Does your nonprofit have to undergo an independent audit this year? If so, we have a few tips that can help you prepare.


Prepare for Nonprofit Accounting Audit


5 Ways to Prepare for a Nonprofit Accounting Audit

1. Be Aware of Federal and Your State Law Audit Requirements

Not every organization is required to have an independent audit. However for some nonprofits, the federal and state regulations require them to conduct an independent audit. This could be due to their annual budget or the source of their funding.

While you may not need to understand the exact federal and state law audit requirements for your organization, it is important to at least be aware. The following resources can help:

Nonprofit Accounting Audit Resources

State Law Nonprofit Audit Requirements
Federal Law Nonprofit Audit Requirements

2. Hold a Pre-Audit Meeting

A pre-audit meeting is a meeting between the nonprofit staff who will be working with the auditors and the audit team. This initial consultation is very helpful in figuring out how the actual audit process will work.

During your pre-audit meeting you will be to ask specific questions regarding documentation, timeline, and the needs of the auditors throughout the audit.

3. Assemble Your Documentation

Using your pre-audit meeting as your guide, you and your nonprofit audit team will be able to prepare the necessary documents needed during your auditor’s field work.

Common Items an Auditor Will Review
While there are many documents/items that an auditor will review, below are just a few examples of what to expect/prepare:

  • Year-end reconciliation statements and bank statements;
  • List of grant funds already received, and those that are expected, but not yet received;
  • Fixed assets and depreciation schedule;
  • List of physical items that you are intending to sell;
  • All grant awards and related correspondence;
  • General ledger for the fiscal year;
  • Accounting manual and financial management policies;
  • Payroll tax reports, W2’s, 1099’s, timekeeping records, etc.;

During your pre-audit meeting with your auditor, you will be able to ask more specific questions about documentation that you should prepare for your nonprofit audit.

4. Plan for the Auditor’s Field Work

Most likely, an auditor will visit your office to conduct their field work. This is because auditors want to see where your financial operations take place.
To make your auditor’s visit easier, it is best to have someone coordinate the logistics of the visit. This person should organize some of the major details like,

  • Where will the auditor’s sit as they are reviewing documents?
  • Will they need internet access?
  • How many people will be visiting your office?

5. Be Really Organized!

One of the best things you can do to prepare for your nonprofit accounting audit is to be really organized. Take advantage of your pre-audit meeting to ensure you have all the documents ready for the auditors. This can save you a considerable amount of time and money.

Also make sure to give yourself enough time to get everything together. Preparing for an independent audit takes time and shouldn’t be rushed.

Capital Business Solutions provides accounting software for nonprofits, government agencies and other municipal entities. Our accounting software can help your organization streamline and strengthen your internal accounting procedures, allowing you to focus on what matters most – your mission.

Learn more about our accounting software solutions by visiting