Differences in Financial Statements Between Non-Profit Organizations and For-Profit Entities

Please prepare a response to the following post:
discuss whether you saw the same differences in your report (attached). Were there any other differences your classmates did not mention that you felt were relevant or significant?
For this week’s discussion, I chose the charity Houston Society for the Prevention of Cruelty to Animals (“HSPCA”). This is an animal shelter located in my area that I donate to and have adopted several pets from over the years. I found the audited financial statements located on their website and noticed the first difference. Where for-profit companies are audited every year, I noted that the last audited financial statements for the HSPCA were for the year ending December 31, 2020. The presentation of the financial statements closely resembles that of for-profit companies. The report starts with the Audit Opinion and ends with the notes section as does a report for a for-profit company. The actual Audit Opinion is very similar mentioning the opinion, the basis for the opinion being US GAAP, the responsibilities of management and the auditors’ responsibilities.
The two biggest differences I found between not-for-profit and for-profit audit reports were the financial statements included in the report and the format of the financial statements. The only common statement is the Statement of Cash Flows. Instead of a balance sheet and statement of net income, the HSPCA report included a statement of financial position, statement of activities and statement of functional expenses. In addition, these statements are separated differently to reflect the needs of the users of the report, reflecting restricted funds versus non-restricted funds and the activities that the not-for-profit conducts.
So overall, the audit opinion and report are very similar to those of a for-profit company. The differences between the not-for-profit report and the for-profit report highlight the items necessary for the users of the audit report, the committed funds and the activities of the charity.
Houston Society for the Prevention of Cruelty to Animals. (2023). Consolidated Financial Statements. Retrieved from
https://houstonspca(dot)org/wp-content/uploads/2021/10/Houston-SPCA-Financial-Audit-2020.pdf