Certified Public Accountants
Elements of an audit
A CPA firm, such as Jacobson Jarvis, is hired (engaged) by the Board of Directors of a nonprofit organization. The CPAs must be independent of having any financial interest in the organization and of any close relationships with key people within the organization.
The CPA plans the audit to gain a reasonable assurance that the financial statements are free of material errors, including errors resulting from fraud. However, certain types of fraud, especially where forgery or collusion has occurred, are not likely to be detected by a financial statement audit. Audit standards do not require the auditor to perform the extensive testing that would be used in an audit specifically designed to find fraud, as in the case when there is evidence that a fraud has occurred.
CPAs are required to follow certain national standards when performing an audit of financial statements. These standards include examining the evidence that supports the amounts on the financial statements and the other information that is presented in the form of notes to the financial statements. This examination is done by testing certain account balances and transactions. From these test procedures, the CPA accumulates evidence on which to base the report to the Board of Directors.
An audit includes an assessment of the design and operation of checks and balances but only for the purpose of forming an opinion as to the material accuracy of the financial statements. The primary focus is whether the financial statements are misstated. An assessment of risks and the design and operation of procedures addressing those risks are not the primary focus of an audit.
The audit results are presented to the Board in the form of an opinion from the CPA. The opinion does not guarantee absolute accuracy of each number on the financial statements. Rather, it indicates that the statements are a fair presentation to within a reasonable dollar amount. That dollar amount is relative to the size of the organization.
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