COMMUNITY ASSOCIATION AUDIT PROCESS

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COMMUNITY ASSOCIATION AUDIT PROCESS
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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

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Speaker biography Janet Gorden, CPA

• Senior auditor with DeLeon Stang
• Over five years community association auditing
  experience
• Member of the Community Association Institute
  (CAI)

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Agenda

• Introduction
• Overview of community association audit process
• Engagement and audit planning
• Audit fieldwork
• Concluding the audit
• Audit reports
• Board approval and other issues

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WHAT DO YOU THINK AN AUDIT IS?

• List your ideas.

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OVERVIEW OF COMMUNITY ASSOCIATION AUDITS

• Why are audits necessary?
• Most by-laws require annual audits
• Protects the Board of Directors
• Provides confidence on the financial statements
• Available to new members through re-sale package

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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

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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

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CONCLUDING THE AUDIT

• Preparation of the financial statements
• Balance sheet
• Income statement
• Statement of Members equity
• Cash flow statement
• Draft footnote disclosures

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CONCLUDING THE AUDIT(continued)

• Supplementary statements
• Replacement reserve fund
• Reserve study
• Budget to actual reports
• Commitments and contingencies
• Related party transactions
• Subsequent events

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AUDIT REPORTS

• Auditors Opinion Financial statements
• SAS No. 115 letter with management comments
• SAS No. 114 communication from the auditor
• Representation letter

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AUDIT REPORTS (continued)

• Different types of audit opinions
• Unqualified
• Exception
• Disclaimer

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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

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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

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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

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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

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QUESTIONS