THE IMPORTANCE OF AUDITS FOR NON-PROFIT ORGANIZATIONS

An audit for nonprofit organizations involves examining the organization’s financial records to check if they follow the tax-exempt entity requirements.

Audits are not meant to harm or incriminate a nonprofit. They are used as a method of giving assurance that the financial statements of the organization are materially correct. 

  • An audit is important as it provides credibility to a set of financial statements and gives the shareholders confidence that the accounts are true and fair. It can also help to improve a company’s internal controls and systems.
  • Audits are useful to show that the organization’s financial statements are accurate and to give an unbiased view of the organizations financial status.
  • Audits can be beneficial in determining if the nonprofit organization has expended funds on activities not allowed.

The Nonprofit Audit guide is a tool designed to help nonprofit organizations fully understand the process of an independent audit. The National Council of Nonprofits created and provides this guide. Some states require an audit if the nonprofit has a certain amount of revenue derived from state funds. Additionally, some foundations will not fund other nonprofits that do not have audited financial statements.

If your organization has decided to (or is required to) conduct a financial audit, you’ll need to choose an auditing firm that will best suit your needs. However, nonprofit audits aren’t the only way to improve your finances. The more you learn about them, the better you can strategize and enhance your operations. 


We help nonprofits determine if they need an audit. You can get in touch with our accounting team at 323-538-5358 or write to us via info@alajiangroup.com