How AI Can Help Nonprofits Prepare for Their Upcoming Audit
By Madeline DeMedal, Senior Manager, Assurance Services
Everyone is talking about artificial intelligence (AI) these days. I often ask myself, “How can I use AI in my everyday life, and how can I use it to serve my clients better?”
With countless applications to consider, nonprofits are also wondering how AI fits within their organization. One critical area where AI can significantly impact is financial reporting and compliance. Here are a few areas in which AI can make audit readiness more effective, accurate, and less stressful.
Enhancing Internal Controls
As auditors, we frequently ask ourselves, “What could go wrong?” As part of our procedures, we are required to understand the design and implementation of internal controls. Many control objectives revolve around timely reconciliations and complete and accurate information. So, how can AI help? By reducing the effort of routine tasks, AI frees up staff time, allowing them to prepare reconciliations promptly. Moreover, AI algorithms can identify and suggest errors in financial data, increasing accuracy before the audit begins.
Detecting Fraud and Errors
Auditing standards tell us, “The auditor has a responsibility to plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether caused by error or fraud.” To achieve this, auditors make various inquiries and perform certain procedures. Nonprofits can use AI to prepare for and address these issues. AI can identify unusual transactions or patterns that may indicate fraud or errors, allowing the management to address these issues before the audit starts and for its monthly close. Furthermore, AI systems can continuously monitor financial activities, providing real-time alerts for unusual or suspicious activities.
Ensuring Compliance and Regulatory Adherence
Compliance and regulatory checks are integral to nonprofit audits. AI can provide support that all financial records comply with current regulations and standards, reducing the risk of non-compliance findings during the audit. Many nonprofits often struggle with managing their grants effectively and require additional resources. AI and automation technologies can assist in this area by improving grant management by streamlining the monitoring process.
Audit Trail and Financial Reporting
Want to ensure your audit ultimately goes smoothly? Here’s an inside scoop: auditors love to see complete and accurate reconciliations and clean audit trails. By utilizing AI, a nonprofit can more quickly generate financial reports and audit trails, saving time and reducing the risk of human error.
Marcum’s culture embraces change and can attest to the efficiencies created by AI, particularly through AskMarcum.ai. By adopting similar AI-driven tools and efficiencies, a nonprofit organization focused on strengthening its financial and compliance reporting can further enhance its mission—ultimately achieving greater impact. And at the end of the day, that’s what it’s all about.
AI offers nonprofits a range of tools to streamline and enhance the audit preparation process. Here’s the required caveat: as with any AI result, there is no substitute for an independent review. Don’t leave your audit readiness to chance—reach out to us today and take the first step towards a smoother, more efficient audit process.
