🚫 Specific Prohibited Non-Audit Services
To preserve objectivity, auditors are restricted from providing certain non-audit services to their audit clients. These include:
– Bookkeeping or accounting record services
– Financial systems design and implementation
– Appraisal or valuation services
– Actuarial services
– Internal audit outsourcing
– Management or HR functions
– Investment advisory or banking services
– Legal services
– Expert services unrelated to the audit
Tip for nonprofits: Keep audit and advisory roles separate to avoid compromising independence.
📜 Other Rules That Safeguard Independence
In addition to prohibited services, several rules help reinforce auditor independence:
– Taking Responsibility for Non-Attest Services: The auditor must assess whether management can take responsibility for the non-attest services they provide (e.g. preparation of audit financial statement and tax filings). Someone within the organization (staff, contractor, Board, volunteer) needs to have the skill, knowledge, and experience to take responsibility for the non-attest services.
– Cooling-Off Periods: Former auditors must wait before taking key financial roles at an audit client.
– Fee Transparency: Disclosure of audit and non-audit fees helps stakeholders assess potential conflicts.
🧠Oversight of the External Auditor
Your board or audit committee plays a vital role in maintaining independence. Key responsibilities include:
– Selecting and engaging the audit firm
– Reviewing audit scope and results
– Evaluating auditor independence and performance
– Ensuring compliance with regulations
✅ Final Thoughts
For nonprofits, auditor independence isn’t just a regulatory checkbox—it’s a best practice that builds trust with donors, grantors, and the community. By understanding the rules and maintaining strong oversight, your organization can ensure its audits are both effective and ethical.
Need guidance?
Cerini & Associates is here to help. Our team understands the unique challenges nonprofits face and is committed to guiding you with clarity, integrity, and care. Connect with us!
Kenneth R. Cerini, CPA, CFP, FABFA
Managing Partner
Ken is the Managing Partner of Cerini & Associates, LLP and is the executive responsible for the administration of our not-for-profit and educational provider practice groups. In addition to his extensive audit experience, Ken has been directly involved in providing consulting services for nonprofits and educational facilities of all sizes throughout New York State in such areas as cost reporting, financial analysis, Medicaid compliance, government audit representation, rate maximization, board training, budgeting and forecasting, and more.
