A very important part of the accounting procedures is the AUDIT of the accounts. It is the responsibility of the administrative officer (the Pastor) to ensure that an audit is performed. The audit is a search into the financial transactions and not a cursory check of the Annual Report. The purpose of the search is three-fold:

1. Check to determine the accuracy of the transactions and final balances against the beginning balances.
2. Assist the CFO by recommending ways to facilitate the accounting procedure.
3. To provide protection for both the Financial Officer and the jurisdiction.

As soon as possible after the year-end reports are completed, the auditor(s) and the CFO will have to arrange to complete the audit of the financial records. If there is a large volume of entries, the auditor(s) may want to make interim auditing checks to facilitate the final audit. It is recommended that an interim audit be conducted after six months so the auditor is completely familiar with the accounting system before making the year-end audit.

Auditing involves considerably more than a mere totalling and balancing of the financial records. Auditing entails inquiring into the financial practices of the jurisdiction to determine that proper care has been exercised in the classification of receipts and disbursements. The audit should also attest that assets have been safeguarded and are available and funds have been disbursed in accordance with the approved budget.

1. Gather records for the financial audit
1. Minutes of business meetings, current and prior year
2. Copy of financial statements
3. Minutes of conferences approving quotas and allocations
4. List of congregational officers
5. Copies of newsletters and other correspondence
6. Chart of accounts (line items of the budget) and copy of the approved budget
7. Record book or computer print-out
8. Offering envelopes, receipts, deposit slips, invoices, vouchers, monthly CFO reports, cancelled cheques, etc.
9. All bankbooks, certificates of deposit, savings account records, etc.
10. All bank statements and their reconciliation for the audit year, plus the prior December and the succeeding January (and February, if necessary)
11. Copies of all bank account signature cards if available
12. Copies of any outstanding loan agreement(s) if available
13. Copies of any contracts
2. Cash Audit
1. Prepare a reconciliation of receipts and deposits. Determine reasons for differences. This procedure verifies ending cash balances.
2. Examine cancelled cheques. Make sure the endorsement on the back agrees with the payee. Examination of cancelled cheques should include comparing cheques with entry in the CFO’s cash disbursements.
3. Examine cancelled cheques as evidence of expenditures, watching for proper endorsement as the amounts are compared with the entries in the cash account. Examine vendor’s invoices or signed receipts covering payments on materials or services purchased. Determine that materials or services were received.
4. Obtain a copy of the CFO’s last bank reconciliation and verify that cheques listed as outstanding actually cleared the back after the statement date. (Bank clearing date is either stamped or perforated into the cheque.) Verify that any deposits in transit are credited to the account on subsequent statements.
5. Bank and Savings account balances should be verified directly with the bank or savings institution at the jurisdiction’s year-end.
3. Test Receipts
1. Select one or two weeks’ offering envelopes - both local and World Church contributions - at random. Trace the envelope number and amounts to the Congregation’s Financial Officer’s Monthly Report.
2. Trace the deposit as shown on the monthly income and expense record keeping system to the bank statements.
3. Examine copies of receipts issued to contributors and others: accounting for numerical sequence of receipts, duplicate copies of the original copy and the total of all receipts in a given month equal the total of all deposits for that month.
4. Test Expenditures
1. Verify that only authorized expenditures were made.
2. Examine the invoices, receipts or vouchers for signatures and proper amounts.
5. Miscellaneous
1. Make sure all chequing, savings, and other investment accounts are made in the name of the Church.
2. Other assets such as investments in bonds or certificates of deposit should be verified by examination of the asset or by direct communication with the depository.
3. Examine the minutes of the conferences to see that all expenditures were made in accordance with an approved budget.
4. Audit report should be made to presiding officer and a copy to Congregational Stewardship Commissioner.