Role of external auditors

How the external auditor's findings can help strengthen the accounting system.

The external auditor may discover weaknesses in the internal control procedures that will affect the accounts. The auditor should report these weaknesses to the trustees. The principal purposes of this report to management are:

• To enable the auditor to comment on the accounting records, systems and controls he or she has examined during the course of the audit: for example, weaknesses in credit control, the reconciliation of ledgers and the maintenance of grant approvals.
• To provide management and trustees with financial statistics that can be used to judge the performance of a charity: for example, the number of weeks' expenditure in reserves, or total staff costs expressed as a ratio of total resources expended.
• To communicate any matter that might affect future audits: for example, new accounting standards.

The report to trustees and management should recommend what changes need to be made to systems in situations where there are no other compensatory controls.

The auditor must ensure that the recommended changes have in fact been made.