community associations audit process
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COMMUNITY ASSOCIATION AUDIT PROCESS
DeLeon & Stang, CPAs and Advisors
Allen P. DeLeon, CPA
Janet Gorden, CPA
LUNCH-N-LEARN
Speaker biography – Allen P. DeLeon, CPA
Partner with DeLeon & Stang, CPAs and Advisors
Over 25 years community association auditing experience
Member of the Community Association Institute (CAI)
Chair of the Maryland Association of CPAs
Speaker biography – Janet Gorden, CPA
Senior auditor with DeLeon & Stang Over five years community association
auditing experience Member of the Community Association
Institute (CAI)
Agenda
Introduction Overview of community association audit
process Engagement and audit planning Audit fieldwork Concluding the audit Audit reports Board approval and other issues
WHAT DO YOU THINK AN AUDIT IS?
List your ideas.
OVERVIEW OF COMMUNITY ASSOCIATION AUDITS
Why are audits necessary?Most by-laws require annual auditsProtects the Board of DirectorsProvides confidence on the financial
statementsAvailable to new members through re-
sale package
ENGAGEMENT AND PLANNING
Engagement letter Client prepared materials list Risk assessment and evaluation of internal
controls What is audit materiality and how is used
during the audit? Auditor Independence First year audit issues
AUDIT FIELDWORK
Gathering audit evidence. Testing account balances Analytical review Gather footnote information and support Receivable, bank and investment confirmations Record audit adjustments and document any waived
adjustments
CONCLUDING THE AUDIT
Preparation of the financial statements Balance sheet Income statement Statement of Members’ equity Cash flow statement
Draft footnote disclosures
CONCLUDING THE AUDIT(continued)
Supplementary statements Replacement reserve fund Reserve study Budget to actual reports Commitments and contingencies Related party transactions Subsequent events
AUDIT REPORTS
Auditors’ Opinion & Financial statements SAS No. 115 letter with management
comments SAS No. 114 – communication from the
auditor Representation letter
AUDIT REPORTS (continued)
Different types of audit opinionsUnqualifiedExceptionDisclaimer
ADVICE TO BOARDS
Review the draft audit report and ask questions
Pay attention to the SAS No. 115 letter for significant control deficiencies or material weaknesses
Review audit adjustments and make sure they are recorded by management company
Sign representation letter within 60 days
RECENT AUDIT TRENDS
Allowance for bad debts and delinquent assessments receivable
Going concern Borrowing from replacement reserve fund Out of date replacement reserve studies Inadequate budgeting – resulting in operating
fund losses
RECENT AUDIT TRENDS (continued)
Books kept on cash basis Filing incorrect tax returns – 1120 vs. 1120H Not recording prior year audit adjustments Lack of fidelity insurance Not recording all year end accruals Not recording insurance claims
FUTURE ACCOUNTING AND AUDITING STANDARDS
Clarity project Going concern Private company accounting standards OCBOA accounting standards Review or compliation IFRS – merging US and International
accounting standards
QUESTIONS