One of the items a Treasurer needs to arrange early in the term is the audit of the financial statements of the Chapter as of April 30, 20__. A formal audit by an independent Certified Public Accountant who is licensed in the state in which the Chapter is located or an internal audit by an Audit Committee may be conducted.
Formal Audit
The formal audit may be prepared by a qualified faculty member, other than the Faculty Advisor, who holds a valid license to practice as a CPA in the state in which the Chapter is located. The services performed by the CPA must be an AUDIT. A review or Compilation will not be acceptable. Professional standards do not permit the issuance of an audit opinion if the procedures were performed by individuals who are not independent as to the Chapter. An engagement letter should be obtained from the individual or firm which is engaged to perform the audit. A sample Engagement Letter and information regarding the engagement letter are provided later in this Section of the Financial Reporting Guide.
Independent Audit Report
If your chapter has gross receipts over $100,000 during the year, you must have an audit of your chapter’s financial statements. One option is to have a formal audit by an independent Certified Public Accountant who is licensed in the state in which the Chapter is located. The formal audit may be prepared by a qualified faculty member, other than the Faculty Advisor, who holds a valid license to practice as a CPA in the state in which the Chapter is located. The services performed by the CPA must be an AUDIT. A review or compilation will not be acceptable. Professional standards do not permit the issuance of an audit opinion if the procedures were performed by individuals who are not independent as to the Chapter. An engagement letter should be obtained from the individual or firm that is engaged to perform the audit.
An example independent audit report is shown below:
Standard Audit Report - Unqualified Opinion
We have audited the statement of financial position of ___________ Chapter of Beta Alpha Psi (the Chapter) as of April 30, 20XX and the related statement of activities for the year then ended. These financial statements are the responsibility of the Chapter's management. Our responsibility is to express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of __________ Chapter of Beta Alpha Psi at April 30, 20XX, and the results of activities for the year then ended in conformity with U.S. generally accepted accounting principles.
Date
City, State
Internal Audit
The alternative to an independent audit is to have an "internal audit" performed by a Chapter Audit Committee. If the Chapter elects to have an "internal audit" performed by a Chapter Audit Committee, an officer with the title "Internal Auditor" should be elected or appointed. The Internal Auditor will chair the Audit Committee and may be considered one of the committee members comprising the minimum number of members required. The Internal Auditor may not serve in any other officer position during the fiscal period to be audited.
An Audit Committee of not less than three Chapter members should be appointed. Requirements for the committee are:
- A committee member cannot have served as a Chapter officer during the fiscal period to be audited.
- A Chapter member elected in April to any office except treasurer for the next academic period (semester, quarter or academic year) may serve on the Audit Committee for the fiscal period ending April 30 of the month of the election.
- A faculty member, other than the Faculty Advisor, should be selected to assist the Audit Committee.
The Audit Committee will conduct an internal audit of the Chapter's financial records. The "internal audit" should be performed in accordance with the Institute of Internal Auditors "Standards for the Professional Practice of Internal Auditing." Sample Audit procedures are illustrated in Appendix A. The internal audit report will be issued by the Committee to the Chapter and included with the year-end report submitted to the Executive Office. A report identifying recommendations for improved internal controls and/or observations for the improvement of Chapter operations should accompany the year-end report.
