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However, those websites fail to discuss that the IRS does still have a review process for charities and other nonprofit organizations. Nonprofits are subject to specific accounting standards, such as the Financial Accounting Standards Board (FASB) Accounting Standards https://nerdbot.com/2025/06/10/the-key-benefits-of-accounting-services-for-nonprofit-organizations/ Codification (ASC) 958, which governs the presentation of financial statements. This standard emphasizes net asset classification, distinguishing between unrestricted, temporarily restricted, and permanently restricted funds. Understanding these classifications is essential for accurately assessing a nonprofit’s financial health and resource allocation. Absent the curiosity of the IRS, nonprofit leaders may seek audited financial records for other reasons.

What is a financial statement audit? And do you need one?

Accounting, confirming, following up, and ascertaining business patterns allow the auditors to create a narrative of where a nonprofit stands. These deficiencies make it more likely that the financial statements will contain undetected or unprevented material misstatements. When transparency matters—whether to retain tax-exempt status, qualify for grants, or assure stakeholders—Dimov Audit is the partner you can rely on. We don’t just check boxes—we help nonprofit leaders understand their financial health and improve governance. Whether required or voluntary, audits are often essential to long-term credibility and funding success.

Nonprofit Partnerships: Elevate Your Organization’s Success

Through careful planning and effective risk assessment strategies, organizations are better equipped to deliver accurate financial reports while remaining compliant with all reporting standards. Navigating the audit process for a nonprofit organization involves several crucial steps, each requiring careful attention and cooperation. It begins with meticulous fieldwork and data collection where every piece of information must be accurately gathered. This is a collective effort, as noted in reflections from a SOC 2 audit, which emphasizes the importance of having the entire organization on board for successful compliance.

• A nonprofit audit is an independent examination of a nonprofit organization’s financial records, conducted by an audit firm or an independent auditor.
• Auditors uncover the use and management of fund across various departments within the nonprofit organization.
• Luckily, there are several other options to review your organization’s information instead of a complete audit.
• Auditors verify that program expenses are adequately documented and reported in accordance with the organization’s goals.
• Donors need to trust an organization before they contribute a one-off gift or recurring funding, and an independent audit provides them with that much-needed reassurance.
• The IRS and the nonprofit’s board of directors also use financial audits to ensure that nonprofits are in compliance with all laws, regulations and their governing documents.

What are Nonprofit Audit SAS Standards?

• For starters, the Internal Revenue Service (IRS) rarely has a reason to audit your organization—since you’re a nonprofit and don’t pay taxes.
• When it comes to managing your nonprofit, it’s important to focus on serving your mission and achieving your organization’s greatest potential.
• Deadlines are paramount, and proper checks can prevent filing errors and uphold accountability.
• Use Google to find at least three options (based on reviews and portfolios) for CPAs or auditing firms that work with nonprofits.
• By embracing the audit process, your organization can operate more efficiently and better fulfill its mission.
• Plus, we can suggest potential auditors and work with you to develop and implement your post-audit action plan, customizing our approach based on your unique needs and goals.

The Ford Foundation’s experience with updating their content management system illustrates the need for adaptability and readiness for scaling operations, a lesson that’s very much applicable to the auditing process. Effective financial management is the backbone of a thriving nonprofit, ensuring stability, transparency, and informed decision-making. Our free courses provide in-depth knowledge on key accounting principles, budgeting strategies, and reporting requirements to help your organization thrive. If any of these requirements apply to your nonprofit, that doesn’t necessarily mean you’ll need to conduct an independent audit every year going forward. For example, some nonprofit bylaws require annual audits, but others state that they should occur every two, four, or five years. Or, if your organization doesn’t plan to apply for any grants that request audit reports this year, even though you did so in the past, you may be able to skip this year.

• To find the status click on “Grants” on the navigation bar then select “Constituents” from the drop-down menu and lastly, open any constituent record to find their charity status and what other labels they may have.
• In the past, you may have seen the terms “reportable condition” and “material weakness” in your audit reports.
• Beyond these contingencies, any time nonprofit organizations seek abatement or money back from the IRS, an IRS agent may count these as red flags and invoke the audit process.
• With the right amount of information and preparation, you can come out of a nonprofit financial audit successfully.
• Instead, other federal or state agencies mandate audits for certain nonprofit organizations depending on several circumstances.

As a nonprofit professional she has specialized in fundraising, marketing, event planning, volunteer management, and board development. Donorbox is an all-in-one online fundraising platform for nonprofits of all sizes. Our simple-to-use and powerful features range from Donation Forms and Fundraising Pages to Recurring Donations, Crowdfunding, Peer-to-Peer, Events, Memberships, and more. Our tool integrates with leading CRM tools to help you utilize this data to the max! When auditing becomes a standard practice within your organization, your board, staff, volunteers, and donors understand their responsibilities and hold themselves and others accountable. This type of audit generally addresses issues with your tax return, discrepancies between your organization’s and freelancers’ or employee returns, or if a division of the IRS issues an IRS-wide examination.