Carl Thomas

CPA | Manager

Financial statement audits don’t have to be a stressful time for nonprofit organizations. With some proactive planning and preparation, nonprofits can successfully prepare themselves to have a successful and smooth audit process. Below are some key tips to help your team get ready before the auditors arrive:

1. Get Organized

Make sure that important documents are easy to find and well-organized. This includes:
                                                            

• Bank statements
• Vendor invoices
• Significant agreements

      
Having these readily available will help to streamline the audit process.

2. Update Your Books

Ensure your accounting records are current. You should:

• Complete your month-end close process through the audit period or to the current date.
• Finalize bank reconciliations.

      
Up-to-date books are essential for a smooth audit.

3. Review and Analyze Financial Results

Before the audit:

• Run a preliminary balance sheet, as of the audit date.
• Run a year-to-date budget vs. actual income statement.
• Look for unusual balances or results that are outside of your expectations.

        
If something looks off, investigate further. It might require adjusting a journal entry.

4. Know Your Compliance Requirements

   Nonprofits face unique compliance obligations. Be aware of the following:

• If your organization received significant federally sourced funding, it could need a Single Audit (federal compliance audit).
• Some states require nonprofits to submit financial statements or other reporting to a state regulatory body or to undergo state-related compliance engagements if certain revenue thresholds are met.

Know your state and federal requirements ahead of time.     

5. Coordinate with Your Audit Firm

Proactive communication with your auditor can prevent delays and confusion. Consider the following:

• A Pre-Planning Meeting – Set up a call or a meeting to clarify:
  • Engagement logistics – Will it be on-site, remote, or hybrid?  What are the scheduled dates?
  • Engagement staffing – Who will be the primary contact from your team?  Who from the audit firm will take the lead?  What other individuals on both sides will be involved?
• Engagement letter – Make sure you receive the engagement letter and sign it before any work begins. Review the fees and check for any changes in the audit standards that may impact the investment.
• Prepared by Client (PBC List) – Ask when the audit firm will provide the PBC list and what the timeline is for fulfilling the requests?
• Significant Matters – If there have been any significant or unusual transactions during the year, or if your organization is unsure about your books/records and how something should be reported, bring it up now.  It is always better to be proactive when you are aware of issues or have questions.

At Cray Kaiser, we understand that preparing for an audit can feel overwhelming. Our experts are here to support you every step of the way, from organizing your records to navigating compliance requirements and coordinating with your auditors. If you need guidance with preparing for your upcoming audit, don’t hesitate to contact us at 630.953.4900 or fill out this form.