Auditing the church books

An internal audit is done to insure that all things are being done in order and that nobody is stealing anything. In a typical church situation, the auditor should look at every canceled check, and be certain in his mind that that check is reasonably reflected in the financial documents that are used to report to the governing authority of the church. He should examine the procedures for collecting and depositing the money and see that reasonable precautions are taken against theft before deposit and there are measures to ensure accurate recording of the intent and amount of the gifts.
The reports should add up - the figures should be checked. It isn't necessary to view every receipt unless something raises a suspicion, but receipts should be there.

Most churches could also use some cogent advice in how to improve the reports they submit, the procedures they use; rendering advice on these matters is also a legitimate function of the auditor.

 

If I were to do the internal audit for you, here are the things I would look at:

1.) Financial statements issued to members
2.) Agree cash balance to bank statement(s)
3.) On a test basis, contact members to determine if all of their contributions were recorded and classified properly
4.) On a test basis, look at expenditures to ensure that they were approved and were for authorized purposes
5.) Review all bank statements for unusual, large or repetitive items
6.) Review Form 941, W-2, W-3 filings and agree them to the financial statements
7.) Would test the collection and expenditure processes, because a.) I would need to be comfortable that all offerings are received, recorded and deposited correctly and on a timely basis and b.) no cash disbursements are made for personal or unathorized purposes.
8.) Review the cash flow statement and notes to the financials.
9.) Do a cash rollforward from prior year (very important)
10.) Finally, I would ask a few direct questions.

(In other words, an internal auditor should look at everything).

Hope this helps.

[ March 16, 2002, 10:12 PM: Message edited by: webmaster ]

 

Of course, any treasurer worth his salt will ask for a regular audit. It is a mark of his worth to do this. It is also a reponsibility of all concerned to see that proper procedures are set up, not only for the current administration, but for those who follow.

 

While this is true, a "regular" external audit is not practical for most churches. It costs too much compared to the benefits. Also, I wouldn't be surprised if the cost of audit would increase dramatically as a result of current events in the accounting world and the increased liability auditors face.