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India’s IT landscape has experienced a dramatic shift over recent decades, moving away from traditional, paper-dependent bookkeeping methods to a vibrant, tech-powered ecosystem. Today, organizations depend on — ranging from enterprise resource planning (ERP) tools to cloud platforms — not only to boost efficiency but also to safeguard compliance, security, and data accuracy of financial reporting. This change entails additional responsibility since keeping thorough records helps to prove financial integrity and responsibility. An audit trail acts as the "black box" of an organization—a kind of financial journal that captures every activity. It records who did what, when, and how within the financial system. This creates a straightforward way to verify the accuracy and accountability of financial records. Think of it as holding a backstage pass that lets you peek behind the curtain—offering complete visibility into every transaction for transparency, tracking access to sensitive data to bolster security, and capturing system changes to ensure compliance. With their growing importance, audit trails are now a legal must-have in India, following regulatory mandates that came into effect on April 1, 2023. The push for audit trail comes straight from the Companies (Accounts) Rules, 2014, where Rule 3(1) says any organization using accounting software—whether it's ERP systems or even web portals—must have a permanent audit trail that can't be turned off. It’s got to automatically track every change, stamp it with a timestamp, and keep those records on hand for audits. Meanwhile, auditors, under Rule 11(g) of the Companies (Audit and Auditors) Rules, 2014, must double-check that this feature was running all year, and wasn't tampered with. This rule isn't just for large organizations—it applies to every Indian organization. Whether it's nonprofits under Section 8 or foreign entities, it covers everything from standalone to consolidated financial statements.

Point of View | 7-9 Min Read The Securities and Exchange Board of India has fundamentally changed how listed entities document and disclose related party transactions. Through the Industry Standards Forum, comprising ASSOCHAM, CII, and FICCI, in consultation with SEBI, the regulator introduced Industry Standards on "Minimum Information to be Provided for Review by the Audit Committee and Shareholders for Approval of Related Party Transactions." The framework applies to all listed entities in India and is designed to standardize reporting and disclosure requirements, elevating governance, transparency, and oversight of related party transactions across the board. For internal auditors, this is not a disclosure formality to note in passing. It reshapes what evidence must exist before a related party transaction can be approved, and internal audit functions are directly responsible for verifying that evidence is complete and accurate. From April 2025 to September 2025: How the Effective Date Actually Landed SEBI's RPT Industry Standards had a longer runway to implementation than originally announced. The standards were first set to apply to related party transactions entered into on or after April 1, 2025. Following stakeholder feedback requesting more preparation time, SEBI deferred the effective date, first to July 1, 2025, and then, through a revised circular issued June 26, 2025, to a final effective date of September 1, 2025. That September 1, 2025 date is when the standards actually took hold, and it is the date internal auditors and audit committees should treat as the operative compliance baseline. SEBI followed this in October 2025 with a further amendment. A circular dated October 13, 2025 introduced threshold-based relaxation in the minimum information listed entities must furnish, easing the compliance burden for transactions below specific value thresholds while keeping the core disclosure framework intact for larger and more material transactions. Identifying and Classifying Related Party Transactions The framework's starting requirement is accurate identification of all related parties as defined under Regulation 2(1)(zb) of SEBI's LODR Regulations, 2015. From there, transactions must be classified based on materiality into three categories: Material RPTs, which exceed the prescribed value or turnover thresholds Transactions involving promoters or promoter groups that exceed prescribed thresholds Residual RPTs that fall outside the above categories This classification is not a paperwork exercise. It determines the level of scrutiny, documentation, and approval a transaction requires, and misclassification at this stage undermines everything that follows in the approval process. What Internal Auditors Must Verify Internal auditors carry direct responsibility for confirming that adequate documentation exists for every related party transaction placed before the Audit Committee. The minimum information requirements include: Basic details of the related party The relationship and ownership structure connecting the related party to the listed entity The related party's financial performance Details of previous transactions with that related party The value of the proposed transaction Basic details of the proposed transaction itself For specific transaction types, additional documentation is required. This includes proposed transactions involving the sale, purchase, or supply of goods or services, or similar business transactions; loans, inter-corporate deposits, or advances given by the listed entity or its subsidiary; investments made by the listed entity or its subsidiary; and guarantees (excluding performance guarantees), sureties, indemnities, or comfort letters given by the listed entity or its subsidiary. The Internal Auditor's Practical Role Under the Framework Internal audit's role under these standards extends beyond a single compliance check. In practice, it involves: Pre-approval verification: confirming that the minimum information package for a proposed RPT is complete before it reaches the Audit Committee, not after Materiality classification review: independently testing whether transactions have been correctly classified as material, promoter-related, or residual, since misclassification changes the entire approval pathway Documentation completeness testing: sampling RPT files to confirm all required fields, financial performance data, prior transaction history, and transaction-specific disclosures are present and traceable Threshold monitoring: tracking cumulative related party transaction values across a