Original air date: May 9, 2017 Rebroadcast and recording information at http://www.mhmcpa.com The role of the audit committee is ever-evolving. In addition to assisting with reviews of financial reporting and audit preparation, committees are increasingly being tasked with enterprise risk assessment. From cybersecurity threats to the management of employee benefits, audit committees are looking for how organizations are assessing and managing their key risks. An evaluation of your organization’s audit committee practices helps ensure that your committee is prepared to fulfill its ever-changing role. In this session, we will take a deep dive into audit committee charters, emerging best practices related to the activities of audit committees and provide some practical advice for managing meetings and interactions with the audit committee.

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CBIZ & MHM
Executive Education Series™
Tuning Up and Revitalizing Your Audit
Committee Charter
Mike Burns and Tracey McDonald
May 9 and 11, 2017

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About Us
• Together, CBIZ & MHM are a Top Ten accounting provider
• Offices in most major markets
• Tax, audit and attest and advisory services
• Over 2,900 professionals nationwide
A member of Kreston International
A global network of independent
accounting firms
MHM (Mayer Hoffman McCann P.C.) is an independent CPA firm that provides audit, review and attest services, and works closely with CBIZ, a business consulting,
tax and financial services provider. CBIZ and MHM are members of Kreston International Limited, a global network of independent accounting firms.

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Disclaimer
The information in this Executive Education Series
course is a brief summary and may not include all
the details relevant to your situation.
Please contact your service provider to further
discuss the impact on your business.

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Mike leads the financial services group of our Not-For-Profit &
Education Practice. Mike has more than 30 years of experience and
focuses his efforts in serving not-for-profit and educational
organizations.
He assists clients in the areas of financial statement audits, audits under
Uniform Guidance (formerly known as OMB Circular A-133), debt
offerings, accounting matters, and related business concerns.
Mike is also the chairperson of the board of a college in metro Boston
which helps bring a practical focus in his work with his clients.
617.761.0584 • mburns@cbiz.com
Mike Burns, CPA
Managing Director
Presenter

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Tracey is a not-for-profit attest co-practice leader in Tampa Bay. Prior to
joining the Tampa office in 1994, she had previously worked for a big
four accounting firm.
Tracey has experience with clients in a number of industries including
not-for-profit organizations, healthcare, assisted living facilities,
manufacturing, distribution, employee leasing, food service, and
professional employee organizations.
In addition, Tracey provides consulting for federal indirect cost rates,
federally qualified community health centers and captive insurance. She
also has substantial knowledge of the reporting requirements for
employee benefit plans, uniform grant guidance, and HUD audits.
617.761.0584 • mburns@cbiz.com
Tracey McDonald, CPA
Managing Director
Presenter

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Agenda
Common Current Practices of NFP Audit Committees02
01
03
04
Emerging Practices of NFP Audit Committees
Next steps
Questions and Resources05
Basics of NFP Audit Committees

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Basic Responsibilities of an Audit Committee
• Drafts a charter for its own role and evaluates it periodically.
• Responsible for the appointment, compensation and oversight
of the independent auditors.
• Makes inquiries of management and independent auditors to
evaluate the audit process.
• Receives reports directly from the independent auditors in
connection with audit findings and the results of the audit.
• Recommends acceptance of the audit report and any resulting
recommendations made by the auditors.
• Evaluate the performance of the independent auditors.
• Evaluate the performance of the audit committee.

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Basic Responsibilities of an Audit Committee
• Oversee the integrity of the financial reporting process.
• Oversee the process for identifying and addressing financial
and related risks.
• Ensure the Organization has policies and programs to prevent
and detect fraud.
• Support a culture that embraces the importance of ethics and
compliance.

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Ancillary Responsibilities of an Audit Committee
• Be aware of the Organization’s overall financial health and
develop an understanding of whether the Organization’s
financial reporting practices and internal controls are adequate
(changes to programs or operations make this an important
inquiry on an ongoing basis).
• Serve as the “ombudsperson” for the receipt of complaints
about financial mismanagement (should be addressed in the
Organization’s Whistleblower policy).
• Oversee the Organization’s ERM process.

