While many non-profits are not required to get an annual audit, many can benefit from its advisory nature by receiving insights and advice on how to improve their business. However, an audit may not be financially feasible for some non-profits. Unfortunately, instances of fraud in the non-profit sector have adversely affected the public perception of the industry, and more donors are placing greater value on some type of an independent, third party examination before giving away their hard-earned dollars.
Non-Profits: Risk Managment Engagments vs. Audits
Where does all this leave non-profits who can’t afford a full blown audit, but see the value of having an outsider assess and offer suggestions on how to mitigate their fraud risk? Risk management engagements are a perfect middle ground. These engagements typically cost less than an audit, yet afford the non-profit the discretion to have the CPA focus solely on areas that may be susceptible to fraud; furthermore, these engagements can be tailored to each organization and the procedures can be agreed upon up front, this way the non-profit is paying for exactly what it wants. Beyond improving an organization’s fraud prevention procedures, risk management engagements make non-profits more transparent to potential donors, thus improving the chances of securing future contributions.
Ultimately, an audit is going to offer the greatest assurance on the accuracy of your accounting records, but there are alternatives that could make more sense for your organization. Unless you’ve had an experienced professional take a look at your business and controls, your organization could be exposed to risks, including fraud.