TABLE OF CONTENTS ABSTRACT: 2 INTRODUCTION 2 SECTION I: CORPORATE GOVERNANCE 3
1. Corporate Governance Reforms Relevant to NPOs 3
2. Audit Committees of NPOs 4 SECTION II: RISK MANAGEMENT 6
1. Absence of Risk Management in NPO 6
2. Reasons for Risk Management in NPO 7
3. Process of Risk Management in NPO 9 SECTION III: INTERNAL CONTROLS 10
1. An illustrative example 10
2. Good Internal Controls 11
3. Strengthening Internal Controls 12 CONCLUSION 14
This paper discusses internal auditing in not-for-profit organizations (NPOs). Specifically, our goal is to identify the role of the internal audit in NPOs by focusing on key areas such as corporate …show more content…
However, in small NPOs, the board may perform both oversight and managerial functions. The advisory board of a NPO typically provides advice and counsel and often composed of volunteers rather than elected members. For example, the voluntary advisory board for a university is composed of members of the community and students. Unlike business firm, who are largely motivated by substantial compensation, volunteers serve on the board by devoting their time, effort, dedication, beliefs and interests or even money just for good cause.
1. Corporate Governance Reforms Relevant to NPOs
From SOX, we can identify eight provisions that would be more appropriate and applicable to NPOs:
1. Vigilance and independence of directors: by being more vigilant and independent, directors can improve the effectiveness of corporate governance.
2. Audit Committees: it is important component of corporate governance in overseeing financial reporting, risk management, internal control and audit activities. It is expected that NPOs will establish and revise audit committee charter by adopting requirements of SOX regarding independence and financial expertise of audit committees.
3. Improvements in financial reporting process: they require more transparent and timely financial reports and help prevent fraudulent financial activities.
4. Risk management and internal control: they are vital to the sustainable success of NPOs.
5. Audit quality: better audit quality