Nonprofit Accounting Basics

Audit Committee

Note: Articles published before January 1, 2017 may be out of date. We are in the process of updating this content.

The primary function of an audit committee is to ensure the organization carries out an independent outside audit. Specific duties include:

  • hiring an auditor (this is not a staff function!)
  • reviewing the audit report with the auditor
  • assuring the board that the financial statements reflect the organization's financial condition
  • requesting an internal audit from time to time
  • verifying all affairs in the organization are conducted ethically

An organization with a complicated financial structure, various revenue streams, and/or a budget of at least $500,000 should consider annual independent audits. Smaller nonprofits that might experience regular audits financially too burdensome, could choose a review or at least have a professional accountant compile the financial statements. Organizations that receive government funding usually do not have a choice: an outside audit is a compulsory requirement for receiving funding. Also, some funders expect their grantees to share their audited financial reports.


Additional references:

Audit Guide for Audit Committees of Small Nonprofit Organizations