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7 red flags that your organization may need a new auditor

Dec 27, 2021

Whether you’ve been working with an auditor for a few months or a few decades, how can you be confident you have someone in place who’s serving your nonprofit’s needs as effectively as possible?

It’s important that the auditor knows your organization from top to bottom and fully understands the major issues your industry is contending with. How much do they work with nonprofits or in the public sector?

Just as crucial is their approach to their work: Are they a true partner? Are they tuned in to changes in your operations? Are they able to identify risks your team is taking that you’re unaware of?

If you’re not sure whether your current auditor is meeting your organization’s needs, you may benefit from a fresh perspective. Keep a watch for these potential red flags:

  1. Your auditor doesn’t ask a lot of questions. You may have a comfortable relationship established over years, but do they continue to be curious about how your organization is evolving? Changing business operations and personnel affect audits. And a high-quality audit requires in-depth knowledge of those changes. It’s important to meet with people outside of top management and finance, like program and operations managers, to truly know what’s going on in an organization.
  2. Your auditor isn’t reaching out throughout the year. When new accounting pronouncements or compliance requirements are on the horizon, an auditor should be proactive in communicating them to you and the potential impacts on your organization. Communication shouldn’t be limited to the audit period. Sporadic communication could suggest they’re not as plugged in as they need to be and expose your organization to risk.
  3. Your auditor isn’t well-connected in your industry. Find out how many similar agencies the auditing firm works with and how much experience your specific auditor has working with organizations like yours. Having both depth and breadth of experiences with organizations like yours should give you peace of mind that you have the right auditor in place. A versatile troubleshooter will help you move forward with confidence. So, do you look into how your auditor’s experience level compares with other firms serving your area?
  4. You receive a pro forma RFP from an auditor. If you’re considering switching auditors and beginning the procurement process, do you have an RFP document that is thorough enough to yield adequate information in the proposals you receive? Does your RFP seek references from prior clients and a portfolio of related work? Does it ask for details about the credentials of the auditor being considered?
  5. You’re tempted to hire the first auditor you speak to. Be sure your organization does a comprehensive review of several firms, in accordance with your procurement policy, even if the first contender impressed you. Careful due diligence takes time and you may find the extra effort will yield an even better candidate.
  6. You favor the lowest-bidding auditor. Find out what a firm has to offer in addition to auditing services that may help your organization. The least expensive firm may not give you all you need.
  7. You overlooked an auditor’s peer review report. Remember that even auditors get audited, and it’s worth reviewing those findings about your current firm or ones you are considering. Even if you like your current auditor, it’s worth seeing how they fared in their most recent peer review report. You may learn about aspects of their performance elsewhere that might prompt you to consider a switch.

How Wipfli can help

Not sure you have the right auditor? We’ve put together a free sample RFP that you can use to help find a new auditor or better assess your current auditor. Click here to download the sample RFP.

We also offer auditing services that help you manage your compliance requirements, minimizing risks and staying on top of the ever-changing regulatory landscape. Plus, we offer an annual My Wipfli membership designed for nonprofits, where your leadership team gets 24/7 access to resources, articles, templates and the ability to ask our nonprofit specialists questions unique to your organization. Click here to learn more.

Author(s)

Michael Webber, CPA
Senior Manager
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Danielle Martin, CPA
Senior Manager, Audit
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