financial year, since transactions that appear immaterial individually can cross materiality thresholds when aggregated Post-October 2025 threshold application: confirming that the relaxed minimum information requirements are being applied correctly only to transactions that genuinely qualify under the October 2025 threshold-based relaxation, rather than applied broadly by default Why This Matters Beyond Compliance Standardized RPT disclosure exists because related party transactions carry inherent conflict-of-interest risk, and inconsistent documentation historically made it difficult for Audit Committees and shareholders to evaluate whether a transaction genuinely served the listed entity's interests. Internal auditors who treat this framework as a genuine governance safeguard, rather than a box-ticking exercise, give Audit Committees the confidence to approve transactions on solid evidentiary ground and give shareholders a clearer basis for trusting that approval process. Frequently Asked Questions When did SEBI's RPT Industry Standards actually take effect? The standards were originally proposed for April 1, 2025, but were deferred twice and took final effect on September 1, 2025, following a revised circular issued June 26, 2025. What are the three categories of related party transactions under the framework? Transactions are classified as material RPTs exceeding prescribed thresholds, transactions involving promoters or promoter groups exceeding prescribed thresholds, or residual RPTs that fall outside both categories. What is the internal auditor's specific responsibility under the RPT standards? Internal auditors must verify that adequate documentation exists for each related party transaction, including related party details, relationship and ownership information, financial performance, prior transaction history, and transaction-specific disclosures, before the transaction reaches the Audit Committee. What changed in October 2025 regarding RPT disclosure requirements? SEBI issued a circular on October 13, 2025 introducing threshold-based relaxation, easing the minimum information requirements for related party transactions below specific value thresholds while keeping full disclosure requirements for larger and material transactions. Which regulation defines a related party under this framework? Related parties are identified under Regulation 2(1)(zb) of SEBI's LODR Regulations, 2015. Who does the RPT Industry Standards framework apply to? The framework applies to all listed entities in India that are required to comply with Regulation 23 of the LODR Regulations, covering approval of related party transactions by the Audit Committee and, where material, by shareholders. Talk to Our Team Strengthening internal audit procedures around related party transaction documentation and materiality classification? Pierag's Business Risk Advisory practice helps internal audit functions build verification processes that hold up to SEBI's current RPT Industry Standards. Talk to our team about your RPT compliance readiness. Related reading: Audit Trail: Ensuring Financial Integrity and Accountability | Standard Setters' Updates, H2 2025 Edition

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Point of View | 8-10 Min Read Nonprofit organizations play a vital role in creating impact, but ensuring financial transparency and regulatory compliance remains a genuine, ongoing challenge. Nonprofits must navigate a layered set of financial and regulatory requirements to demonstrate transparency, accountability, and operational efficiency to funders, donors, and regulators alike, and the rules governing that oversight have shifted meaningfully over the past two years. This guide covers the audit types nonprofits most commonly encounter, the federal compliance landscape as it actually stands in 2026, and how organizations can build the readiness to handle both. Financial Statement Audits: The Foundation of Nonprofit Assurance A financial statement audit examines whether an organization's financial statements are fairly presented in accordance with GAAP, along with the strength of the internal controls supporting that reporting. For nonprofits specifically, this means attention to fund accounting, net asset classification, and the accuracy of how restricted and unrestricted funds are tracked and reported, areas that differ meaningfully from for-profit financial reporting. A clean financial statement audit does more than satisfy a compliance requirement. It signals to donors, board members, and funders that the organization's financial reporting can be trusted, which directly affects an organization's ability to secure future grants and major gifts. Uniform Guidance Audits (Single Audits): What Changed and Why It Matters Now For federally funded nonprofits, the Single Audit is the most consequential compliance requirement to understand, and the rules governing it changed significantly in 2024 and continue evolving through 2026. The threshold increased. As of October 1, 2024, the federal Single Audit threshold rose from $750,000 to $1,000,000 in federal awards expended during a fiscal year, the first increase since 2003 and the most significant revision to the Uniform Guidance (2 CFR Part 200) since it was originally issued in 2013. Organizations spending less than $1 million in federal funds annually are no longer required to undergo a Single Audit, though they must still follow all underlying Uniform Guidance requirements, including procurement standards, subrecipient monitoring, and allowable cost principles. Dual compliance is a real, practical issue. Because the new threshold applies only to federal awards issued on or after October 1, 2024, organizations holding a mix of older and newer awards must track which threshold applies to which award. A nonprofit combining an older $750,000-threshold award with a newer $1 million-threshold award could still trigger a Single Audit even while spending less than $1 million in total federal funds, depending on how the awards are structured. This dual-compliance environment is expected to persist through at least 2026 for organizations with multi-year grants that straddle the effective date. The de minimis indirect cost rate increased too. Organizations without a federally negotiated indirect cost rate can now recover 15 percent of modified total direct costs as indirect expenses, up from 10 percent, a change that meaningfully improves cost recovery for smaller and less experienced federal award recipients. Further changes are already in motion. OMB published a proposed overhaul of the Uniform Guidance