By James Jordan, CPA

When it comes to church transparency, a needed practice for congregations to prioritize is a regular audit. An important first step for many ministers and churches when considering an audit is simply learning what is meant by the term as well as understanding how a proper audit is carried out.  

An audit is conducted by a Certified Public Accountant (CPA) in a public CPA firm that renders an opinion regarding the financial statements representing the financial condition of a church. There are professional ethical standards, such as independence from the church, and Generally Accepted Auditing Standards (GAAS) from the American Institute of Certified Public Accountants (AICPA) that must be followed. The auditor and the CPA firm should be current members of the AICPA to ensure adherence to these and other standards. 

An audit’s objective is to obtain a high level of assurance about whether the financial statements are free of material misstatement thereby enabling the auditor to express an opinion whether the financial statements are presented fairly, in all material respects. 

Audited financial statements provide the user with the auditor’s opinion that the financial statements are presented fairly, in all material respects, in conformity with the applicable financial reporting framework.  In an audit, the auditor is required to obtain an understanding of the entity’s internal control and assess fraud risk. The auditor also is required to corroborate the amounts and disclosures included in the financial statements by obtaining audit evidence through inquiry, physical inspection, observation, third-party confirmations, examination, analytical procedures and other procedures. 

The auditor issues a report that states the audit was conducted in accordance with GAAS and provides an opinion that the financial statements present fairly in all material respects the financial position of the company and the results of operations are in conformity with the applicable financial reporting framework. The auditor may also  issue a qualified opinion if the financial statements are not in conformity with the applicable financial reporting framework, issue a disclaimer of opinion or an adverse opinion if appropriate.

Anything less than the above is not an audit and any assurances purported otherwise should not be relied upon as such. They should be more properly referred to as a “look see” by an interested individual or individuals. Regardless of what checklist they might be using, or where they work, their well-intentioned effort should not be relied upon by a bank, insurance company, or other financial institution as the same standard of an audit without the opinion of a CPA in public practice. No reputable CPA will risk their license by not following the AICPA standards while rendering an opinion.

James Jordan is a CPA who lives in Newnan, Georgia. Jordan specializes in congregations and works with churches across the country. He also teaches church finance courses at Emory University’s Candler School of Theology. He will be a featured presenter at this summer’s CBF General Assembly in Dallas. His workshop on Tuesday afternoon, June 27, at General Assembly titled A Jack & Jill of All Trades: Reverend, Pastor, CEO: Embracing the Financial Management Side of the Pastoral Life will include a significant conversation about the role of audits in churches.