Does the thought of your annual financial audit induce anxiety? With some preparation and insight into the process, nonprofits can navigate to an audit-ready harbor.  

Why Get Audited? 

Nonprofits may be required by state law or funders to undergo an independent audit. Audits also provide credibility and auditors can be a source of helpful advice on technical issues. Look at the auditor as an ally and the audit process as a map to better financial management. Start with last year’s audited financial numbers to begin the audit process. 

The Audit Process 

  • Pre-Fieldwork – Gather documents requested by auditors 
  • Planning – Auditors determine risk areas, samples for testing 
  • Testing – Inspect documentation and transactions 
  • Reporting – Finalize open items, issue opinion 

Why It Matters 

The audit tests financial rigor and governance. Maintaining readiness throughout the fiscal year demonstrates nonprofit stability and health. Staying audit-ready promotes:

  • Efficiency and risk management 
  • Stakeholder confidence 
  • Good standing for grants 

Nonprofits should work on gathering audit information all year long. Integrating these tasks into natural business cycles prevents sinking as the audit looms. 

Ongoing readiness:

  • Setting aside key documents 
  • Monitoring governance changes 
  • Keeping tie-outs and schedules current 

While the audit may seem like only an annual task, nonprofits can integrate readiness into their regular monthly processes.  

Monthly Audit-Readiness 

  • Record all transactions with supporting documentation 
  • Reconcile accounts 
  • Prepare financial statements 
  • Document via checklists 

By anchoring readiness to month-end closes, nonprofits navigate the audit in small pieces instead of rushing at year-end.  

While audits can create anxiety, consistent processes reduce strain and YPTC is here to help with resources and experienced staff. To learn more, click here to watch the webinar.