Auditing a Not-For-Profit

Week 6 Case Analysis – Auditing a Not-for-Profit (Submission is due on Canvas by 8am on April 12th)

Read the Castle Hall Academy Case.

Assume that you have been assigned to the Castle Hall audit that your firm, Biltmore, Green and Hewlett was appointed to perform.  You have never worked on a Not-for-Profit client before, so you realize you need to do some background research to better understand this type of entity.(Feel free to use the internet, including the AICPA and FASB standards websites to conduct your research.)

Answer the following questions:

Overview of Not-for-Profits Concepts:

1. Define what a Not-for-Profit (NFP) is.  Address how a NFP differs from a For-Profit entity.  
2. How do F/S of a NFP differ from a For-Profit entity’s F/S?
3. What is fund accounting? Who uses fund accounting?  Define  “unrestricted funds”, “restricted funds” and “endowment funds”.
4. With reference to the COSO Framework, what internal controls are critical in a NFP?
5. What are some of the challenges that many NFP’s face?
6. Many NFP’s engage CPA’s to conduct compilation engagements.  Define a compilation engagement and describe how it differs from an audit engagement.  
7. What are some of the reasons why an NFP would have an audit of their F/S performed?

Questions regarding the Castle Hall audit:

1. With reference to the COSO Framework, discuss the positive and negative elements regarding the internal controls at Castle Hall.
2. Refer to the F/S prepared by Ken Stanton.  Are they consistent with the format required by the FASB standards ?  Summarize the issues/deficiencies with Ken’s F/S.
3. Refer to the $10M fund raising campaign initiated by Castle Hall in 20X2.  Do contributions related to this campaign qualify as unrestricted funds? (Explain why or why not.)  What are the inputs and significant assumptions used in the calculation of the FV estimate for this account?