Audits are expensive. They are the highest level of assurance; therefore, require the most work. The fee quoted will depend on several factors:
• How many different sources of funding does the organization have?
1. Multiple grants
2. Program revenue
3. Fundraising activities
• How complicated is the balance sheet?
1. Number of mortgages or loans
2. Multiple capital leases
3. Split interest agreements
4. Retirement plans
5. Number of fixed assets to be tracked and depreciated
• Other Factors:
1. Is the organization an affiliate or are there subsidiary’s
2. Do grant covenants require special audit procedures
3. Does the organization meet the Uniform Guidance requirements
4. Did the organization have timely audits the previous two years and were there any findings
The auditor is required to gain an understanding of the organizations internal control structure and perform risk
assessments before the substantive testing of the audit even begins. There may also be a compliance portion to the audit required by uniform guidance or grant covenants
If the organization has not adequately followed generally accepted accounting principles or other comprehensive basis of accounting the audit fee could be substantially over the original fee quote. Most auditors will discuss the new fee before any work increasing the fee is commenced.
So why would you pay a firm $5,000 or even $10,000 more than the lowest bid response? Like everything, you get what you pay for. A lower quality audit can end up costing you in the long run. I had a client several years ago change auditors based on fee. The successor auditor did not adequately test the grants. The grantor contacted me as the predecessor auditor as well as the current auditor. The grantor found the terms of the grant was not properly followed in the years succeeding my audit years. The executive staff at the nonprofit were all fired and the organization had to pay back millions in grant funds risking their on-going ability to operate.
If all you want is the report at the end of the audit. Go with the lowest bid. If you want a quality audit and assurance you are compliant with your grants and the law, perform a thorough assessment of the audit firm and base your decision first on capabilities and reputation.
Contact us to discuss your audit or attestation needs.