Accountant to perform the audit, or hire an eternal auditor to conduct the audit. The primary purpose of the audit is to determine that all cash received and paid out has been properly accounted for by the Treasurer. All recorded transactions may be scrutinized by the auditor. A check should be made: (1) to ascertain that all the cash received was recorded in the cash records and deposited in the Chapter’s bank account; (2) that cash was disbursed only for authorized expenditures, and (3) that the statements fairly reflect the results of Chapter operations for the Chapter year and the financial condition of the Chapter at the year end.

  1. IntroductionAs a minimum, the following procedure should be followed:
    1. The money columns of the cash receipts and disbursements record should be footed for all twelve months, or for as many months as seem advisable, if test checking is being used.
    2. Test checks should be made to assure that cash receipts entries are properly supported by Cash Receipt Vouchers. These amounts should also be traced to the duplicate deposit slips and to the bank statements. Cash Receipts Vouchers should be examined for authenticity.
    3. Totals of cash receipts by months should be compared or reconciled with the total deposits in the bank as shown by the passbook or bank statements (i.e. proving cash).
    4. The duplicate deposit slips for the last three or more weeks of the audit period should be compared item for item with the entries in the cash receipts records. This comparison should be made to see that there are no items deposited in the bank that have not been recorded in the cash receipts record. Unrecorded deposits might be made during the days immediately preceding the close of the period in order to repay funds previously borrowed by an un-entered check so as to avoid showing a shortage at year end. Also, if there are two or more bank accounts, a check might be issued on the last day of the year on one bank and deposited immediately in a second bank without recording either the check or the deposit. This is known as “kiting” and should be detected by comparing the duplicate deposit slips with the entries in the cash receipts record. If the auditor wishes a bank to confirm duplicate deposit slips, the slips should be taken to the bank for confirmation.
    5. Obtain a cut-off bank statement and cancel checks from the bank about three weeks after the end of the accounting year. Look for checks issued but not recorded in the Journal by comparing checks returned by the bank with entries in the cash disbursements record. If any checks that were deposited at the close of the period were returned by the banks on which they were drawn because of insufficient funds or for other reasons, they would also be discovered at this time by the auditor. Cut-off statement should be mailed directly to the auditor.
    6. Checks paid and returned by the bank should be compared with the entries in the cash disbursements record.
    7. The total cash payments by month as shown by the cash payments records should be compared with or reconciled to the total payments by month as shown by the bank statement and cancel checks.
    8. Cash payments should be verified to Cash Disbursement Vouchers.
    9. Cancel checks should be examined by:
      1. Comparing the name of the payee and the amount of the check with the entry in the cash payments journal.
      2. Endorsements on back of the check should be carefully scrutinized for agreement with the check payee.
      3. Supporting documents and checks bearing the Chapter’s own endorsement or payable to Chapter officers should be investigated.
      4. Notations on paid checks representing the bank’s cancellation date should be examined to determine that checks are applicable to the period under audit.
      5. The numbers of all checks should be accounted for.
      6. Cash Disbursement Vouchers should be examined for authenticity.
    10. Accounts receivable should be circularized by letter or verified by phone. Fixed assets should be verified as to value existence.
    11. The year end financial statements should be verified by proving revenue and expense figures and balance sheet items.
      Upon completion of the audit, the auditor should prepare an audit report. The report should be addressed to the Chapter with copies to the incoming and outgoing Chapter Presidents and Treasurers. The Chapter auditor should also discuss the results of his audit at the first meeting of the board of directors after completion of his audit.
Nonprofit Website Design Custom Web Design