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    meera s
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    Auditing a not-for-profit organization involves three main steps: 1) evaluating inherent risks such as employees misstating financial information or accountants making mistakes, 2) performing testing with special attention to revenue accounts and documentation for donations and grants, and 3) compiling findings into an audit report identifying the accounting and auditing frameworks used.

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    Audit of not for profit or non profit organisation

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    Auditing a not-for-profit organization involves three main steps: 1) evaluating inherent risks such as employees misstating financial information or accountants making mistakes, 2) performing testing with special attention to revenue accounts and documentation for donations and grants, and 3) compiling findings into an audit report identifying the accounting and auditing frameworks used.

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    113 views2 pages

    Audit of Non Profit Organisation

    Uploaded by

    meera s
    Auditing a not-for-profit organization involves three main steps: 1) evaluating inherent risks such as employees misstating financial information or accountants making mistakes, 2) performing testing with special attention to revenue accounts and documentation for donations and grants, and 3) compiling findings into an audit report identifying the accounting and auditing frameworks used.

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    How to Audit a Not-for-Profit Organization

    Unlike publicly traded companies, nonprofit organizations are not required by the Securities and
    Exchange Commission to undergo annual audits. Many not-for-profit organizations, however, are
    required to receive an audit if they accept certain types of funding or earn a large amount of revenue.
    A positive audit opinion can increase donor and board member confidence in the nonprofit's
    operations.

    Evaluate Risks
    Auditors usually kick off an audit by evaluating a nonprofit's inherent risk -- the risk that employees
    are misstating financial information. Such risk may arise when management has strong incentives to
    misstate financial information or when an accountant makes an honest mistake in reporting. Inherent
    risk can be high in not-for-profit organizations that must report certain results to continue receiving
    grants. Nonprofits that pay low wages may have trouble attracting qualified accountants. If the
    auditor deems inherent risk to be high, he should increase testing to compensate for the potential
    mistakes.
    Perform Testing
    Auditors typically test a variety of accounts and transactions. They should pay special attention to
    revenue accounts when auditing a nonprofit. Nonprofit entities have different sources of revenue
    than their for-profit counterparts, and all employees may not be familiar with the revenue recognition
    rules for donations and grants. Auditors should check to see if the nonprofit has adequate supporting
    documentation and determine the correct timing of revenue recognition for grants that have strings
    attached.

    Report Results
    After testing an adequate number of transactions and accounts, auditors compile their
    findings into an audit report. They must identify the accounting framework and auditing
    framework used during the process. In the United States, most nonprofits are set up as
    corporations and use generally accepted accounting principles. Because nonprofits are
    corporations but not publicly traded, auditors should use the U.S. generally accepted auditing
    standards as the auditing framework.

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