Not-for-profit (NFP) audit committees have new challenges to face in 2025. These include political polarization, backlash against sustainability and diversity, equity, and inclusion (DEI) initiatives, and heightened scrutiny of mission relevance and outcomes.
The 2025 Mandate for Audit Committees
Determine whether the organization is evaluating and capitalizing on generative artificial intelligence (GenAI) investments and opportunities responsibly. Consider the maturity of the organization's governance over third-party relationships.
Chief audit executives (CAEs) globally and in North America rank cybersecurity as the top area in which internal audit will spend the most time and effort. Other top priority areas are governance/corporate reporting, business continuity, regulatory change and financial liquidity.
The committee must monitor the process around financial reporting and the effectiveness of the company's internal controls. They must review the company's financial statements, and they must observe the independence of statutory auditors.
Nonprofit audit committees play a pivotal role in maintaining transparency and accountability. Their responsibilities include financial oversight, compliance, reporting guidelines, risk management, external audits, internal audits, and ethical standards.
The role of the audit committee is to support council in fulfilling its governance and oversight responsibilities in relation to financial reporting, internal control structure, risk management systems, internal and external audit functions and ethical accountability.
The “5 P's of Internal Audit” includes 5 video-clips presenting testimonials from audit managers on the topics of Plan, Perform, People, Profile and Product.
What to include when building an audit plan
ASK ACCOUNTING MANAGEMENT
▶ What was your reaction to the audit findings? were they resolved? ▶ Are the financial statements fairly presented? ▶ What are the reasons for financial statement variations from the prior year?
There are five potential threats to auditor independence: self-interest, self-review, advocacy, familiarity, and intimidation. Any lack of independence compromises the integrity of financial markets.
The 2-year rule for audit is quite simple. If a company meets two or more of the above criteria for two years in a row, then it must have a statutory audit. Conversely, a firm that currently has to be audited can't qualify for an audit exemption until it fails to meet at least two over the criteria over two years.
(6) The Audit Committee shall have authority to investigate into any matter in relation to the items specified in sub-section (4) or referred to it by the Board and for this purpose shall have power to obtain professional advice from external sources and have full access to information contained in the records of the ...
Stay focused on financial reporting and related internal control risks—job number one. Clarify the role of the audit committee in the oversight of generative AI (GenAI), cybersecurity, and data governance. Understand how technology is affecting the finance organization's talent, efficiency, and value-add.
The 7 steps in the audit process generally cover Planning, Risk Assessment, Internal Control Testing, Fieldwork/Evidence Collection, Reporting, and Follow-Up, focusing on a systematic review from initial engagement to ensuring corrective actions are taken for operational improvement. This framework ensures comprehensive evaluation, from understanding the client's business to delivering actionable insights and ensuring accountability for identified issues.
The 7 E's in operational auditing are Effectiveness, Efficiency, Economy, Excellence, Ethics, Equity, and Ecology, forming a comprehensive framework for internal auditors to assess an organization's success beyond mere compliance, focusing on goal achievement, resource optimization, quality, moral conduct, fair treatment, and environmental impact to add significant value.
What Not to Say During an Audit?
7 Auditing Principles Every Auditor Must Embrace
Confirm agenda topics before each meeting – A critical step is for the audit committee chair to touch base with other committee members, management, and the external auditors before the agenda is distributed. The chair can then make adjustments to topics or change the order and/or allocation of time.
What happens during an audit? Internal audit conducts assurance audits through a five-phase process which includes selection, planning, conducting fieldwork, reporting results, and following up on corrective action plans.
The 5 Cs of audit (Criteria, Condition, Cause, Consequence, Corrective Action) are a framework for structuring clear, actionable audit findings, explaining what should be (Criteria), what is found (Condition), why it happened (Cause), what the impact is (Consequence/Effect), and how to fix it (Corrective Action/Recommendation) to drive organizational improvement and compliance.
The principles of independence, objectivity, competence, confidentiality, professionalism, due professional care, and continuous improvement are essential for the internal audit function to fulfill its role as a trusted advisor to the organization.