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The Independent Audit for Nonprofits: Does it Make a Difference?

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Abstract

Prior for-profit literature provides evidence that an independent audit of the financial reports is associated with a corporation’s improved investment efficiency and financial performance. In contrast, this study investigates the relationship between independent audits and financial performance in nonprofit organizations. Relying on prior studies, nonprofits that seek an independent audit are expected to have better oversight and higher financial reporting quality, and that improved oversight and reporting quality are associated with less fraud and higher quality decision makings. This study finds that that NPOs that seek independent audits enjoy better financial performance than NPOs that do not seek independent audits.

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Authors and Affiliations

  1. Francis Marion University, 4822 E Palmetto St, 29506, Florence, SC, USA

    Scott Dell

  2. University of Wisconsin -Whitewater, 800 W Main St, 53190, Whitewater, WI, USA

    Meena Subedi & Maxwell K. Hsu

  3. Florida Atlantic University, 777 Glades Road, 33431, Boca Raton, FL, USA

    Ali Farazmand

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  1. Scott Dell
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  2. Meena Subedi
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  4. Ali Farazmand
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Correspondence to Meena Subedi.

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Dell, S., Subedi, M., Hsu, M.K. et al. The Independent Audit for Nonprofits: Does it Make a Difference?. Public Organiz Rev 23, 1437–1453 (2023). https://doi.org/10.1007/s11115-022-00662-5

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