Audit not a substitute for good corporate governance
Management is still primarily responsible for maintaining proper financial records and preparations of the financial statements. BY TITUS KUAN AND ANG SOON LII
RECENT high-profile cases of financial irregularities in certain non-profit organisations have once again turned the spotlight on the role of the auditor in such cases and how such matters can be prevented.
Non-profit organisations (NPO) such as charities, associations and religious bodies exist to serve a specific cause rather than generating profits. The audit is often more challenging than that of a commercial organisation. There would be unique circumstances that are absent in a typical profit-driven entity. The generation of monies does not require a delivery of a good or service, hence it may be more difficult to account for the funds received from the public.
For instance, many NPOs receive funds which are restricted to certain usage as pre-specified by the respective donors. A NPO which is a religious organisation may have received millions of dollars for new building facilities. To ensure that the restricted funds are used for the right purpose, usage of these restricted funds should be carefully monitored and unutilised amounts separately tracked in the financial statements. An auditor would need to understand the nature of such arrangements between the NPO and their donors when carrying out the audit.
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