Audit in Non Profit Organization

4024 Words Mar 26th, 2014 17 Pages
| Internal Auditing in Not-For-Profit Organizations |

TABLE OF CONTENTS ABSTRACT: 2 INTRODUCTION 2 SECTION I: CORPORATE GOVERNANCE 3
1. Corporate Governance Reforms Relevant to NPOs 3
2. Audit Committees of NPOs 4 SECTION II: RISK MANAGEMENT 6
1. Absence of Risk Management in NPO 6
2. Reasons for Risk Management in NPO 7
3. Process of Risk Management in NPO 9 SECTION III: INTERNAL CONTROLS 10
1. An illustrative example 10
2. Good Internal Controls 11
3. Strengthening Internal Controls 12 CONCLUSION 14

ABSTRACT:
This paper discusses internal auditing in not-for-profit organizations (NPOs). Specifically, our goal is to identify the role of the internal audit in NPOs by focusing on key areas such as corporate
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What are the limits? NPO differs from for profit sector on different key areas namely the motivation factor, the funding and the staff. In the not-for-profit sector, the goals are focused on providing services or benefits to the members or client or furthering a cause. Any excess revenues earned do not go back to the owners but rather put towards furthering the cause. Funding is also different in NPOs; the variety of funds for NPOs can come from donors, government grants or foundation grants. Lastly, a big key difference between the for-profit and not-for-profit sectors is the use of volunteers. While some NPOs may have paid staff running the organization, most NPOs usually run on a volunteer basis. The Board of Directors is also sometimes run by volunteers. These differences affect and place some limitations on the design of the internal auditing function. Nonetheless, the impact of NPOs on our economy, by its size and presence in different areas, makes internal audit a key factor for success in the NPO.
SECTION I: CORPORATE GOVERNANCE
To gain public confidence, particularly donors, NPOs should improve their governance by demonstrating integrity, ethics, transparency and honesty in their performance. Unlike business firms, NPOs do not have the external corporate governance requirements of the capital markets and do not face the product market competition. Thus, NPOs must rely primarily on internal governance to assess…