What does the IRS want when it conducts a nonprofit audit?
Two different things share the word audit. An IRS examination is the IRS reviewing an organization's exempt status and returns (IRS); a financial audit is an independent CPA giving an opinion on the financial statements. The IRS also runs lighter non-examination reviews called compliance checks (IRS).
Last verified: 2026-09-20 · Every figure links its source.
IRS examination, compliance check or CPA audit?
| Who starts it | What it looks at | Outcome | |
|---|---|---|---|
| CPA financial audit | The organization buys it | The financial statements, and in a single audit federal program compliance | An opinion, plus findings in a single audit |
| IRS compliance check | The IRS | Whether specific items were reported properly on filed forms | Education and correction; it is not an examination |
| IRS examination | The IRS | Exempt status, the return and tax positions | A determination, which can include tax, penalties or status change |
The IRS is explicit that a compliance check is not an audit and does not directly relate to determining a tax liability for a period (IRS, compliance checks). If the letter says compliance check, you are not under examination.
Source: IRS, exempt organizations audit process · IRS, compliance checks · Last verified: 2026-09-20
What does the IRS look at in an examination?
Whether the organization is still organized and operated for its exempt purpose, whether earnings have inured to private individuals, whether lobbying or political activity crossed the line, and whether the returns were accurate (exemption requirements). Records that support the return — minutes, payroll, contracts, grant agreements, the general ledger — are the usual request (IRS, audit process).
Source: IRS, exempt organizations audit process · IRS, exemption requirements for 501(c)(3) organizations · Last verified: 2026-09-20
How is an organization selected?
The IRS publishes how it chooses organizations for review, and the short answer is a mix of return data, projects targeted at particular issues, referrals and other information (IRS, selecting organizations for review). Questionnaires sent to a category of organizations are compliance checks rather than examinations (IRS).
We do not publish odds of being examined: the IRS does not present a rate that applies to an individual organization, and any number circulating as one is unreliable.
Source: IRS, selecting organizations for review · IRS, compliance checks · Last verified: 2026-09-20
What should a nonprofit prepare?
- The filed returns for the years in question, and the workpapers behind them.
- Board minutes showing approval of compensation and major transactions.
- Payroll records and contractor agreements.
- Grant agreements and restricted-fund documentation.
- The conflict-of-interest policy and any disclosures made under it.
- The audited financial statements, if any — Form 990 Part XII already says whether they exist (IRS).
An examination is not a financial audit and does not replace one; likewise a clean audit opinion does not resolve an IRS question about exempt purpose.
Source: IRS, exempt organizations audit process · IRS, About Form 990 · Last verified: 2026-09-20
Questions and answers
What does the IRS want when they conduct a nonprofit audit?
To confirm that the organization is organized and operated for its exempt purpose and that its returns are accurate. The request usually covers returns, minutes, payroll, contracts and grant agreements.
What triggers an IRS audit of a nonprofit?
The IRS describes selection as coming from return data, targeted projects, referrals and other information. It does not publish a rate that applies to an individual organization.
Is an IRS compliance check the same as an audit?
No. The IRS states that a compliance check is not an examination and does not directly relate to determining a tax liability for a period.
Looking for the financial audit instead? Start here.
Questions this page answers
Other ways people ask the same things, and where the answer sits above.
- When does the irs audit?
- Who gets irs audited?
- What is the likelihood of an irs audit?
- What are the odds of an irs audit?
- What are the chances of an irs audit?
- What are the odds of getting an irs audit?
- How likely is an irs audit?
- Can the irs audit if common law marriage to single?
This is public-record information, not accounting or legal advice.