Why Your Nonprofit Might Not Be Ready for an Audit (And What to Do Instead)

An audit is often seen as the gold standard of financial oversight. For some organizations, it’s required—by law, by a funder, or by a government agency. But for others, it’s something they choose to pursue in hopes of building trust and demonstrating accountability.

However, an audit isn’t always the right move—especially if your organization isn’t quite ready for one. In fact, jumping into an audit prematurely can do more harm than good.

When an Audit Might Not Be the Right Step

 You’re Not Legally or Contractually Required to Have One

First and foremost: If no law, funder, or grant agreement requires an audit, you have the option to say no. Many smaller nonprofits are surprised to learn they may not be obligated to undergo an audit.

You Don’t Have Clean, Organized Financial Records

Here’s a hard truth: If your books are a mess, an audit is not the solution. In fact, it will only magnify the problem. Auditors are not hired to fix your records—they’re hired to assess whether your financial statements are accurate and whether you have strong internal controls.

If your documentation is incomplete, accounts are unreconciled, or financial activity hasn’t been properly categorized, the audit will be more expensive, more stressful, and potentially inconclusive.

In this case, your time and money are better spent cleaning up your books—then preparing for an audit down the line.

You’re Still Building Basic Financial Systems

If your nonprofit is young or has recently undergone major changes (like a system conversion or staffing turnover), your financial processes might still be evolving. An audit at this stage can be premature and could lead to findings that are less about fraud or error—and more about growing pains.

An audit report filled with management letter comments and internal control issues won’t inspire confidence. Better to strengthen your foundation first.

What to Do Instead of an Audit

If you’re not ready for an audit—or don’t need one—there are still ways to show fiscal responsibility and work toward stronger financial systems.

• Hire an Accountant to Clean Up Your Records

This is the single most important step. A professional can help you catch up on reconciliations, organize documentation, and ensure your chart of accounts aligns with your reporting needs.

• Request a Financial Review or Compilation

These services, performed by a CPA, offer a different level of service than an audit and cost less than a audit. A review provides limited assurance, while a compilation is more basic but still gives you polished financial statements to share with stakeholders.

• Ask for an Internal Controls Assessment

A CPA or nonprofit finance consultant can perform a focused assessment of your policies, procedures, and risk areas. This gives you practical recommendations without the pressure of an audit opinion.

• Invest in Training and Financial Literacy

Sometimes the best investment is in your people. Train your finance staff in nonprofit accounting best practices, internal controls, and budgeting. A well-informed team will set you up for audit readiness in the future.

Get Ready, Then Audit

Audits are important, but only when they’re timely and meaningful. If your nonprofit is still getting its financial house in order, rushing into an audit may drain resources without providing real value.

Instead, take a phased approach:

• Clean up your books
• Strengthen your internal controls
• Build financial habits you can sustain
• Then decide whether to have an audit performed