An NPO audit examines specified financial information or controls against an agreed and applicable framework. A non-profit’s legal form, activities, funding and registrations determine which audits and reports it needs. There is no single “NGO audit” that automatically covers every obligation.
Reviewed 6 October 2026 using the Companies Act and ICAI professional guidance. Official Companies Act, ICAI internal-audit guide for NPOs.
Separate the audit and reporting requirements#
| Requirement | What to establish first | Typical evidence |
|---|---|---|
| Financial-statement audit | Legal form, governing law and reporting framework | Accounts, schedules, records and auditor appointment |
| Tax-related audit/reporting | Applicable tax law, registrations and conditions | Tax computation, receipts, expenditure and required reports |
| Foreign-contribution reporting | Whether foreign contribution is received and applicable permissions | Dedicated records, receipts, utilisation and prescribed returns |
| Donor assurance | Grant conditions and agreed scope | Programme expenditure, supporting evidence and agreed report |
| Internal audit | Governance mandate and risk-based scope | Control design, transaction testing and corrective actions |
A Section 8 company is subject to the relevant company-law audit framework. A trust or society needs its own governing-law review. Neither non-profit status nor small receipts establish a blanket audit exemption.
Statutory audit and internal audit are different#
Financial-statement audit and internal audit serve different purposes. Internal audit can examine controls, grant management, procurement, safeguarding and other risk areas within its agreed scope. It should not be represented as a replacement for a required statutory or tax report.
ICAI’s NPO internal-audit guide provides professional guidance on relevant risks and controls. The checklist below is a practical preparation workflow, not a universal statutory audit programme. Official ICAI technical-guide library.
Prepare an annual audit file#
NPO audit preparation
- Constituting documents, registrations and governing-body records.
- Agreed audit scope, reporting framework and appointment evidence.
- Trial balance, ledgers and reconciled bank accounts.
- Donation evidence, grant agreements and restricted-fund schedules.
- Expenditure approvals, invoices and programme allocations.
- Asset register, custody records and material balance schedules.
- Related-party details, commitments and relevant legal matters.
- Previous findings and evidence of corrective-action completion.
Reconcile programme reports to the financial accounts. A donor utilisation statement prepared independently from the ledger can hide inconsistencies. Document allocation methods for shared costs and preserve the supporting rationale.
Audit workflow and responsibility#
- Identify every required report and the intended recipient.
- Agree the reporting period, scope and accountable people.
- Close the books and resolve reconciliation differences.
- Provide complete evidence and answer audit queries.
- Review proposed adjustments and disclosures with management.
- Obtain the required approvals and complete applicable submissions.
- Assign owners to findings and monitor their resolution.
Management remains responsible for records and financial reporting. Do not assume the auditor will reconstruct missing books or that a signed report removes weaknesses in operating controls.
Frequently asked questions#
Does every NGO have the same audit requirements?
No. Review legal form, governing legislation, applicable tax conditions, foreign-contribution status and funding agreements.
Is internal audit the same as statutory audit?
No. Internal audit reviews risks and controls within its mandate. Statutory financial audit follows the applicable legal reporting requirement.
What accounting standards should an NPO use?
Determine the framework by entity type and activities. Read the separate NPO accounting guide for the company/non-company distinction and practical fund-accounting controls.
Related reporting#
Read NPO accounting standards and NPO annual returns. Contact SigmaTenders with your legal form and funding sources to map the required audits and reporting responsibilities.