Nonprofit Audit Readiness Quiz

    Check off 10 items auditors always look for first. See your readiness score and what gaps need fixing before your audit begins.

    Check everything your organization currently has in order:

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    What Audit Readiness Means for a Nonprofit

    Being audit-ready means your auditor can trace every significant balance in your financial statements to support you already have, without anyone rebuilding records during fieldwork. The ten items above are the foundation. Gaps in them are the most common reason audits run long and generate adjustments.

    Areas auditors focus on

    • Cash: bank and investment reconciliations for every account through fiscal year-end, with reconciling items explained.
    • Contributions and grants: award letters and agreements that show whether revenue is a contribution or an exchange transaction, and whether donor restrictions apply (FASB ASC 958-605).
    • Net assets: a roll-forward of net assets with donor restrictions showing when restrictions were met and released.
    • Functional expenses: a documented basis for allocating shared costs among program, management and general, and fundraising (FASB ASC 958-720).
    • Governance: approved board minutes, a conflict of interest policy, and documentation of significant decisions.

    When the audit is required, not optional

    If you expend $1,000,000 or more in federal awards in a fiscal year beginning on or after October 1, 2024, you also need a Single Audit, which adds a Schedule of Expenditures of Federal Awards and compliance files for each major program. In Maryland, registered charities need a CPA audit at $1,000,000 or more in charitable contributions and a review at $400,000 to $999,999 (effective July 1, 2026). See the rules for Maryland, Virginia, and Washington, DC.

    Timing

    Readiness work belongs in your year-end close, not the week before fieldwork. Your auditor will send a request list of items to prepare; having the basics above in place lets you respond to it quickly. How long the audit takes depends on your size, the number of funding sources, whether it is your first audit, and the condition of your records. For a detailed list, use our nonprofit audit checklist and our audit readiness services.

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    Nonprofit Audit FAQ

    It varies with the organization's size and complexity, the number of federal programs, whether it is a first-year audit, and above all the condition of the records. Organizations with reconciled accounts and organized grant files tend to finish faster with fewer adjustments. Your auditor should give you a timeline and request list at the planning stage.

    Incomplete bank reconciliations and missing grant documentation are the top two causes of audit delays and additional fees. Organizations should complete all bank recs through the fiscal year-end before audit fieldwork begins.

    Auditors typically request: trial balance, bank statements for all accounts, grant agreements and award letters, board meeting minutes for the full year, prior year financial statements, fixed asset schedule, payroll records, and accounts payable/receivable listings.

    Yes, but preparation gaps increase audit hours and final cost. Auditors must perform additional procedures when records are incomplete, which translates directly into additional billable time. Most CPAs will pause fieldwork until critical documents are available.

    Start well before fieldwork — ideally as part of your year-end close. That leaves time to complete bank reconciliations, organize grant files, finalize board minutes, and resolve discrepancies before auditors arrive. If a funder report or Single Audit deadline applies, work backward from that date.

    Nonprofits reporting under U.S. GAAP must present expenses by function (program services, management and general, and fundraising) and by nature, with the allocation method disclosed (FASB ASC 958-720). Auditors test that shared costs such as salaries and rent are allocated on a reasonable, documented basis, such as time records or square footage.

    Only if you expend $1,000,000 or more in federal awards in a fiscal year beginning on or after October 1, 2024 (2 CFR 200.501), including federal funds passed through a state or local agency. A Single Audit adds compliance testing of major federal programs and a Schedule of Expenditures of Federal Awards to the financial statement audit.

    It depends on your state and funders. In Maryland (effective July 1, 2026), registered charities need a CPA audit at $1,000,000 or more in gross income from charitable contributions and a CPA review at $400,000 to $999,999; government grants are excluded. Virginia and DC set no statutory threshold, so grant agreements, lenders, and bylaws usually decide.

    Also see: Audit Requirement Checker | Single Audit Checker

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