NGO Audit Readiness Checklist: Prepare Before the Auditor Starts

An audit should review an organised set of books and evidence. It should not become an emergency exercise in locating bank statements, reconstructing approvals or guessing why old entries were posted.

Audit readiness is therefore a year-round control system. The NGO should be able to explain significant balances, trace material transactions and provide the governance or grant evidence that sits behind the accounts.

If your team would like year-round compliance support, our annual compliance service can help keep records in order between audits.

1. Confirm the actual audit or review scope

Before preparing a file, identify what review is actually taking place.

It may be:

• statutory/entity audit;
• tax audit or prescribed tax report where applicable;
• donor or grant audit;
• project-specific certification;
• internal audit;
• management review;
• Government grant utilisation review;
• FCRA-related audit/reporting work where applicable.

Do not assume the same schedule or certificate applies to all of these.

Record:

• entity and period;
• auditor/reviewer;
• appointment/engagement reference;
• scope;
• required report/form;
• reporting deadline;
• responsible NGO coordinator;
• secure document-sharing route.

Preparation supports the auditor; it does not determine the auditor’s procedures or opinion.

2. Close the books first

Do not send half-posted books merely because the audit date has arrived.

Before handover:

• post known receipts and expenditure;
• reconcile all bank accounts;
• count/reconcile cash;
• review advances;
• review payables/receivables;
• update asset records;
• reconcile grant/fund balances;
• record known corrections;
• identify unresolved items.

If something cannot be resolved before handover, disclose it in an open-items schedule rather than hiding it.

3. Prepare a clean trial balance or ledger extract

The audit file should include a controlled version of the accounting data.

Record:

• period covered;
• extraction date;
• software/system;
• version or file reference;
• preparer;
• reviewer;
• whether post-extraction entries are locked or separately logged.

If the books change after the audit file was sent, maintain a change log so the auditor knows which version is current.

4. Build supporting schedules

Common schedules may include:

• cash and bank balances;
• fixed assets;
• advances;
• grants received and receivable;
• donor receipts;
• project expenditure;
• staff and payroll costs;
• major vendors/service providers;
• liabilities;
• major income categories;
• restricted/unrestricted funds;
• interest;
• related-party or conflict-sensitive transactions where relevant.

The exact schedule set depends on the NGO and reporting framework.

5. Bank and cash evidence

For each bank account, prepare:

• bank statement for the full period;
• reconciliation at period end;
• outstanding payment/receipt list;
• bank confirmation if requested through the audit process;
• account-opening/mandate record where relevant;
• authorised signatory record;
• major unusual transaction explanations.

For cash:

• cashbook;
• closing physical count;
• custodian;
• count evidence;
• unresolved differences.

6. Advances and unsettled balances

Old advances are a common audit problem because they often hide missing evidence or incomplete project closeout.

Prepare an ageing schedule with:

• recipient;
• purpose;
• fund/project;
• amount;
• date;
• settlement due date;
• evidence received;
• unused cash returned;
• balance outstanding;
• action owner.

Do not clear an old advance merely by moving it to “expense” without the underlying evidence and approval.

7. Grant and donor schedules

For each material grant, connect the accounts to:

• award/agreement/sanction;
• approved budget;
• amendments;
• releases received;
• interest treatment;
• project expenditure;
• advances;
• reporting submitted;
• unspent balance;
• return/refund obligation if any;
• assets purchased;
• required certification.

For donations, ensure receipt records, bank entries and donor-reporting data can be reconciled.

8. Procurement and payment evidence

The auditor may need more than the invoice.

For material or sample transactions, retain:

• request/need;
• selection/procurement evidence required by policy or donor;
• approval;
• invoice/bill;
• receipt/delivery/activity evidence;
• payment instruction;
• bank proof;
• ledger posting;
• project/fund coding.

Where a single person performed multiple roles because the NGO is small, document the compensating review control.

9. Payroll and people costs

Keep the records needed to show that staff/consultant costs are genuine and properly authorised.

Depending on the relationship, this may include:

• appointment/contract;
• approved compensation;
• attendance/time/activity record where relevant;
• payroll computation;
• statutory deduction evidence where applicable;
• bank payment;
• consultant invoice;
• project allocation basis;
• governing/management approval.

Do not create attendance or time sheets retrospectively solely because an auditor asked for them.

10. Fixed assets

Prepare an asset schedule that agrees with the accounts.

Check:

• additions;
• disposals;
• location;
• custodian;
• donor/funder restrictions;
• physical existence;
• serial/asset ID;
• title/property records for major assets;
• depreciation/accounting treatment under the NGO’s applicable framework.

11. Governance records belong in the audit file

Financial controls are connected to governance.

Keep accessible:

• governing instrument;
• current governing-body list;
• major minutes/resolutions;
• bank-signatory authority;
• finance/procurement policy;
• conflict declarations where used;
• grant acceptance approvals;
• major contract/asset decisions;
• delegated authority matrix.

An audit question about a transaction may ultimately be a question about who had authority to approve it.

12. Compliance and registration evidence

Prepare a controlled register of the NGO’s actual registrations/approvals and current status.

Examples may include:

• entity registration/incorporation;
• PAN;
• tax-registration/approval orders;
• NGO Darpan;
• CSR-1;
• FCRA where applicable;
• GST/TDS or employment registrations where applicable;
• activity licences where applicable.

