Auditor's records

We had an interesting situation come up yesterday in our audit. Back in May, we made a donation batch. A few days later, one of the checks in that batch was returned. On our Unit Financial Statement for May, it reflects the donation batch amount, and there is a separate line entry for an adjustment to the donation category, reflecting the returned check.

At some point, however, Church HQ *adjusted* the slip to remove the check that was returned. They never told us they did that. The new batch amount was therefore the original batch amount - the returned check amount. On the auditor's records, that donation batch showed as the corrected amount, and not the original amount in all of our donation batch documents. He wrote it up as an exception. I disagree that it was an exception, given that the documents on our side match exactly to what we received and processed.

Has anyone seen adjustments done like that before? I expected to see a separate line item that references the original donation, not a change to the donation itself.

I have seen that before in an audit.

I don't consider it an exception. You have verified that the transaction he is trying to test is supported by the documentation. Yes, the amount don't match, but your documentation fully supports the deposit he is trying to test.

I wouldn't get too anxious about the audit exception. It does leave me wondering what his corrective action is for the item. The corrective action is supposed to be "what are we going to do differently in the future so that we don't have future exceptions of this type?" The only real corrective action item I could see would be that when a returned item notice is received, the clerk prints a copy of the returned item notice and files it with the original donation batch so that it is easier to trace in the future. If the corrective action is specific to that batch, the auditor doesn't fully understand the purpose of a corrective action in an audit. I guess the other corrective action item could be that members shouldn't write insufficient funds checks for donations.

The audit question specifically instructs the auditor that if the amount shown in the church's financial systems is less than in the ward records then it could be because of a returned check. It instructs the auditor to reconcile the difference by looking for adjustments in the Unit Financial Statements. Only if there isn't an adjustment should it be an exception. This is stated in Question 16 of the audit form.

So it sounds like the auditor didn't follow the directions correctly. That should probably be brought to the attention of the audit committee so they can make sure that's included in the audit training. As for corrective action, if the unit gets a notice when there is a returned check then scgallafent's suggestion could be done. But I didn't think the unit gets any notification anymore so I'm not sure it's really possible.

eblood66 wrote:The audit question specifically instructs the auditor that if the amount shown in the church's financial systems is less than in the ward records then it could be because of a returned check.

I may have complained to someone on the finance side when I ran into that in the audit I referenced.