on May 29, 2026, with a comment period running through July 13, 2026, and a final rule expected around October 1, 2026. The proposal does not change the indirect cost rate or the Single Audit threshold itself, but it would expand federal agencies' authority to terminate awards and add new review and conditions requirements before awards are issued. Nonprofits relying on federal funding should treat this as an active development to monitor, not a settled rule, until the final version is published. Grant Compliance Audits: Best Practices Beyond the Single Audit Threshold Even organizations below the federal Single Audit threshold routinely face grant-specific compliance audits driven by individual funder requirements. Best practices for grant compliance include maintaining accurate financial reporting tied directly to each grant's budget and terms, documenting internal controls over how grant funds are allocated and spent, and ensuring regulatory adherence to program-specific requirements that may exceed general Uniform Guidance standards. Common areas that generate audit findings include time-and-effort reporting that does not meet 2 CFR Part 200 requirements, procurement procedures that bypass competitive bidding thresholds, unallowable costs charged to federal programs, and late or incomplete financial reports to funding agencies. Organizations that build these controls into routine financial operations, rather than reconstructing documentation at audit time, consistently experience fewer findings and faster audit turnaround. The Changing Landscape: Federal Funding and Tax Updates Nonprofits Need to Track in 2026 Beyond the Uniform Guidance changes already discussed, several other 2026 developments affect nonprofit compliance and funding strategy directly. Charitable giving tax changes took effect. Beginning in 2026, taxpayers who do not itemize deductions may deduct certain cash gifts to qualified charities up to IRS limits, a change that could broaden small-dollar donor participation. At the same time, taxpayers who do itemize can now only deduct charitable contributions to the extent those contributions exceed 0.5 percent of adjusted gross income, meaning some larger, itemizing donors may see reduced tax benefit from smaller gifts. Development teams should factor both changes into donor messaging and campaign planning. Executive compensation and endowment excise taxes expanded. The excise tax on compensation exceeding $1 million paid to a nonprofit's five highest-paid employees, retroactive to 2017 under existing law, continues to apply, and colleges with large endowments now face a graduated excise tax schedule on endowment investment income that can reach as high as 14 percent, up from a previous flat 1.4 percent rate. Proposed grant-condition changes remain unresolved. OMB's May 2026 proposed overhaul, alongside separate proposals affecting how federal agencies review and condition grant awards, has drawn concern from nonprofit advocacy groups regarding potential disruption to federally funded community programs. Organizations should treat these as proposals in active comment periods, not finalized policy, and plan primarily around what is currently in force. Future Readiness: Adapting to Shifting Funding and Compliance Demands Nonprofits that are best positioned for what comes next in this landscape share a few common practices: they track federal awards by issue date to correctly apply Uniform Guidance thresholds, they maintain audit-ready documentation year-round rather than reconstructing it during audit season, and they monitor active regulatory proposals like OMB's 2026 Uniform Guidance overhaul closely enough to adjust before a final rule takes effect rather than after. Technology adoption, particularly for grant tracking, cost allocation, and subrecipient monitoring, is increasingly what separates organizations that handle these shifting requirements smoothly from those that scramble each audit cycle. Frequently Asked Questions What is the current federal Single Audit threshold for nonprofits? As of October 1, 2024, the federal Single Audit threshold is $1,000,000 in federal awards expended during a fiscal year, up from the previous $750,000 threshold. Do all nonprofits need a Single Audit? No. Only nonprofits that expend $1,000,000 or more in federal awards during their fiscal year are required to undergo a Single Audit. Organizations below that threshold must still follow Uniform Guidance requirements but are not required to commission the formal audit. What is the de minimis indirect cost rate for nonprofits in 2026? Organizations without a federally negotiated indirect cost rate can recover 15 percent of modified total direct costs as indirect expenses, increased from the previous 10 percent rate. What changes are proposed for the Uniform Guidance in 2026? OMB proposed a further overhaul of the Uniform Guidance on May 29, 2026, with comments accepted through July 13, 2026 and a final rule expected around October 1, 2026. The proposal does not change the Single Audit threshold or indirect cost rate but would expand agencies' authority over award termination and conditions. How does the 2026 charitable giving deduction change affect nonprofits? Non-itemizing taxpayers can now deduct certain cash gifts up to IRS limits, potentially broadening small-dollar donor participation, while itemizing donors can only deduct contributions exceeding 0.5 percent of their adjusted gross income, which may reduce the tax benefit of smaller gifts for some donors. What's the difference between a financial statement audit and a Single Audit? A financial statement audit examines whether an organization's financial statements are fairly presented under GAAP. A Single Audit goes further, testing compliance with the specific requirements attached to each federal program the organization received funding from, in addition to the financial statement audit itself. Get the Full Point of View This overview covers the key aspects of nonprofit audits and the regulatory landscape as it stands in 2026. The complete point of view includes deeper guidance on preparing for each audit type and practical recommendations for building long-term compliance readiness. Navigating the Single Audit threshold, dual-compliance award tracking, or upcoming Uniform Guidance changes? Pierag's  Assurance practice helps nonprofits build audit readiness for the current federal compliance landscape. Talk to our team about your nonprofit audit needs. Related reading: Review Engagements vs Audits: A 2026 Guide | Audit Trail: Ensuring Financial Integrity and Accountability