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Many nonprofit organizations are under no legal obligation to have annual, or even regular, financial statement audits. But your organization might want to consider going through the process anyway. It offers numerous benefits that can pay off. Financial audit process So what’s involved in an audit? An independent auditor examines your nonprofit’s financial statements, accounts, transactions, records, accounting and financial procedures and processes, and internal controls. The goal is to issue an opinion on whether your financial statements present your financial position and changes in your net assets fairly, within materiality limits, in accordance with U.S. Generally Accepted Accounting Principles. The process isn’t one-sided. It requires extensive communication and collaboration between your staff and auditors. For example, auditors often send their clients a prepared-by-client list of items your staff needs to gather pre-audit. This usually includes documentation such as: Bank statements and reconciliations, Investment account statements, Unpaid invoices, Grant and fundraising details, and Payroll information. The collection process can seem like a hassle, but it helps the audit proceed more smoothly and with fewer delays. This in turn can reduce your audit cost. When the auditors complete their work, you’ll receive a management letter that outlines their recommendations regarding, among other things, internal controls. If you have an audit committee, it typically will...