Always Add Written Management Responses When There Are Audit Findings [SUBSCRIBERS-ONLY]

Audit findings are not unusual. Most nonprofit organizations will have many more years with audit findings reported by their auditors than years for which there are no findings. Audit findings tend to produce feelings of negativity and thoughts that something is wrong. Adding thoughtful written management responses will turn negative feelings into positive and constructive actions.

Financial statement audits are time intensive, comprehensive, stressful, and expensive. To make the most of the efforts and resources applied, consider certain key inflection points that could be better optimized to ensure the best results possible are realized from your financial statement audit process. One of those key inflection points surrounds the AU-C Section 265 management letter from your auditors communicating internal control related matters.

AU-C Section 265.06 states that “[t]he objective of the auditor is to appropriately communicate to those charged with governance and management deficiencies in internal control that the auditor has identified during the audit and that, in the auditor's professional judgment, are of sufficient importance to merit their respective attentions.”

Note that the emphasis is to “communicate to those charged with governance and management.” There is no specific guidance beyond communication of findings by the auditors to management. By adding a written management response, the organization actively participates in and improves the audit process.

Apply these three strategies related to providing written management responses.