What is an Audit?
An audit conducted by a Certified Public Accountant is a process that provides you assurance that your financial statements are free from material misstatement. An auditor’s report provides you with an independent opinion as to whether your financial statements are fairly presented, in all material respects, or not.
What’s Included in the Audit?
While audit procedures vary widely depending on the complexity of an organization, our primary goal is to obtain a real understanding of your organization and its activities, including its internal controls, and to design and perform audit procedures responsive to your specific operating environment. We want to ensure that we obtain evidence that is sufficient and appropriate to provide a basis for our opinion.
When Should We Have Our First Audit?
Usually, a fledgling nonprofit will not need a full-scale audit in its first few years. Once you have applied for and received a significant grant, you may find that an audit is required by the grant agreement. Often, an organization’s board of directors will recognize that the organization is becoming large enough that an annual audit is needed to provide them some comfort about the organization’s finances and governance.
A special kind of audit, known as a Single Audit is required by the federal government if your nonprofit spends more than $750,000 in federal funds. In North Carolina, a lower threshold of $500,000 in State financial assistance (or federal funds passed through the State) triggers an audit.
If you are considering obtaining bank financing, you may well be asked to provide audited financial statements to the lender. See our Debt Financing section for more information about obtaining financing.