Question

First, search the internet for the official website of a nonprofit organization that interests you (The American National Red Cross). When you review this website, locate the 2018 or 2019 financial statements. Use the financial statements you locate to answer the following questions:

• How does the audit opinion given to this nonprofit entity by its independent auditors differ from the audit opinion rendered on the financial statements for a for-profit business?
• What are some significant differences you see between the report you just reviewed and a for-profit statement?

Answer 1

The basic aspect, which bifurcates business organisation is the purpose of their operation, i.e. not all organisations work for the profit motive; rather there are some entities whose aim is to serve the society first. This way, there are two major types of organisation, which are profit organisation and non-profit organisation

PROFIT ORGANIZATION NON PROFIT ORGANIZATION

Financial Statement

Income statement, Balance Sheet and Cash flow statement

Receipt & Payment A/c, Income & Expenditure A/c and Balance Sheet.

The audit opinion given to this nonprofit entity by its independent auditors differ from the audit opinion rendered on the financial statements for a for-profit business by following:

1. Preparation and presentation of financial statements

2.Disclosure requirements.

3. Applicability of financial reporting framework.

The audit report for "The American National Red Cross" included a statement of the scope of the audit and the audit agency's opinion.

WHich includes except for the effects of certain unrestricted donations being included as endowment funds and certain campaign contributions for support of the following year being reported as income in the fiscal year in which they were received or receivable

Auditors opinion whether management has complied and prepared its financial statements based on generally accepted accounting principles

These principles were applied on a basis consistent with the preceding year except for an accounting change with which the audit agency concurs.

Auditor also expresses an opinion regarding cost effectivenss of entity in spending money and true and fair view of its accountability and disclosure regarding any grants received from goverment and conditions thereby attached to the post receipt of grant.

Significant differences in profit statement are:

A nonprofit entity issues a somewhat different set of financial statements than the statements issued by a for-profit entity. The financial statements issued by a nonprofit are as follows:

• Statement of financial position. This is similar to the balance sheet of a for-profit entity, except that a net assets section takes the place of the equity section that a for-profit entity uses. The net assets section breaks out unrestricted net assets, temporarily restricted net assets, and permanently restricted net assets.
• Statement of activities. This statement quantifies the revenues and expenses of a nonprofit for a reporting period. These revenues and expenses are broken down into the unrestricted, temporarily restricted, and permanently restricted classifications that were referred to earlier for the statement of financial position.
• Statement of cash flows. This statement contains information about the flows of cash into and out of a nonprofit; in particular, it shows the extent of those nonprofit activities that generate and use cash.
• Statement of functional expenses. This statement shows how expenses are incurred for each functional area of the business. Functional areas typically include management and administration, fund raising, and programs.