Last year, I was on a call with a church leader who told me, confidently, We get an audit every year. As we talked, I asked a practical question: Do you have a plan for replacing your large dollar purchases over time? I explained that major equipment and building improvements show up on the balance sheet as fixed assets, and that an audit typically includes notes that help you understand what you own. The line went quiet. Then they said, What’s a footnote? We don’t have that.

At that moment, it clicked. They were not getting a real audit. A real audit comes with full financial statements and extra notes after the numbers. Those notes explain important things, like how the church tracks big stuff it owns, like buildings and equipment, and how it counts the cost over many years. So here is the question worth asking. Do you know what an audit is, and what it actually does for your church?

If you have ever wondered, Are we sure our financial reports are accurate? That is exactly what an auditor helps answer. Think of an auditor as an independent financial checkup for your church. An outside CPA firm reviews key records, tests what matters, and gives a report that increases confidence for leaders, boards, and donors.

A Board-Led Process Protects Trust

Hiring an auditor is one of the clearest ways a church can reinforce financial accountability and governance. The board carries responsibility for financial oversight, and that responsibility should shape how the church selects and engages its auditors.

As a governance best practice, the board or an appropriate board committee should engage the auditors, not a staff member. This helps preserve independence and reinforces the board’s oversight role. Even a CFO should not be the party who engages the auditor. The CFO can manage the process, but the engagement should be board-led.

Determine What You Need

Before you hire a firm, clarify what type of CPA engagement you need. Many churches use the word audit to describe several different services. That creates confusion, and confusion creates risk.

Common engagement types include:

  • Audit—The highest level of assurance. The auditor tests transactions and internal controls and issues an opinion.
  • Review—A limited assurance engagement involving inquiries and analytical procedures. It is less extensive than an audit and should not be described as one.
  • Compilation—No assurance. A CPA helps present financial statements based on management’s information.
  • Agreed-upon Procedures—Targeted testing of specific areas, with results reported without an overall opinion.

If your governing documents require an annual audit, substituting a review or compilation to save money can place the church out of compliance with its bylaws. Either follow the bylaws as written or amend them through the church’s required process.

Know Your Requirements

Your decision may be shaped by external requirements, including:

  • Lenders and loan covenants
  • Grant terms and reporting requirements
  • Denominational policies
  • ECFA requirements
  • Donor Trust

Why Audits Matter

A church may choose to pursue an audit even when not required because a properly conducted audit can strengthen stewardship in tangible ways:

  • It promotes an environment of accountability that reduces opportunities for misuse of funds.
  • It produces a management letter that identifies weaknesses and inefficiencies in financial procedures.
  • It strengthens credibility with donors, lenders, and other external stakeholders.
  • It protects leaders and staff who handle funds by demonstrating oversight and discipline.

An audit is not a fraud prevention system but creating and reviewing consistent system of internal control is still essential.  

The Board’s Role

The board has ultimate responsibility for financial oversight and because the auditor is an accountability function, the auditor should be accountable to the board, not to the staff whose work the auditor is evaluating.

A clean structure looks like this:

  1. The board appoints an audit committee or assigns the responsibility to an appropriate board committee.
  2. That committee leads selection and recommends a firm to the full board.
  3. The board approves the engagement and authorizes the engagement letter.
  4. Staff, including the CFO, coordinates logistics and prepares materials, but does not control the auditor relationship.

The purpose of this structure is independence. Auditors should never feel that their “client” is the staff member whose work they are auditing.

How to Hire the Right Audit Firm

Audit firms are not interchangeable, especially for churches. A structured process keeps the decision objective and protects the board from choosing based on comfort, relationships, or price alone.

Confirm Church-Specific Experience

Ask direct questions:

  • How many churches do you serve?
  • Do you serve churches with similar size, budget, and complexity?
  • Who will be on our engagement team, and what is their church experience?
  • How many CPA’s will be working on the engagement?

Churches are unique entities. Donor restrictions, designated gifts, weekend cash handling, and volunteer involvement create risks that auditors must understand in order to plan efficiently and communicate clearly.

Evaluate Planning

Strong firms reduce disruption by planning early. Ask for:

  • A written timeline
  • A prepared-by-client list (PBC list, which is what auditors may call that list)
  • A clear explanation of what will be requested and when

One hard lesson many churches learn: a painful audit is often a planning problem before it is a technical problem. When the process is staged and predictable, staff stress drops and audit quality rises.

Confirm Independence and Boundaries

Auditors must remain independent. If the church receives other services from the same firm, clarify what is allowed and what is not. A quality firm will be direct about boundaries, even when it costs them additional revenue.

One good lesson that shows up repeatedly: independence is easier to protect when responsibilities are documented. Clear roles protect the auditor, the staff, and the board.

Assess Communication to Leadership

A good audit firm can explain issues in plain language to a committee or board. Boards need clarity, not jargon. If an auditor cannot explain findings in a way non-accountants can understand, the audit will not strengthen governance.

Consider Cost

Competitive bids can help control costs, and continuity with the same firm can reduce fees over time because the firm becomes familiar with your systems. But choosing the lowest price without evaluating competence and planning discipline can increase disruption and hidden costs.

A hard lesson that many churches learn: the “cheap” audit is not cheap if it absorbs staff time, creates last-minute crises, and leaves the board unclear about what to do next.

Interview Questions that Reveal Fit

Proposals can look polished. Interviews reveal reality. These questions tend to separate strong firms from weak ones.

  1. Walk us through your audit timeline for a church like ours.
  2. What are the top three risks you commonly see in churches?
  3. How do you approach internal controls when staffing is lean?
  4. What does your PBC list look like, and how do you prevent last-minute requests?
  5. Who will do the work day-to-day, and what is their church experience?
  6. How do you handle scope changes and additional fees?
  7. Will you present findings to our committee or board if requested?

Internal Controls

An audit and internal controls are inseparable. When internal controls are weak, two things happen:

  1. The audit becomes more disruptive and often more expensive.
  2. The church becomes more vulnerable to errors and misuse of funds.

Practical examples of weaknesses include situations where a single individual can access uncounted funds alone, one person records/prints/signs checks, or where too many people have access to keys or combinations without oversight. Even when everyone is trustworthy, weak structure creates unnecessary temptation and unnecessary doubt.

Insurance, including bonding, is not a substitute for a sound system of internal control. The board should regularly review control practices, not only after a problem occurs.

A Simple Board-led Decision Path

  1. Confirm requirements by reviewing bylaws, lender covenants, grant terms, denominational policies, and any applicable regulations.
  2. Choose the engagement level based on requirements and risk.
  3. Run a structured selection process evaluating church experience, planning discipline, independence clarity, number of CPAs on the audit, and board-level communication.
  4. The board engages the auditor by approving the firm and authorizing the engagement letter through the board or a board committee.
  5. Staff executes the plan. The staff team coordinate the timeline, provide documentation, and respond to audit requests.

Conclusion and Application

If your church wants an audit that strengthens trust rather than creates stress, focus on two priorities. First, choose the right engagement level and the right firm with a structured process. Second, keep the relationship board-led so independence is protected and oversight is clear.

An audit is a tool that can reinforce accountability, strengthen internal controls, and improve how leaders interpret the financial story. When the board engages the auditor and staff supports the process, the audit becomes what it should be: a quiet reinforcement of trust that protects the mission.