The Search for an Independent Auditor for Your Nonprofit
Independent audits are one of the strongest tools nonprofits can use to demonstrate accountability and financial transparency. Even if your organization isn’t required by law to undergo one, the process reassures donors, regulators, and stakeholders that your finances are reliable. But selecting an auditor isn’t as simple as hiring an outside firm—you must ensure the relationship meets true independence standards. The American Institute of Certified Public Accountants (AICPA) Code of Professional Conduct offers critical guidance.
Independence: More Than a Technicality
The AICPA code makes it clear that independence must exist both in fact and in appearance. Independence in fact means the auditor is free from conflicting interests. Independence in appearance means avoiding situations that might lead outsiders to believe the auditor’s objectivity has been compromised.
It isn’t always about one obvious conflict. Sometimes, small issues add up. For example, a modest personal donation to a nonprofit might not seem concerning on its own, but if paired with other ties to the organization, a reasonable observer could question whether the auditor can remain impartial.
Recognizing Threats to Independence
The code outlines several potential threats, some of which may be acceptable and others that cross the line. A key principle is whether a reasonable, informed third party would believe the auditor’s independence has been impaired.
Advocacy risks: If the auditor actively supports your nonprofit’s cause—for instance, lobbying for your mission or having a personal stake in its success—their impartiality may be compromised.
Familiarity risks: Independence may be questioned if the auditor has close personal ties to individuals in your leadership team, or if they themselves serve in a governance role.
Role conflicts: An auditor who designs or manages your nonprofit’s internal controls cannot later be considered independent in reviewing them.
Previous nonaudit services: Hiring a firm that recently prepared your financial statements or provided accounting support may create conflicts.
Importantly, auditors must step aside if they feel undue influence or pressure from within your organization.
Safeguards That Strengthen Trust
To reduce risks, both auditors and organizations can implement safeguards. Professional bodies and regulators enforce protections such as licensing standards, continuing education, disciplinary measures, and external quality reviews.
Your nonprofit can also put safeguards in place. For example:
Establish an active, independent audit committee to oversee auditor relationships.
Ensure open communication channels between the committee, leadership, and auditors.
Use clear oversight structures to prevent conflicts from developing.
From their side, auditors may assign different partners or teams from separate offices to maintain independence. They’re also required to document both the threats they identify and the safeguards they apply.
Balancing Efficiency With Diligence
Budget and time limitations can make the audit selection process feel daunting. Yet rushing the decision or choosing the cheapest option could expose your organization to risk. A thoughtful, deliberate search process ensures your nonprofit works with a truly independent auditor who strengthens, rather than weakens, your credibility.
Finding an independent auditor is about more than compliance—it’s about protecting your mission. With the right safeguards in place, your nonprofit can secure an audit process that builds trust, confirms accountability, and reinforces your reputation for integrity.