As a nonprofit, do we need to change auditors every so often? If so, how often should we change?
I am not aware of any requirement that a nonprofit must change auditors periodically. Even under Sarbanes-Oxley, publicly traded companies are not required to change audit firms (the accounting lobby was able to prevent that indignity), although they are required to change the lead auditor every five years.
For a nonprofit, it makes sense to review the auditor relationship every 5-7 years (if there are other firms in the area that understand nonprofits and your type of nonprofit in particular) and ask for a change in lead partner (if the firm is large enough to do it), even if you don’t change firms. You may decide not to change even if you have the option, but the exercise can be valuable.
Wednesday, January 23, 2008
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IRS draft of "Good Governance Practices for 501(c)(3) Organizations" section 7. FINANCIAL AUDITS states: The auditing firm should be changed periodically (e.g. every five years) to ensure a fresh look at the financial statements. This proposal is currently in draft form but is apparently being considered.
This is a good point. The IRS Good Governance Practices would be recommendations if finalized, however, and not requirements. For some organizations it would be very hard to find adequate accounting help in the locality if they were required to change periodically.
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