The Importance of a Good Audit
Since potential lenders, donors, funding organizations, and other stakeholders use the financial statements to make decisions about a nonprofit’s financial health, it is important that the statements present an accurate representation of the nonprofit’s financial status. Otherwise, the stakeholders of the nonprofit may make poor decisions about making loans, giving contributions, or providing funding. One way of increasing the likelihood of accuracy is to have the statements audited. An audit is the examination of the financial statements by an independent public accounting firm in order to form an opinion regarding the statements’ adherence to GAAP. This type of audit is an external audit, as the individual performing the audit should not be directly connected with the organization being audited. Once the audit is complete, the auditor prepares the auditor’s report, which contains the auditor’s opinion regarding the financial statements. The auditor’s report is also known as the “Report of Independent Accountants.”
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