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Differentiating the Audit and Finance Committees
Audit Committee:
• Reviews the
Organization’s financial
statements and other
official financial info
provided to the public.
• Oversees the
Organization’s internal
controls including
compliance with P&P,
and risk management.
Finance Committee:
• Oversees preparation of
the annual budget and
financial statements.
• Advises the Board on
making significant
financial decisions.
• Oversees development
of policies and
procedures over
financial resources.

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Differentiating the Audit and Finance Committees
Audit Committee:
• Oversees annual
independent audit
process.
• Reviews the annual
information returns and
recommends for
approval prior to filing.
• Review whistleblower
policy and process.
Finance Committee:
• Oversees governance
policies referenced in
Form 990.

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Common Questions an Audit Committee Member Might Ask
During the audit planning meeting:
• Any major accounting or auditing issues discussed with
management prior to your retention?
• How can your planned audit scope be relied upon to detect
material errors, fraud, illegal acts or material weaknesses in
internal control? How does this compare to the prior year?
• Are there any areas where the Organization could be of greater
assistance to reduce the amount of time spent by auditors?
• Are there any concerns with how management controls key
transaction processes?
• Will your risk assessment of internal control policies and
procedures enable you to reduce audit tests?

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Common Questions an Audit Committee Member Might Ask
During the audit exit meeting:
• Did the Organization impose any limitations on you?
• Were there any disagreements regarding an accounting,
auditing or financial reporting matter?
• Are the accounting practices used by management overly
conservative or aggressive?
• Did you review information furnished by other experts?
• What is management’s attitude toward establishing strong
internal controls?
• What is your general assessment of the integrity and
competency of the Organization’s accounting staff?
• Did management request changes to the representation letter,
the management letter, or proposed audit adjustments?

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Audit Committee Self-Evaluation
1. Does the Committee have a charter that covers
standard best practices? Has it been reviewed?
2. Have all elements of the Committee’s responsibilities as
noted in the charter been covered throughout the year?
3. Are members properly educated about the entity, its
P&P, and its risk profile?
4. Are members independent?
5. Are meeting agendas and supporting documents
provided in advance with enough lead time?
6. Do the right members of management attend
meetings? Does it vary throughout the year?

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Audit Committee Self-Evaluation
7. Do meeting materials include executive summaries
that highlight issues and critical discussion points?
8. Will orientation for new members include meetings
with the CEO, the CFO, other financial management
and the independent auditors?
9. Are educational topics included on the agenda
(deep dives on a specific area of risk or a specific
accounting estimate)?
10.Were any audit findings or results indicative of a
need to modify our charter or upcoming agendas?

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Common Current Practices of NFP Audit Committees
• Meets 2-3 times per year.
• Meets with auditor to review audit planning prior to the start of the
audit.
• Meets with the auditor to review reports and results at the end of
the audit.
• Conducts an executive session with the auditor post-audit and
sometimes at planning.
• Meets with management and sometimes the firm preparing Form
990 prior to filing.
• Often meets to review the results of benefit plan audits.
• Commonly reviews conflicts of interest and whistleblower
complaints based on organizational polices regarding the same.
• Normally has a charter that is more detailed as to duties and
requirements than other board committees.

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Common Current Practices of NFP Audit Committees
• Meetings tend to focus on the review of voluminous
documents delivered via email.
• Discussion about other risks are becoming more common but
tend to be driven by the latest news or issues that other
organizations have experienced.
• There tends to be only limited activity as to oversight of
internal control as part of the ongoing committee charge.
• There tends to be only limited activity assessing the charge and
the effectiveness of the committee.

