It may have that connotation to you, but in general (at least in the US) non-profit organizations are not required to have independent audits. Typically, that requirement only happens if they receive a certain amount of government funding. An organization may choose to undergo audits in order to make people feel better about donating to it.

I really, really don't think that anybody is being fooled or misled into thinking that Anna's Archive is a "legitimate" audited organization when they describe themselves as a non-profit.

> The connotation of a non-profit is that it's being audited.

This is very geography-specific. In the US, 501(c)(3)s (what most people think of when they say "non-profit" where I am) have no general requirement for audits. There's also plenty of non-profit-by-some-definition organizations that never file a Form 1023, giving up some benefits of the 501(c)(3) regulations but in exchange being even less regulated.

The entities are regulated at the state level in the usa, with the responsibility to comply with both state and federal tax authorities.

Audits have nothing to do with it; all entities are subject to audit.

The primary difference between a non-profit and a for-profit is that a non-profit does not distribute profit to shareholders, including the founders.

Audit or threat of audit is the mechanism of enforcement and that is all that ever matters.