External Audit Procedure for Finance (NGO)
The external audit process for an NGO’s financial operations begins with the appointment of an independent, qualified audit firm. The NGO’s management provides the auditors with access to financial statements, donor agreements, internal policies, and relevant supporting documents. An entrance meeting is conducted to discuss the audit scope, key risk areas, and timelines. The auditors design an audit plan based on an understanding of the NGO’s financial activities, funding structures, and compliance obligations with donor and legal requirements.
During the fieldwork phase, external auditors perform a thorough review of financial statements, supporting documentation, internal controls, and grant compliance. They test the accuracy of reported figures, ensure proper fund utilization in line with donor restrictions, and verify that accounting practices comply with applicable standards (such as IFRS or IPSAS for NGOs). The auditors may conduct interviews with finance staff, inspect procurement and payroll records, and assess financial risk management practices. Any discrepancies, errors, or concerns about financial integrity are documented during this stage.
Upon completion of fieldwork, the external auditors compile their findings into an audit report, which includes an independent opinion on whether the financial statements present a true and fair view. The report highlights any material weaknesses, instances of non-compliance, or recommendations for improvement. This final report is presented to the NGO’s management and board, and often shared with key donors or regulatory bodies. Follow-up actions may be recommended, and a management letter may be issued to help strengthen financial governance and accountability.
