Does the thought of your annual financial audit induce anxiety? With some preparation and insight into the process, nonprofits can navigate to an audit-ready harbor.
Why Get Audited?
Nonprofits may be required by state law or funders to undergo an independent audit. Audits also provide credibility and auditors can be a source of helpful advice on technical issues. Look at the auditor as an ally and the audit process as a map to better financial management. Start with last year’s audited financial numbers to begin the audit process.
The Audit Process
- Pre-Fieldwork – Gather documents requested by auditors
- Planning – Auditors determine risk areas, samples for testing
- Testing – Inspect documentation and transactions
- Reporting – Finalize open items, issue opinion
Why It Matters
The audit tests financial rigor and governance. Maintaining readiness throughout the fiscal year demonstrates nonprofit stability and health. Staying audit-ready promotes:
- Efficiency and risk management
- Stakeholder confidence
- Good standing for grants
Nonprofits should work on gathering audit information all year long. Integrating these tasks into natural business cycles prevents sinking as the audit looms.
Ongoing readiness:
- Setting aside key documents
- Monitoring governance changes
- Keeping tie-outs and schedules current
While the audit may seem like only an annual task, nonprofits can integrate readiness into their regular monthly processes.
Monthly Audit-Readiness
- Record all transactions with supporting documentation
- Reconcile accounts
- Prepare financial statements
- Document via checklists
By anchoring readiness to month-end closes, nonprofits navigate the audit in small pieces instead of rushing at year-end.
While audits can create anxiety, consistent processes reduce strain and YPTC is here to help with resources and experienced staff. To learn more, click here to watch the webinar.
