What happens in a nonprofit audit?
An engagement letter, then planning and a document request, then fieldwork in which the auditor tests controls and balances, then findings and a draft report, then the board. A single audit adds compliance testing of major federal programs and a federal filing (2 CFR 200.514, 2 CFR 200.512).
Last verified: 2026-09-20 · Every figure links its source.
How are nonprofits audited, step by step?
- Engagement. Scope, fee, timing and responsibilities are agreed in writing.
- Planning and risk assessment. The auditor learns the organization, its funding and its controls, and decides where a material error is most likely.
- Document request. The prepared-by-client list — the full version is in our audit checklist.
- Fieldwork. Walkthroughs, control testing, sampling of transactions, confirmations sent to banks and funders, revenue and restriction testing.
- Compliance testing, in a single audit, for each major program (2 CFR 200.514(d)).
- Findings and responses. Anything reportable is discussed, and management writes the corrective action plan (2 CFR 200.511(c)).
- Draft, board, filing. The board or audit committee reviews; the reporting package is filed on the federal deadline (2 CFR 200.512).
Source: 2 CFR 200.514 · 2 CFR 200.511 · 2 CFR 200.512 · Last verified: 2026-09-20
What is needed for a nonprofit audit?
Short version: a closed year, reconciled accounts, the agreements behind your funding, the payroll allocation basis, signed minutes, and the status of every prior finding. If federal awards are involved, add the schedule of expenditures of federal awards, which management prepares (2 CFR 200.510(b)). The itemised list is in the audit checklist.
Source: 2 CFR 200.508 · 2 CFR 200.510 · Last verified: 2026-09-20
What should you look for in the result?
- The opinion on the financial statements, and in a single audit the compliance opinion for each major program (2 CFR 200.515).
- The schedule of findings and questioned costs, including the summary of the auditor's results.
- The management letter — items that did not rise to a finding but that the auditor wants fixed; it must be provided to a federal agency or pass-through entity on request (200.512(d)).
- Whether prior-year findings were closed.
For context on what typically comes back: 16.2% of nonprofit single audits for audit year 2024 reported at least one finding.
Source: 2 CFR 200.515 · 2 CFR 200.512 · Federal Audit Clearinghouse · Last verified: 2026-09-20
How is a small nonprofit audit different?
Smaller organizations rarely have segregation of duties, so the auditor tests compensating controls — board review of bank statements, dual signatures, documented approvals — and often reports a related deficiency anyway. The work is also more concentrated: one person usually produces every schedule. Where an audit is not required at all, a review or compilation may meet the need; the comparison is on types of audits for nonprofits.
Source: GAO Government Auditing Standards · 2 CFR 200.514 · Last verified: 2026-09-20
Questions and answers
What happens in a nonprofit audit?
An engagement letter, planning and a document request, fieldwork with control and substantive testing, findings and management responses, a draft report, board review and — in a single audit — a federal filing.
How are nonprofits audited?
By an independent CPA firm under professional standards, and under Government Auditing Standards when a single audit is required.
What is needed for a nonprofit audit?
A closed year, reconciled accounts, funding agreements, payroll allocation support, signed minutes, prior-finding status, and the schedule of expenditures of federal awards where federal money was spent.
What do you need for an audit at a small nonprofit?
The same documents, plus evidence of the compensating controls a small team relies on: board review of bank statements, dual signatures and documented approvals.
What to look for in a nonprofit audit report?
The opinion, the schedule of findings and questioned costs, the management letter, and whether prior-year findings were closed.
Preparing now? Open the preparation checklist.
Questions this page answers
Other ways people ask the same things, and where the answer sits above.
- How to audit a nonprofit?
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- What do you need for an audit nonprofit?
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- What is the support needed for a nonprofit audit?
This is public-record information, not accounting or legal advice.