Who Else is Needed to Serve on the Audit Committee?

To obtain a balanced perspective, in addition to the financial expert, we recommend two to five additional members with diverse backgrounds and experience. These other individuals should be “financially literate.” This generally means that the committee member must be able to read and understand fundamental financial statements sufficiently to recognize when the numbers along with associated disclosures do not make business sense. This ability, coupled with diligence and an inquisitive attitude, will enable members to ask insightful questions and thoughtfully assess the responses.

As noted previously there are various resources and methods available for finding the right members for your organization.

BDO Insight

In addition to financial expertise, serious consideration should be given to one’s expertise within a certain industry. For example, charitable organizations have concerns that are unique in comparison to trade associations, while educational institutions and health care organizations have very different issues as well. In addition, some nonprofits operate in more than one industry. These may include, for example, universities that operate a hospital, religious organizations that may operate a broadcasting station or a school, museums that have gift shops, a charity that also owns low-income housing facilities, an association with a publishing affiliate, etc. When evaluating whether members have the required expertise, we believe that audit committees should assess if its candidates have the capacity or background to fully grasp the issues relative to the specific industry or industries that the nonprofit operates in.

GO BACK: Effective Audit Committee Guide