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June 18, 2006
Audit or Not? That is the Question
Some HOAs are required to have a "review" done each financial year. Some documents require an audit. This is the legal standard in California:
"(b) A review of the financial statement of the association shall be prepared in accordance with generally accepted accounting principles by a licensee of the California State Board of Accountancy for any fiscal year in which the gross income of the association exceeds $75,000 and the review shall be distributed to the members within 120 days after the close of the fiscal year."
Here are some qiestions commonly asked about audits (a review is a lower standard than an audit):
Question: If I as a Board member or the Board as a whole would like to have an audit done instead of the standard year end financial review, how would we actually go about this?
Answer: The Board is usually authorized to approve having an audit instead of a review. One board member could not make that decision on their own. The decision would be made through a approval of a motion or approval of a resolution. If there was a provision in the governing documents that getting an audit done would require approval of the members, then the Board could not make the decision on its own.
Question: Do we simply ask the Manager to request the CPA to expand the review to an audit?
Answer: A Board could do that by authorizing the manager to authorize the CPA to do the auidit.
Question: Do we ask the CPA ourselves and not go through the Manager?
Answer: A Board could make the arrangements without involving the manager or authorize one Board Member to engage the services.
Question: Do we hire someone outside of the loop?
Answer: The CPA engaged should not have a financial connection to the Board or manager. The CPA ethical codes in California require the CPA that does the review or audit to be independent of the Board and management.
Question: Should I as a signatory Board member simply contact the financial institutions and verify balances myself? (I was an internal auditor prior to retiring and am comfortable with this approach. And still hold an inactive Certified Internal Auditor Certificate.
Answer: The CPA will guide the process and tell you what he or she needs and what items she or she will independently verify.
Posted by Beth Grimm at June 18, 2006 9:24 PM