Audit Basics

Preparing for an audit

Preparing for an audit
is a year-round task.

While preparing for an audit requires your nonprofit’s
full attention, the process has several undeniable benefits.

Show they’re good financial stewards of the funds your donors and grantmaking organizations provide

Reassure supporters that your nonprofit manages its operations efficiently

Give board members and executives accurate financial data to make informed decisions

Your organization can work throughout the year to make the audit process easier. Here are best practices to complete before the audit begins:

Align your ongoing internal policies and processes to what is needed for audits
- View the audit process as a continuum, not a one-off
- Ensure the right people have access to the right things
- Store all relevant documentation in one centralized location
- Reconcile all areas that can be reconciled on a monthly (or at minimum, quarterly) interval
- Track restricted and unrestricted net assets and activities
- Track grant reporting
- Assess financial reports for errors to reduce surprises during the audit
Ensure you have internal controls in place, including:
- Segregation of duties
- Clear classification of restricted and unrestricted net assets
- Auditable general ledger
- Ability to monitor accounting operations
Reach out to the auditor early and create an audit timeline
Meet with your auditor to kick off the project
If you had an audit last year, ask your auditor if the request list will be the same or if new standards need to be implemented
Review the last audit and verify that the recommendations were implemented
Ensure your internal finance staff knows the timing of the audit and what they are responsible for gathering and reporting on
Build a year-end audit process calendar with deadlines for each deliverable
Coordinate supporting schedules in advance
Review how funds and grants were applied and be prepared to explain any variances
Check in with the board and audit/finance committee