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An audit involves gathering independent evidence supporting the amounts and disclosures in the financial statements. An audit provides reasonable (not absolute) assurance that the organization’s financial statements are free of material misstatement. We supplement our audit reports with private communication to management and the board where we may provide feedback on internal control or other financial practices.
Our focus is on smaller less complex nonprofits and we provide audits to 501c3 organizations with revenues up to $5M. We do not offer Yellowbook or Single Audit (2 CFR 200) audits.
When to get an audit?
For many organizations with revenue
>$2M an audit may be required under California law.
For organizations with revenue
>$1M an audit is a common requirement of funders or is considered “best practice” by boards as part of their financial oversight of the Organization.
For organization with revenue
>$500K practice ranges from annual audits to periodic audits (once every 2 or 3 years) with reviews in the intervening periods or simply reviews only.
For organizations with revenue
<$500K an audit is often a matter of judgement and audits are less commonly seen. Common reasons for an audit at this size is to be audit ready for expected growth, to provide a learning opportunity for staff or to comply with a regulation or funder requirement.
One item of note: If “your latest audited financial statements” is an item on the list of requests from a government or foundation, that may not mean you absolutely have to have an audit especially if your organization has less than $500,000 in revenue. Some funders will agree to accept a 990 tax form prepared and signed by a CPA, or a financial review. It doesn’t hurt to ask. If a potential funder insists on an audit — especially if they indicate that you have a good chance at receiving funding that will more than cover the audit fee – many organization’s carry out an audit.
If you need a regular Generally Accepted Auditing Standards audit – please reach out to us!
Reviews provide limited assurance with respect to the financial statements. The financials themselves are similar in appearance, and the process is focused on inquriy and discussion of a nonprofit’s approach to accounting matters (inquires of management) as well as the relationships and reasonableness of numbers provided (analytic procedures). A review does not involve significant substantive testing of underlying source records - and so is often much easier on accounting staff and their time.
Smaller organizations with revenues < $1M may be a good candidates for a review, and some organizations alternate reviews with a periodic audit as a cost management step.
We provide preparation of the following tax forms:
- IRS Form 990 (or 990EZ or 990N) and all related schedules as needed – the basic return required of all nonprofit organizations
- IRS Form 990-T and all related schedules as needed – for those organizations that require this additional level of reporting
- Franchise Tax Board (FTB) Form 199 – the basic return required for all exempt organizations registered in California
- FTB Form 109 – for those organizations that require this additional level of reporting to the State of California
- Registry of Charitable Trust Form RRF-1 – the annual form required by the Attorney General for most exempt organizations that raise funds in California
Engaging Crosby & Kaneda for your tax preparation needs provides peace of mind and assurance that your forms are complete, accurate, and in compliance with all IRS and State of California reporting requirements. Some funders and external stakeholders may also appreciate that the tax forms are prepared by a CPA firm.