An audit is coming, or has arrived, and you are not ready.
Maybe a funder now requires one, maybe your size or your state triggers it, maybe a grantor is examining a specific award, or maybe you are simply afraid of the word. An audit is not a punishment and it is not a trap, but walking into one unprepared turns a routine examination into a crisis and can surface findings that cost you money or trust. This work helps you find out whether and what kind of audit you need, prepare so you pass cleanly, run the engagement well, and respond to any findings the right way. It is not the audit itself, which is performed by an independent professional, and it is not the preparation of your financial statements, which is the financial work. Use this if an audit is required or requested, or if you want to be ready before one is. If your books are not current, make them current first, because an audit of unreliable books helps no one.
Not every nonprofit needs a full independent audit, and the ones that do may need it for different reasons that shape what is examined. Check the sources that can require an audit: your state's rules for organizations of your size, your funders' and lenders' requirements, and any grant that requires an examination of its own spending. Confirm each with the source or your accountant rather than assuming. If a full audit is not required, decide with your accountant whether a lighter review or preparation is appropriate, or none at all.
Open the Audit Requirement Check →Most of what makes an audit go well happens before the auditor arrives. Gather what an auditor will ask for: reconciled financial statements, bank statements, grant and contract documents, board minutes, policies, and the records behind restricted funds. Preparation always surfaces problems, a reconciliation that does not tie, a policy never adopted, a restricted fund unclear. Fix what you can now, because a problem you find and fix is far better than one the auditor finds, and route anything you cannot resolve to the right guide or professional.
Open the Audit-Readiness Checklist →An audit is a working relationship with an independent professional, and running it well makes the difference between a smooth engagement and a painful one. Select an independent auditor experienced with nonprofits, agree on scope and timing, and keep the engagement reporting to the board, not only to the staff being examined. Give the auditor what they ask for promptly and honestly, and have the board formally receive the completed audit.
Open the Audit Engagement Guide →An audit often comes with findings or recommendations, and what you do with them matters as much as the audit itself, to funders, to regulators, and to your own improvement. For each finding, decide the specific change that resolves it, who owns it, and by when, and feed the systemic ones back into your calendar and policies. Report your response where a funder or regulator expects to see it, and have the board confirm the fixes are made.
Misused funds, a false report, a serious legal breach: stop treating it as a process fix. Get an attorney and your accountant, because how you respond has legal consequences. This is a route, not a stop, and it is the most serious edge in this guide.
The audit itself must be done by an independent professional, and its independence is the whole point, so this guide never has you audit yourself. Any finding that touches possible wrongdoing goes to an attorney. And the judgment of whether you are required to have an audit at all belongs to your accountant, because the rules are specific to you and change. The guide makes you ready and helps you respond; it does not replace the professionals whose independence and judgment the process depends on.
You know, from a confirmed source, whether you need an audit and which kind. If you have one, you walked in prepared and the file was complete. And any findings became owned, dated fixes rather than lingering problems.
Most leaders move from here to Find and Manage Your Risks, the last of the compliance foundations. The financial work, produces the statements an audit examines.