Trust and nonprofit audits

Identify why the audit is required

The requirement may arise from income-tax law, the organisation’s governing instrument, its legal form, a grant agreement or a recipient’s reporting conditions. More than one report may be required, and a donor utilisation certificate is not automatically the same as an audit of the organisation’s accounts.

For registered nonprofit organisations under the Income-tax Act, 2025, section 348 requires an audit where income before the relevant nonprofit provisions exceeds the maximum amount not chargeable to tax. The prescribed report is Form 112, due one month before the applicable return due date. Income-tax Act, section 348 and Income-tax Rules, 2026, rule 188.

This current-year route should not be substituted automatically into an audit relating to an earlier period. We establish the reporting year and relevant law before naming the report and its due date.

Plan around funds and activities

A restricted grant needs to be traced from its agreement and receipt through permitted expenditure to the unspent balance. General donations, corpus-related receipts, programme income and foreign contributions can raise different accounting and compliance questions.

We review the governing objects, registration orders, grant restrictions and trustee or governing-body decisions alongside the accounts. A programme cost shared between grants needs a documented allocation basis. A bank payment by itself does not demonstrate that a grant permitted the expenditure.

Where foreign contribution is involved, its accounts and reporting requirements need a separate assessment. Tax registration, FCRA permission and a donor’s approval each have their own conditions.

Evidence for the audit

Provide the trial balance and ledgers, bank reconciliations, prior accounts and reports, governing documents, approval orders, donor and grant records, activity evidence and governing-body minutes. Material assets, liabilities, related-party transactions and commitments also need support.

An incomplete record does not mean the organisation can skip an audit. We agree what must be completed, who will provide it and how the gap affects the timetable. Bookkeeping repair is identified separately from independent audit work.

During fieldwork, we examine relevant records, test selected transactions and balances, and raise questions affecting the accounts or report. Management considers proposed adjustments and supplies explanations. The auditor assesses whether the evidence supports the conclusion; an unresolved material issue can affect the report.

What the audit delivers

An audit engagement produces the signed report appropriate to the appointment and the financial statements or prescribed particulars it covers, subject to completion of the necessary work. Significant findings and proposed adjustments are discussed with those responsible for governance. We also complete the required report filing and respond to reporting queries. If another auditor holds the appointment, our records-preparation work supplies that auditor with the reconciled schedules.

Audit provides reasonable assurance within its applicable framework, not a guarantee that every error or fraud will be found. Independence, eligibility and management’s responsibility for records remain essential. ICAI Standard on Auditing 200.

Reporting timetable

The schedule works back from the statutory, grant or governing-body reporting date. Planning can begin before year-end; final reporting depends on completed accounts, material evidence and authorised approvals.

Related services

• Nonprofit tax registration

• FCRA grant records and reporting

• Bookkeeping and reconciliations

Email TheTaxCo, message us on WhatsApp or book a call. Include the organisation’s legal form, financial year, reason for the audit and whether an auditor is already appointed.