Auditing is an important tool in the management of the third sector, which includes non-profit organizations. This is because, although these entities are not for profit, they still need to deal with financial resources, such as donations, subsidies, agreements and other forms of fundraising.
The purpose of the audit is to assess the efficiency and effectiveness of financial processes, as well as to identify possible fraud, deviations or irregularities, in addition to suggesting improvements in the financial and administrative management of the organization. In this way, it contributes to transparency and accountability, which are fundamental to maintaining the trust of society and donors in third sector entities.
In addition, auditing can help third sector organizations to ensure compliance with laws and regulations, as well as with the ethical principles and values that guide the work of these entities. This may include compliance with tax obligations, compliance with labor standards, proper use of resources, among other aspects. It can also help identify opportunities for improvement and strengthen the organization's strategic and operational management, contributing to its sustainability and long-term growth.
A study called “The Impact of Auditing on the Performance of Nonprofit Organizations”, published in the journal “Nonprofit Management & Leadership”, analyzed data from more than 500 nonprofit organizations in the United States and concluded that the audit had a significant and positive impact on its financial performance.
Below, we list some impacts of auditing on the third sector that can be significant and positive.
1.
Improved transparency and accountability: Auditing helps to ensure that the organization's finances and activities are transparent and that accountability is done properly, which can increase the confidence of society and donors;
2. Identification of opportunities for improvement: The audit can identify strengths and weaknesses of the organization and suggest improvements, enabling management to make more informed and strategic decisions;
3. Reduction of financial and operational risks: The audit can help identify possible fraud, deviations or financial irregularities, which can reduce the financial and operational risk of the organization;
4. Compliance with laws and regulations: The audit helps ensure that the organization is in compliance with applicable laws and regulations, which can avoid fines or other sanctions;
5.
Strengthening the organization's sustainability: The audit can help ensure that the organization is using its resources appropriately and efficiently, which can strengthen the organization's sustainability and ensure its long-term continuity;
Another study published in the “Journal of Accounting and Public Policy”, called “The Effect of Auditing on the Accountability of Nonprofit Organizations”, examined data from non-profit organizations in the United Kingdom and concluded that auditing increased the organizations’ responsibility in relation to the financial management and reporting.
Studies and research show that auditing is an essential tool for the efficient and transparent management of third sector entities, allowing them to fulfill their mission in a responsible and ethical manner, guaranteeing the trust and support of society.
Get in touch with TATICCA – ALLINIAL GLOBAL, which operates throughout Brazil and globally, with integrated auditing, accounting, tax, corporate finance, technology, risk advisory, business consulting and training services. For more information, visit www.taticca.com.br or e-mail taticca@taticca.com.br and learn more. Our company has professionals with extensive experience in the market and has certified methodologies for carrying out activities.