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Who Audits a Church?
- A church auditor is either an independent CPA the church hires or a volunteer the congregation appoints.
- A lender, a denomination or a grantmaker will say which of the two it accepts. Ask before appointing anybody.
- Either way, keep the review independent of whoever handles the money. Our church audit team takes the independent side.
What Does a Church Auditor Do?
An auditor confirms that the church handled its money properly, rather than hunting for wrongdoing.
An auditor’s tasks include:
- Reviewing financial statements and ledgers for accuracy
- Testing internal controls for churches, like donation handling as well as expenditure approvals
- Evaluating financial statements against applicable accounting principles and nonprofit reporting standards
- Checking whether the church used donor-restricted gifts the way the donor intended
- Preparing an independent report summarizing findings and presenting recommendations
Does a Church Auditor Have to Be a CPA?
No. A church can appoint a volunteer or a committee, and nothing in state law stops it.
Only a licensed CPA may hold out as a CPA, in every state. An audit report is a CPA firm’s report, and a lender, a denomination or a grantmaker asking for an audit is asking for that document.
Anyone may keep a church’s books, prepare its financial statements or carry out an internal check of the records. What states restrict is who may claim the credential.
A church may call the volunteer version an audit, and there is nothing wrong with the work or the word. In the profession, audit means something narrower: a CPA firm’s opinion on financial statements, given under professional standards.
Church Audit Committee or Independent CPA?
Churches use the word auditor for a volunteer role as well as for a CPA. The board appoints a church audit committee, or the membership elects one.
- The committee checks that the church counted, recorded and spent the money the way the board approved, and reports its findings inside the church.
- The CPA doing a financial statement audit tests the same ground under professional standards and issues an opinion a lender or a grantmaker can rely on.
What Makes a Church Auditor Independent?
For a CPA, independence is a professional requirement, and it attaches to attest work such as an audit or a review. The same firm can prepare a church’s payroll and its tax filings with no independence question, as long as it does no attest work for that church.
The AICPA treats bookkeeping for an audit client as a threat the firm has to manage. It goes further where the firm hosts the church’s accounting system, and treats that as an impairment the firm cannot cure.
Where a church spends federal awards, the CPA works under Government Auditing Standards, and the GAO sets tighter independence rules there than the AICPA does.
For a volunteer, the church or its denomination sets the test. Denominations that publish audit guidance name the same roles as disqualified:
- The person who keeps the records
- A board member or church officer
- A close relative or close friend of anyone who handles money
- The pastor, even where the pastor handles no funds
How to Set Up a Church Audit Committee
No professional body publishes a standard for church audit committees. A church setting one up can use this shape:
- Three or more members, with a majority who are not on staff
- A chair who is not a church employee
- At least one member who can read a bank reconciliation and a set of financial statements
- The external auditor attends as an advisor, without a seat on the committee
A CPA who reports to the committee still has to decide whether the board needs the same account. The committee can also ask to meet the auditor once a year with no staff in the room.
Does a Small Church Need a CPA Auditor?
A small church with simple finances and nobody outside asking can run an internal review and stop there.
Revisit that when the church takes on a loan, a grant or a building project.
How to Choose a Church Auditor
Before you appoint anybody, ask:
- Is the firm licensed in your state?
- Which people will do the work, and how many churches have they audited?
- Does the firm keep the books for any church it also audits, and how does it handle that?
- What will we receive at the end, and when?
- What does the fee cover, and what would be billed separately?
Contact Dimov Audit today for church audit service needs.
Church Auditor FAQs
What is a church audit?
A CPA examines the church’s records and controls, tests transactions, and issues an opinion on the financial statements. What a church audit covers.
How much does a church audit cost?
Between $3,000 and $25,000, depending on the church’s size, the complexity of its finances and the level of service. What sets the price.
Do churches need to be audited?
Not as a general rule. A lender, a denomination, the bylaws or federal award rules can each require one. When a church has to be audited.
Does the IRS audit churches?
The IRS calls it a church tax inquiry, not an audit, and Congress restricted when one may start. What the IRS may and may not do.
Can a church be an LLC?
Yes. An LLC can be recognized under 501(c)(3). A church may also own an LLC to hold property or run a business activity. When a church uses an LLC.
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REVIEWED BY
Reviewed by George Dimov, CPA. Dimov Audit audits affordable housing and HUD-assisted projects for owners and agents across all 50 states.
