Building Confidence: The Key Role of Nonprofit Audits

In today’s climate of increased scrutiny, regular audits are more than a formality — they’re a cornerstone of credibility for nonprofits. Stakeholders, from donors to government agencies, need assurance that your organization operates transparently and responsibly. An audit provides that assurance while uncovering vulnerabilities in financial policies, internal controls, and governance processes.

Two Audit Types: Internal and External

Internal audits, often handled by in-house leadership like a CFO, help assess how your nonprofit aligns with financial standards and laws. They examine internal controls, efficiency, and policy adherence.

External audits are performed by independent CPAs and offer an objective opinion on your financial health and compliance with Generally Accepted Accounting Principles (GAAP). These audits test bank records, AP/AR, and controls — and must be conducted by someone without ties to your organization.

The Role of the Audit Committee

Nonprofits often rely on an audit committee — typically 3 to 5 financially savvy members — to oversee the audit process. Their independence and knowledge help maintain year-round control, select appropriate auditors, and communicate with both internal and external audit teams.

Be Prepared

Effective audits require preparation. Keep thorough records — including statements, grant documentation, and fundraising details — and stay in communication with your auditor throughout the year. Early questions about financial planning or new revenue models (like merchandise sales) help avoid surprises later.

Why It Matters

While not always legally required, external audits enhance operational discipline and build trust. They can even detect fraud before damage escalates. And though IRS Form 990 doesn’t mandate audits, it does ask about them — and funders are watching.

Verity CPAs specializes in nonprofit audits, providing tailored, transparent services to help your organization remain accountable and audit-ready all year.

📞 Let’s ensure your next audit builds trust, not tension. Reach out to Verity CPAs at info@verity.cpa or 808.546.5026.