Audits are necessary, but the fact that someone is checking on someone else does not automatically guarantee that the checked doesn’t need to be checked.

Even auditors can make mistakes, and those mistakes can hurt the entities being audited more than the auditors. Speaking at the American Institute of CPAs (AICPA) Not-for-Profit-Industry Conference, Teresa Bordeaux and Nancy Miller highlighted the most common deficiencies in audits of nonprofits.

Included in those are:

• Failure to audit a major program. Failure to cluster (including failure to audit a cluster or programs that are part of a cluster). Failure to audit as “major” all federal awards assigned the same Catalog of Federal Domestic Assistance (CFDA) number. Two-year look-back failure. Failure to meet percentage of coverage. Incorrect threshold for Type A/Type B determination.
• Generally Accepted Government Auditing Standards (GAGAS or “Yellow Book”) or A133 report errors or omissions.
• Errors in Schedule of Findings and Questioned Costs.
• Failure to document an understanding of internal control over compliance of federal awards sufficient to plan the audit to support low assessed level of control risk for major programs.
• Failure to document the testing of controls and compliance for the relevant assertions related to each compliance requirement with a direct and material effect for the major program.