HOA audit versus review
Hi Terry
My HOA has been doing a CPA review at the end of the fiscal year instead of a required audit as in our bylaws. Would you please explain to me what the difference is and how it can affect the integrity of the finances?
Terry Says
Quoting here from an online source:
An audit is the most comprehensive type of assurance service and requires the auditor to express an opinion on a Company’s financial statements prepared in accordance with Generally Accepted Accounting Practices (GAAP). Audits are typically required as a result of financing, Investor, or governmental requirements. Typically, during an audit, an independent auditor evaluates a company’s internal accounting system and its financial records. The auditor will then issue a report containing the findings of their audit.
A review is a more limited assurance service and involves the accountant performing analytical procedures on financial statements to get a general understanding of the company’s finances. An important difference between an audit and a review is that an audit provides more reasonable assurance, whereas a review does not and the accountant does not express an opinion. A review is also a potential requirement if the Company has financing.
Basically, the board is getting off cheap. BUT you should remind them that if the bylaws require an actual audit of the finances, they are individually liable for any errors, omissions, or thefts that might take place. And notify them in writing, reminding them that this letter should now be ‘on the record’ of the actual business of the community.
If they don’t switch to getting an actual audit every year as required by the bylaws of the association, you can hire an attorney.
This article points out your rights as a member of an HOA.
