Audits vs Reviews vs. Compilations Nonprofit Finance Fund

If you’re unsure about which assurance product is the right fit for your needs, your CPA firm can help you determine the best approach for your organization. Finally, the collection, remittance and reporting of state and local-level taxes depend on the governments that levy the taxes. FUTA taxes are reported annually using Form 940, Employer’s Annual Federal Unemployment (FUTA) Tax Return. You’ll also have to report these amounts (and other information) regularly to the IRS. Even if you’re self-employed with no additional employees, you’re still required to remit payroll taxes on your own salary.

What is a Nonprofit Review?

If your nonprofit is not required to have an audit, you may still choose to have one conducted on a voluntary basis. Second, nonprofits are required to make their application for tax exemption with the IRS, Form 1023, available upon request. If any errors or omissions are found, the auditor will report them to the board of directors.

Required Proposal Contents

The SAS clarifies that the significance of a control deficiency is dependent on the potential for a misstatement, not whether a misstatement actually occurred. All of this translates into increased audit fees, the potential for negative reports in your audit and the risk of losing funding from your funding sources. SAS 112 and nonprofit audit standards is an audit that redefines the types of internal control issues that will be reportable.

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These controls help your organization safeguard assets and ensure accuracy in financial reporting. Reviewing your controls–such as how financial transactions are handled, recorded, and approved–helps with audit preparation. For nonprofits, audits are more than just a regulatory requirement–they’re a tool for safeguarding the organization’s mission and financial health. An audit https://nerdbot.com/2025/06/10/the-key-benefits-of-accounting-services-for-nonprofit-organizations/ helps improve an organization’s financial transparency, builds donor trust, and ensures compliance with regulations. As we mentioned, many foundations and government organizations will want audited financial statements when applying for grants. Talk with your banker or a trusted nonprofit auditor to clarify what level of assurance your organization needs.

This article will cover when and why an independent auditor is necessary for a nonprofit organization as well as the generally accepted accounting principles that serve best when a financial audit is necessary. The Susan S. Lewis CPA firm performs audit services in Chicago and nationally. Effective communication with auditors is essential throughout the audit process. Nonprofits should designate a point person—often the finance director or executive director—who will serve as the primary liaison between the organization and the auditors.

• Audited financial statements are crucial for ensuring financial transparency and accountability.
• Refer to the AICPA Audit and Accounting Guide for additional information and examples.
• At James Moore, our nonprofit assurance professionals provide both reviews and audits of various types of nonprofit entities.
• A nonprofit financial audit might be a legal demand or altogether unnecessary.
• Nonprofits should carefully review each finding and prioritize them based on their potential impact on operations or compliance.

You’ve issued a strong RFP and received proposals from qualified nonprofit auditors. You’re seeing competitive fees, strong nonprofit experience and their client references are glowing. Some RFPs ask audit firms to disclose information on the biggest client(s) they’ve lost in recent years.

• Check your state’s nonprofit audit requirements to determine if you fall into this category.
• Generally, the cost is based on the amount of time the independent auditor or audit firm spends conducting the audit.
• The objective is to provide limited assurance that the financial statements are free from material misstatements, whether due to fraud or error.
• The Board of Directors should determine which type and frequency of audits to conduct based on the organization’s circumstances.
• By taking these proactive steps, organizations can streamline the audit process and minimize disruptions to their daily operations.

Consider whether you have good chemistry, and whether you learned something new and insightful from talking with them. Even if you don’t call in your top choices for a formal presentation, a brief phone conversation or Zoom call can reveal whether you are a potential fit for each other. When we’re asked for this, we certainly provide it, but as auditors, we don’t think RFPs need to require this. Provide contact details for any inquiries related to the RFP, such as a contact name, phone number and email address.

Federal Funding FAQ’s

Audits give your nonprofit an excellent overview of where you need improvements. When auditing becomes a standard practice within your organization, your board, staff, volunteers, and donors understand their responsibilities and hold themselves and others accountable. The IRS will audit your nonprofit if there are discrepancies in your tax reports, but instances of this are few and far between. Nonprofit executives must ensure that finance teams and internal systems are audit-ready well before auditors arrive. RFPs typically ask for names and bios of the audit firm’s engagement team, including partners, managers and staff accountants. State the purpose of the audit and why you are seeking an independent audit firm.

Debunking Common Operating Reserve Myths for Nonprofits

This process allows you to provide a list of firms with information about your organization and its needs, receive information about auditing firms in return, and determine which firms are a good fit for your NPO. To find the right provider for your NPO, begin by doing a lot of initial research and making a list of potential auditors. Some good ways to begin creating a list of firms are to ask fellow NPOs for recommendations, read reviews of auditing firms, and even conduct an online search. Once the audit is complete, nonprofits may receive findings or recommendations from the auditor regarding areas for improvement or compliance issues identified during the review. It is crucial for organizations to approach these findings constructively rather than defensively. Acknowledging areas where improvements can be made demonstrates a commitment to accountability and continuous improvement.