Your nonprofit's annual audit is one of the most critical governance checkpoints you'll face—and it starts long before the auditor walks through your door. The planning meeting sets the tone for accuracy, compliance, and a smooth engagement that won't drain your staff's time. Getting this right means fewer surprises, faster closeouts, and audit fees that land closer to what you expected.
Why the Planning Meeting Matters
An audit planning meeting isn't just a courtesy call. It's where your nonprofit and the auditing firm align on scope, timeline, risks, and resources. Without it, you risk miscommunication about what Form 990 schedules need attention, whether your controls will be tested or just observed, or which internal staff members the auditor will need regular access to. The meeting also flags potential compliance gaps early—before they become expensive corrections during fieldwork.
Who Should Be in the Room
Bring decision-makers, not just accounting staff. Your executive director, board finance committee chair, and the person responsible for day-to-day bookkeeping should all attend. If you have a controller or CFO, they're essential. Some nonprofits also include their grant compliance coordinator, especially if restricted funding is significant. On the audit firm's side, expect the partner overseeing your engagement and the manager who'll lead the fieldwork.
Remote attendance is standard now, so geography isn't a barrier—but make sure attendees can focus without distractions. A 90-minute block is typical; anything longer usually means the auditor is unprepared.
What Gets Discussed First
Audit scope and timing. The auditor will confirm whether this is a full financial statement audit, a review, or a compilation—each has different cost implications, typically ranging from $3,500–$8,000+ for reviews to $10,000–$50,000+ for full audits depending on nonprofit size and complexity. They'll outline the fiscal year being audited, the fieldwork timeline (often 4–8 weeks after year-end), and the expected completion date. Clarify upfront: are they testing specific grant compliance requirements, or is that a separate compliance audit you'll need to budget separately?
Your nonprofit's structure. Share your organization chart, major programs, revenue streams, and any recent significant changes. If you've started a new program, shifted funding sources, or changed accounting software, mention it now. This helps the auditor understand risk areas—a nonprofit heavily dependent on a single major donor faces different audit risks than one with diversified funding.
Form 990 complexity. For most nonprofits, the 990-N, 990-EZ, or 990 (full return) depends on gross receipts and net assets. The auditor should confirm which form applies and whether your organization has hit any new thresholds (Schedule O requirements for officer compensation, Schedule R for related organizations, etc.). If you're unsure which form you're supposed to file, the auditor can clarify this—it's not a trivial detail.
Key Items to Prepare and Bring
- Prior year audit reports and management letters (if applicable)
- Current year-to-date financial statements
- Your general ledger or trial balance
- Bank reconciliations and bank statements for period-end
- Loan agreements or debt schedules
- Board minutes from the past 12 months
- Grant agreements and any compliance audit reports from funders
- List of accounts requiring unusual entries or estimates
Having these ready accelerates the meeting and shows the auditor you're organized—which can indirectly help control costs.
Red Flags to Address Early
If your nonprofit has weak segregation of duties (one person handling cash and reconciliations), tell the auditor upfront. If you've had payroll tax or sales tax issues, or haven't filed a 990 in years, disclose it. If your board hasn't formally approved your accounting policies or internal controls, that matters. Auditors expect to find control gaps; what they dislike is discovering them mid-fieldwork when they've already scoped the engagement differently.
Getting Comfortable with Fees
Ask the auditor for a detailed fee estimate before fieldwork starts, not after. Understand what's included: tax return preparation, benefit reports, SAS 115 communications to the board. Ask what will trigger additional costs—if audit adjustments exceed a certain amount, if additional staff time is needed for explanation, or if they find undisclosed transactions. Typical audits take 200–500 hours depending on complexity; at $150–$300 per hour (billing rates vary by firm and market), that translates to concrete numbers.
Frequently Asked Questions
Q: Can I hire an auditor without an in-person planning meeting? Yes, some firms conduct planning calls or video meetings, but a structured conversation is still essential—whether in-person, video, or phone. The substance matters more than the format.
Q: What's the difference between an audit and a Form 990 review? An audit provides reasonable assurance that financial statements are accurate and tests internal controls; a Form 990 review is less rigorous and less expensive, focusing mainly on whether the return is prepared correctly. Funders often require audits; smaller nonprofits may only need reviews.
Q: Should I prepare a detailed schedule of expenses before the audit starts? Partially. Bring well-organized records and your general ledger, but the auditor will pull samples and trace them themselves—that's part of their procedure. Overly prepared schedules can signal you're hiding something, which isn't the message you want.
Use Mercoly to compare and find trusted audit and Form 990 services providers in your area, ensuring you're working with a firm that fits your nonprofit's size and complexity.