If your organization has never been audited before, it can be hard to know what to expect from your first nonprofit audit.
Nonprofit organizations come in all shapes and sizes, which can affect the complexity and duration of your audit. However, most nonprofit audits typically take between two to four months from beginning to end, and include four main phases: planning, fieldwork, drafts, and final reports.
Planning
In the first phase of an audit, you will be expected to fulfill a list of initial requests, and the audit firm will perform preliminary audit procedures. The auditors will review your systems and confirm readiness to begin fieldwork.
Fieldwork
In this phase, the auditors will review and test your internal controls (guidelines and policies that an organization uses to prevent fraud and ensure proper accounting). A random sample of transactions will be selecting for testing, such as incoming payments, expenses or bank deposits. The auditors will also review certain financial documents and digital records, interview key personnel, and analyze data. This phase typically includes an intensive period of two to four days in which the auditors may visit your office in-person or collaborate remotely with your team.
Drafts
Once your auditors have finished testing, reviewing, and analyzing all evidence, they can begin compiling their findings and drafting the audit reports. It’s very important to ensure all audit requests are fulfilled before this phase begins. If any information is missing, incomplete, or inaccurate, it can delay the drafts or force your auditors to re-do work that they had already completed.
Final Reports
During the final phase of an audit, your team will have the opportunity to review and approve the drafts. Your auditors will then finalize the financial statements and all associated letters, and present the final audit reports to your board of directors.
Keep in mind that an audit is a marathon, not a sprint. Most audit firms understand that your organization has bigger priorities, and will build in plenty of time for your team to gather documents and respond to requests without negatively impacting your day-to-day work. If your organization would prefer a shorter audit timeline, be sure to communicate this to your auditors ahead of time – and be prepared to commit to more stringent deadlines and prompt responses.