For many nonprofit organizations, the word “audit” can evoke feelings of stress and apprehension. However, audits are a normal part of the nonprofit world, serving as a tool to validate financial practices, ensure compliance with accounting standards, and enhance credibility with donors, grantmakers, and regulatory bodies. Understanding the nonprofit audit process and preparing it effectively can transform the experience into a positive one, ultimately supporting the organization’s transparency and accountability.


An audit is an official inspection of an organization’s accounts, typically by an independent body. For nonprofits, audits review financial statements and practices to ensure they are accurate and comply with generally accepted accounting principles (GAAP) and federal, state, and local regulations. This guide explains the nonprofit audit process and provides tips on how to prepare for a smooth and successful audit experience.

The Importance of Audits for Nonprofits

CPA conducting nonprofit audit - Wasilidas & Kulik CPA PC

Audits are essential for nonprofits for several reasons:

The Nonprofit Audit Process Explained

1. Pre-Audit Phase

The audit process begins long before the auditors arrive. Preparation is key to a smooth audit.

a. Understand the Scope of the Audit

b. Choose an Auditor

c. Prepare Internally

2. Document Gathering and Preliminary Review

a. Gather Financial Documents

b. Review Internal Controls

3. Fieldwork

This is the phase when auditors are actively inspecting your records.

a. Auditor Requests

b. Testing and Sampling

4. Exit Interview

At the end of fieldwork, auditors will discuss their findings.

5. Audit Report

The final phase is the presentation of the audit report.

Preparing for the Audit: Tips for a Smooth Experience

1. Be Prepared

2. Communicate Effectively

3. Review Previous Audits

4. Engage Your Board

5. Educate Staff

6. Stay Compliant Throughout the Year


Understanding and preparing for Nonprofit audit process can significantly reduce stress and lead to a more beneficial audit experience. By seeing an audit as an opportunity to improve and validate your financial practices, you can enhance your nonprofit’s credibility and ensure a higher level of financial transparency and accountability. Remember, a successful audit is not just about passing a test; it’s about demonstrating your commitment to stewardship and excellence in all aspects of your organization’s operations.