Do not present every possible registration as mandatory.

13. Audit query tracker

Once fieldwork begins, track queries rather than handling them through scattered WhatsApp messages.

Suggested fields:

• query ID;
• date;
• account/transaction/reference;
• auditor question;
• assigned NGO owner;
• evidence requested;
• response;
• attachment reference;
• open/closed status;
• follow-up;
• reviewer.

Keep a copy of what was actually provided.

14. Management corrections

For proposed audit adjustments or corrections:

• record the issue;
• identify the evidence;
• understand the accounting impact;
• obtain appropriate approval;
• post the entry;
• retain the before/after reference;
• confirm whether it affects donor/project reporting.

The purpose is traceability, not merely agreeing the trial balance to the auditor’s schedule.

15. Audit findings and follow-up

The audit is not finished when the report is signed.

Create a follow-up register for:

• control weakness;
• audit observation;
• responsible owner;
• agreed corrective action;
• due date;
• evidence of closure;
• reviewer;
• status.

Recurring observations should be treated as a system problem.

Pre-audit checklist

Books

• All periods posted.
• All bank accounts reconciled.
• Cash reconciled.
• Advances reviewed.
• Project/fund balances reviewed.
• Major ledger anomalies investigated.

Evidence

• Invoices/bills accessible.
• Approval trail accessible.
• Bank proof linked.
• Grant agreements and reports indexed.
• Asset register updated.
• Payroll/consultant evidence organised.

Governance

• Governing instrument available.
• Current governing body confirmed.
• Major resolutions/minutes indexed.
• Bank mandates current.
• Key policies approved/version-controlled.

Handover

• Audit coordinator appointed.
• Secure sharing route agreed.
• Requested schedule list tracked.
• Open issues disclosed.
• Query tracker ready.

Common audit-readiness failures

• Sending books before bank reconciliation.
• Hiding old advances.
• Reconstructing approvals after the fact.
• Giving the auditor several inconsistent versions of the same ledger.
• Treating governance decisions as outside finance.
• Assuming a donor certificate and statutory audit report are interchangeable.
• Leaving audit findings without owners or deadlines.
• Giving unrestricted access to sensitive records without a controlled sharing process.

Source and applicability notes

This guide draws on NGOGrant’s Finance Controls & Audit Readiness system. Current statutory audit, tax and donor-report requirements vary by entity, registration and grant.

The Income Tax Department’s current forms should be checked for any tax-reporting requirement relevant to the NGO. Grant-specific certifications are controlled by the actual agreement/sanction and applicable rules.

Official sources to keep open

Audit work often ties into these official filings. Keep the portal records and your books consistent:

• Income Tax e-filing portal
• Forms 113 and 114 (donation statement and donor certificate) – Income Tax Department
• FCRA online portal (Ministry of Home Affairs)
• NGO Darpan portal (NITI Aayog)

Links checked on 21 October 2026. Portals change; if a page has moved, search the department’s own site rather than a third-party copy.

Worked examples: getting ready for audit

These are hypothetical examples to show the method. They are not real organisations or cases.

For example, a society in Haryana: its cash book has gaps for two months. Fix: reconstruct entries only from real vouchers and bank records, and note the gap for the auditor rather than inventing entries.

For example, a trust in Andhra Pradesh: advances paid to field staff were never settled. Fix: list each open advance with a reason and follow-up date before the audit starts.

For example, a Section 8 company in Delhi: it received a grant with separate reporting conditions. Fix: prepare a grant-wise schedule showing receipts, spending and balance.

For example, a society in Tripura: its board approved a large purchase only verbally. Fix: record it in minutes now, noting the actual date of the decision, and tighten the approval process.

For example, a trust in Goa: it issued donor certificates but cannot match them to the donation register. Fix: reconcile the two before the audit.

For example, an FCRA-registered society in Madhya Pradesh: it mixed foreign contribution with local funds in one account. Fix: speak to a CA familiar with FCRA immediately.

Frequently asked questions

When should an NGO start preparing for audit?

Ideally throughout the year, by keeping books and vouchers up to date. In practice, start closing the books and preparing schedules a few weeks before the audit date your auditor gives.

What documents does the auditor usually ask for?

Books of account, bank statements, vouchers and bills, grant agreements and utilisation details, fixed asset records, payroll records, board minutes and registration documents. The exact list depends on the audit scope.

When are Form 113 and Form 114 due?

The Income Tax Department lists 31 May after the end of the tax year as the due date for Form 113 (statement of donations) and Form 114 (donor certificate). Check the portal for any change.

Is FCRA audit separate?

Foreign contribution accounts and returns have their own requirements under the FCRA. Keep FCRA funds, books and evidence separate and ask your CA about the current reporting format.

What if the auditor finds problems?

Record each observation, decide who will fix it and by when, and report progress to the board. Do not ignore repeat observations.

Your next step

For a full-year system rather than a last-minute rush, see our annual compliance support or the audit readiness pack.

• NGO annual compliance (₹3,999 + GST per year)
• NGO Finance Controls and Audit Readiness Pack

NGOGrant boundary

NGOGrant can help prepare audit schedules, evidence indexes and follow-up systems. The independent auditor or other qualified professional determines procedures, conclusions, certificates and opinions.