If the Associations bylaws require annual audits or if at least 5% or unit owners request an audit.
Difference between Audit, Review and Compilation
AUDIT
An audit of the organization is done in order to provide a reasonable basis for the auditor express an opinion regarding the financial statements taken as a whole. An audit includes tests of accounting records and of responses to inquiries by obtaining corroborating evidential matter through inspection, observation, or confirmation.
Key Benefits
• If the organization is required to give its financial statements to outside parties, an audit gives the reader a higher standard than simply reviewed financial statements.
• An understanding of the internal control system is obtained and a formal written reportable conditions report is given. The report specifies the weaknesses in the internal control and gives suggested corrective action to be taken.
• Banks and lending institutions look fondly on Associations that have audits.
REVIEW
A review of financial statements includes the performance of inquiry and analytical procedures that provides the accountant with a reasonable basis for expressing limited assurance that there are no material modifications that should be made to the statements for them to be in conformity with generally accepted accounting principles (GAAP).
Key Benefits
• If the organization is required to give its financial statements to outside parties, a review gives the reader a higher standard than simply compiled financial statements.
• The objective of a review is to provide the accountant a reasonable basis for expressing limited assurance that there are no material modifications that should be made to the financial statements.
• No expression of assurance is contemplated in a review.
COMPILATION
A compilation is the presentation of information in the form of financial statements and is the representation of management without undertaking to express any assurance on the statements and should be for internal use only.
Key Benefits
• Lower Cost for Service
• Financial statements presented in an understandable form and with notes attached with explanations.