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Emerging Practices of NFP Audit Committees
• More audit committees are seeking to have management formalize
its process of enterprise risk assessment.
• The key outcome of this is an inventory and assessment of ERM. If
there are assigned owners and oversight by governance, gaps are
commonly identified.
• Some audit committees are renaming themselves to be the “Audit
and Risk Committee” or some other flavor of that if the charge of
enterprise risk assessment is embedded within the committee.
• More audit committees are using tools like BoardEffect which seek
to create secure electronic communication with not just the audit
committee, but the board as a whole.
• More audit committees are converting their charter into draft
meeting agendas effectively cross referencing the various activities
to the scheduled meetings so expectations are clear and recurring.

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Emerging Practices of NFP Audit Committees
• More audit committees are asking to review IRS form 990T so they
have a greater understanding of tax risks and positions the
organization has taken.
• More audit committees are asking about state filings and other
jurisdictional compliance and the policies for the same.
• More audit committees are approving policies suggested by
management for items such as when to file in a particular
jurisdiction particularly when activities are de-minimus.
• More audit committees are seeking to understand insurance
programs, risk sharing and risk retention implicit in the business as
well as maintaining risk insurance programs on a rotational basis,
including having insurance brokers and other representatives
participate given insights and external perspective that can be
gained.
• More audit committees are asking about cyber insurance and related
programs.

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Emerging Practices of NFP Audit Committees
• More audit committees are asking about IT, cyber and related threats given the
obvious risk.
• Some audit committees are having personnel from IT review with the audit
committee key risk, exposures and threats presented given an Organization’s
use of technology.
• Alternatively, more audit committees are seeking periodic engagement of
external consultants to assess IT, security, penetration, phishing and IT best
practices to help provide a heat map and agenda goals and focus areas in terms
of IT threats.
• We have not yet seen a clear and standard set of IT oversight best practices for
universal adoption.
• More audit committees are seeking external experts on a variety of subjects
when useful and advisable to bring greater skill and focus to specified risk
areas.
• More audit committees are seeking to have internal corporate counsel attend
audit committee meeting when such a position exists within the organization.
• Alternatively, more audit committees are seeking a report form counsel on
litigation, claims and assessments.

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Emerging Practices of NFP Audit Committees
• More audit committees are considering practices such as
partner rotation on the engagement team when such
continuous service is long.
• Some audit committees are considering practices to identify an
appropriate interval to consider shopping the audit firm
relationship when deemed in the organization's interest to do
so.
• More audit committees are seeking more insight from auditors
as to the nature of procedures over selected accounts and
transactions.

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Next Steps
• Get a copy of your audit charter.
• Review the emerging practices listed for
applicability and value to your organization.
• Consider if other committees of the board are
already charged with such activities.
• Redraft the charter for consideration by your
audit committee; obtain auditor input if helpful.
• Obtain consensus and approval as to revisions.
• Circulate such with the governance or other
committee charged with oversight of committee
charges to obtain consent on adjustments.
• Bring such changes before the full board for
approval.

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?
Questions and Resources
AICPA
ASSOCIATION OF AUDIT COMMITTEE MEMBERS
ASSOCIATION OF CERTIFIED FRAUD EXAMINERS
CENTER FOR AUDIT QUALITY
COMMITTEE ON SPONSORING ORGANIZATIONS OF THE TREADWAY COMMISSION
CORPORATE BOARD MEMBER
ETHICS RESOURCE CENTER
INSTITUTE OF INTERNAL AUDITORS
IT GOVERNANCE INSTITUTE
NATIONAL ASSOCIATON OF CORPORATE DIRECTORS

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If You Enjoyed This Webinar…
Related Courses:
• 7/27: Not-for-Profit CFO Panel Discussion on Industry Trends
• 8/29 & 9/12: Technology Risk Management for NFPs
• 12/12 & 12/14: Not-for-Profit Tax Update
Recent Publications:
• How Not-for-Profits Can Use Social Media to Drive Engagement
• Questions to Ask Before Accepting In-Kind Donations
• What Not-for-Profits Should Annually Review to Manage Compliance
Requirements

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