---
title: "Audits: Not What You Might Think"
id: "22437"
type: "post"
slug: "audits-not-what-you-might-think"
published_at: "2014-04-01T11:10:24+00:00"
modified_at: "2026-03-16T03:52:35+00:00"
url: "https://associationsnow.com/2014/04/01/audits-not-what-you-might-think/"
markdown_url: "https://associationsnow.com/2014/04/01/audits-not-what-you-might-think.md"
excerpt: "You may not be doing enough to cover yourself from fraud. Some tips to better audit your nonprofit."
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  - "fraud prevention"
  - "nonprofit"
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  - "Association CEO / Executive Director"
  - "C-Level"
taxonomy_persona:
  - "Executive Leadership"
---

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## You may not be doing enough to cover yourself from fraud. Some tips to better audit your nonprofit.

After a [Washington Post investigation (opens in a new tab)](http://www.washingtonpost.com/investigations/inside-the-hidden-world-of-thefts-scams-and-phantom-purchases-at-the-nations-nonprofits/2013/10/26/825a82ca-0c26-11e3-9941-6711ed662e71_story.html)
 uncovered more than 1,000 cases of “diversions of funds” at nonprofits, reporter Joe Stephens noted during a panel discussion that “many of these organizations got clean audits year after year.”

Michael Wyland, CSL, a consultant at Sumption & Wyland, says many association executives and boards have a false sense of security about their annual financial audits. “If you talk to most accountants, they will tell you that a financial audit is not designed to discover fraud,” he says. “An audit is a test of the accounting procedures used in an organization, and it samples transactions and tests whether those transactions are in compliance with generally accepted accounting principles.”

Because a routine audit tests a sample of transactions, when it does uncover fraud, it’s “almost by accident,” Wyland says. A “forensic audit,” on the other hand, will dig up the details of an embezzlement scheme, but it’s far from routine. Costing perhaps 10 times as much as a standard audit, a forensic audit is typically called for only after indications of fraud have arisen.

Experts recommend a few options to better monitor for embezzlement:

**Conduct a fraud risk assessment,** in which financial procedures are examined to brainstorm fraud scenarios and identify control gaps.

**Increase the volume** of transactions sampled in a standard external audit.

**Periodically and randomly sample** transactions internally to ensure compliance with financial procedures.

(Bertlmann/Getty Images)

[Joe Rominiecki](https://associationsnow.com/author/joe-rominiecki/)

Joe Rominiecki is a contributing editor to Associations Now.

[More articles by this author](https://associationsnow.com/author/joe-rominiecki/)

Tags: [#auditing](https://associationsnow.com/tag/auditing/)
 [#Business](https://associationsnow.com/tag/business/)
 [#fraud prevention](https://associationsnow.com/tag/fraud-prevention/)
 [#nonprofit](https://associationsnow.com/tag/nonprofit/)

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