It is almost time again for your not-for-profit (NFP) engagements. Are you ready? Do you know what has changed? Moreover, have you figured out how to increase your realizations and improve your client service?
When auditing a charity, foundation, college/university, religious organization, or trade association – among others – the amendments in ASU No 2016-14, Not-for-Profit Entities (Topic 958) may affect your engagement! Therefore, you need to be familiar with them. For example, “How are not-for-profit organizations classifying net assets?” Here is what you need to know about that. NFP entities will only report two classes of net assets at the end of the period.
- Net assets with donor restrictions
- Net assets without donor restrictions
Still reported, of course, is the current required amount for total net assets.
Keep this in mind, though. The NFP may still use the indirect or direct method for reporting cash flows. However, not needed now is a reconciliation of the indirect method — when using the direct method. That is an equally important change to know. As is the fact that there are numerous enhancements to the required disclosures, and requirement changes are in these areas:
- Net asset classes
- Investment return
- Liquidity & availability of resources and
- Presentation of operating cash flows
So, what is the primary reason for all of these changes? Put simply, it is about the not-for-profit entity providing information about their resources that is more relevant. These changes help the NFP do that, and that is important to their donors, grantors, creditors and other users.
Not-For-Profit Knowledge-Based Audit Title
The updated Knowledge-Based Audit (KBA) title for NFP entities is:
- Required for 12/31/2008 year-ends, and
- Those implementing ASU No. 2016-14 early
To learn more about this standard change, and to review other recent authoritative standards recently issued or approved by the FASB, check out Accounting Research Manager.
Tips to Improve Realizations & Client Service
Regarding increasing your realizations and improving your client service, remember that not-for-profit engagements are some of the most margin-compressed engagements. Therefore, it is critical to find ways to maximize efficiencies. Doing so will ensure a healthy bottom line and, at the same time, improved client service. Consider these tips:
- When you roll-forward your prior year engagements, make sure you get the latest content updates. Also, make sure you keep your responses, where it makes sense. Then, you simply review for changes.
- CCH ProSystem fx Knowledge Coach allows updating to the latest content at any time, while keeping your answers and customizations. Take advantage of the saved time and start your planning!
- Give yourself a head start by reducing your client’s PBC list by ~25% through technology.
- CCH Audit Accelerator requests all the data you need from your client’s general ledger, accounts payable and accounts receivable sub-ledger. It then transforms that data into the most commonly used workpapers, including access to the detailed transactions. Then, with TeamMate Analytics, you run analytics to see the anomalies or risky transactions more quickly for planning a higher quality audit. What you gain is more answers at your fingertips and, ultimately, a more informed view of your client at the beginning of each engagement.
- Tailor your audit programs in direct response to the client’s risk. This will help you avoid over and under auditing. You will also get your ‘best bang for your buck’ with your audit procedures.
- By design, Knowledge Coach easily ties risks to audit procedures. The result is a higher quality and more efficient audit and, thus, a happier client.
Wolters Kluwer’s Integrated Audit Approach
So, as you prepare for your not-for-profit engagements, do not get inundated. Take time to understand the upcoming changes. Understand the impact new ASU may have on your NFP clients. Consider how Wolters Kluwer’s technologies will improve your bottom line!
Are you interested in increased realizations and improved client service? Then check out the Integrated Audit Approach today.