What to look for in an audit?

Audit Report

• Unqualified opinion
  • • Financial statements are fairly presented
      • Balance sheet (financial position) at the year end
      • Results of operations and cash flows for the period
• Differences between internal financials and audit report
  • • • Account grouping
      • Adjusting journal entries
      • Understand and be able to explain

Financial Statements 

• Presented in fund format (columns)
• Balance Sheet
  • Financial position at a year end
• Statement of revenues and expenses and changes in fund balances
  • Results of operations for the year
  • Revenues
  • Expenses
  • Excess or deficit for the year
  • Beginning fund balance
  • Interfund transfers
  • Ending fund balance
• Statement of cash flows
  • Reconcile operating excess/deficit to cash balances
  • Cash provided by/used in operating, investing, financing
    • Operating
      • Changes in assets and liabilities
    • Investing
      • Purchase/sales of investments (CDs)
    • Financing
      • Fixed assets
      • Interfund borrowings/due to and from funds
      • Interfund transfers
      • Loans

Footnotes

• Disclosures to provide the reader with more information about the numbers presented in the financial statements
  • Association organization
    • Type of entity
    • Date formed/incorporated
    • Number of type of units
    • Location
  • Accounting policies
    • Basis of accounting
    • Fund accounting
    • Fixed assets/depreciation
    • Cash and cash equivalents
    • Investments
    • Subsequent events
  • Assessments and assessments receivable
    • Owner assessments
    • Excess income retention
    • Remedies for delinquencies
  • Future major repairs and replacements
    • Separation of funds
    • Reserve study performed
    • Fully funded deficit options
  • Income taxes
    • Tax return type
    • Income that is taxed
  • Special assessments
    • Nature, timing, amounts
  • Litigation
    • Significant litigation
    • Defects
    • Claims against the association
  • Settlements (fund)
    • Funds received from defect claims
    • Accounting of for the fund. Separate bank account.
  • Other funds
  • Loans
    • Terms of the loan: interest rate, number of years, maturity date, principal repayment schedule
  • Related party
    • Significant transactions with board members, home owners