Preparing for an Audit – Nonprofit Association
Are you ready for your audit?
This checklist will help you gather everything your auditor needs before fieldwork begins.
An audit is designed to ensure that the financial statements are presented fairly, in accordance with GAAP (Generally Accepted Accounting Principles). An audit will provide reasonable assurance that the financial statements are free from material misstatement. Financial statements for a nonprofit association consist of:
- Statement of Financial Position
- Statement of Activities
- Statement of Cash Flows
- Statement of Functional Expenses (can be shown as either a separate statement, or in the notes to the financial statements)
Audit Checklist
We designed this sample document checklist for a typical small Association with a June 30 year end. While this list is not all-inclusive, it should help familiarize you with documentation and questions that are typical for an audit.
| Audit Area | Items Needed |
| Audit Planning | Meeting minutes for all board meetings held during the year Audit questions: – Do the minutes provide evidence of approval of opening and closing of Association bank accounts? Are major purchases and other major decisions reflected in the minutes? |
| Audit Planning | All contracts entered into during the year (vendors, consultants, landlords, other service providers, grantors |
| Audit Planning | Fiscal or accounting policies and procedures Audit questions: – Are written policies and procedures in place to assign authority over regular financial transactions such as spending funds, check signing, authority to enter into contracts, and responsibility for maintaining financial records? |
| Cash | Bank reconciliations for all checking and savings accounts, certificates of deposit Audit Questions: – Are bank reconciliations prepared timely? Are there any outstanding checks older than three months? Are there any unusual transactions that have not cleared? Is written documentation available to support all disbursements? |
| Cash | Bank statements for all accounts for June 30, and for the subsequent month July 31 Audit Questions: – Are there any unusual transactions occurring after year end? Do outstanding items at year clear in the subsequent statement? |
| Investments | Bank reconciliations for all investment accounts |
| Investments | Investment statements for all investment accounts for June 30, and for the subsequent month July 31 |
| Accounts Receivable | Schedule of member association dues receivable at year end, and an estimate of the percent or amount of dues that are deemed uncollectable Audit Questions: If using a separate membership software, does the accounts receivable balance agree to the financial statements? Does the annual revenue figure from the software agree to the financial statements? |
| Prepaid Expenses | Schedule of prepaid expenses for insurance and other costs where the period covered extends beyond the fiscal year Audit Questions: Did the Association incur conference costs (such as a hotel deposit) for a conference that is scheduled to take place after year end? Were insurance bills paid where the coverage period extends after year end? |
| Property and Equipment | Schedule of fixed assets purchased during the year, including date, description and cost. Also a schedule of fixed assets sold or disposed of during the year, and amount of sales proceeds |
| Accounts Payable | Schedule of expenses paid for services or goods received by June 30 but were paid for after June 30 |
| Accrued Compensation Expense | Amounts due to employees for accrued sick and vacation leave as of June 30 |
| Deferred Revenue – Memberships | Schedule of member dues paid in advance for the subsequent year |
| Notes Payable | Statement of note payable balance at year end for mortgages or other long term loans. Audit Questions: Did the Association take out any loans or obtain any new financing during the year? |
| In Kind Donations | Value of donated office space or professional services that would normally would have been paid as an expense |
| Dues Revenue | Schedule of Association members and the amount of dues charged for each member or level of membership |
| Payroll | Quarterly payroll tax returns for the year ending June 30 W2 and W3 forms filed 1099MISC and 1099NEC forms filed Audit Questions: Did the Association pay all payroll taxes due? Has the Association received any correspondence from the IRS concerning payroll tax? |
