Annual Audits: Cut Through the Challenges and Embrace the Start!

Hi Everyone!

The annual audit process does not need to be as time-consuming and challenging as some have experienced.  How can an audit be completed in less time and with fewer interruptions?  The start is really important.   Start early and provide documentation requested to enable the CPA to start the audit as early as possible.

Engagement Letter

• The engagement letter is the contract between the Board of Directors for the Association and the Certified Public Accountant (Auditor).
• Sign the engagement letter early and return to the auditor.
• Try to obtain Board approval of the CPA’s engagement letter three to six months before year end.

Pre-Year End Documents and Reports

Provide documentation and account transactions supporting information to the auditor before year end if possible.  Examples of things to provide early:

• Governing documents
• Prior year audit and tax returns (if this year’s CPA is new)
• Latest reserve study (the auditor’s report includes data from the latest reserve study)
• Board meeting minutes
• Special assessments:   If you have a special assessment, the CPA will need to audit the accounting for the special assessment and disclose certain information in the footnotes to the audited financial statements.  Notice to homeowners, board meeting documentation, expenditures to date.  If there is a loan, provide loan agreement(s).
• Settlements:   If the association received settlement monies, provide the CPA with the settlement agreement, bank deposit information.
• Insurance Claims:   Provide claim documents the association sent to the insurance carrier and/or the carriers acceptance correspondence.  If you have received funds from the insurance carrier, provide the CPA with copies of deposits and correspondence.  For expenses incurred, provide access to paid vendor invoices and any other contracts.  Provide status of the claim:  is it complete, is it ongoing, incomplete.
• Litigation:  For associations with ongoing or completed litigation, the auditor will need to know the status, if the association has received, paid or might receive or pay funds from/to a party. For settled litigation, provide a copy of the legal settlement agreements.   For incomplete litigation, the CPA will need to know if an accrual for contingent liabilities should be presented in the audited financial statement.  Complete and timely provision of documentation will help the auditor to understand the situation and to address appropriately.

Clean Records!!!

• Clean, reconciled, complete records maintained by you will greatly enhance the likelihood of a high quality and efficient audit process for all concerned.

By:  Jeremy Newman CPA.  Newman Certified Public Accountant PC.  www.HOACPA.com   We provide audit and tax services to associations throughout Washington.