When Is an Audit Required or Recommended? - Nevada

When Is an Audit Required or Recommended? - Nevada

Nevada State Law - Requirements

Chapter 116- Common-Interest Ownership Act (Uniform Act)
NRS 116.31144

  1. Except as otherwise provided in subsection 2, the executive board shall:
    1. If the annual budget of the association is $45,000 or more but less than $75,000, cause the financial statement of the association to be reviewed by an independent certified public accountant during the year immediately preceding the year in which a study of the reserves of the association is to be conducted pursuant to NRS 116.31152.
    2. If the annual budget of the association is $75,000 or more but less than $150,000, cause the financial statement of the association to be reviewed by an independent certified public accountant every fiscal year.
    3. If the annual budget of the association is $150,000 or more, cause the financial statement of the association to be audited by an independent certified public accountant every fiscal year.
  2. Except as otherwise provided in this subsection, for any fiscal year, the executive board of an association shall cause the financial statement for that fiscal year to be audited by an independent certified public accountant if, within 180 days before the end of the fiscal year, 15 percent of the total number of voting members of the association submit a written request for such an audit. The provisions of this subsection do not apply to an association described in paragraph (c) of subsection 1.
  3. The Commission shall adopt regulations prescribing the requirements for the auditing or reviewing of financial statements of an association pursuant to this section. Such regulations must include, without limitation:
    1. The qualifications necessary for a person to audit or review financial statements of an association; and
    2. The standards and format to be followed in auditing or reviewing financial statements of an association.

NRS 116.015
“Commission” defined.  “Commission” means the Commission for Common-Interest Communities and Condominium Hotels created by NRS 116.600.

Recommendations:

Our firm has identified ten circumstances where we strongly suggest that a CPA Review or Audit be performed. They are as follows:

  1. When large amounts of money are received for unusual circumstances. Two examples are construction defect settlements or large insurance proceeds.
  2. When there is unusual replacement fund/reserve activity. This may be when there are large reserve projects, when the Association is severely underfunded, or if the Association is not meeting budgeted expectations.
  3. When there is a change in management companies. (This is not an absolute, but it seems to be a good time to ensure that the transition between the management companies results in the correct balances being carried over and properly set up on the new books.)
  4. When there is little or no internal control. An example of this would be when the Association is self-managed, and the treasurer writes the checks, signs the checks and prepares the bank reconciliations.
  5. When the board has not been receiving financial statements on at least a quarterly basis. This is especially true when there is no standard accounting system in place.
  6. When there is suspected fraud or embezzlement. (Please tell your CPA of your suspicions before the engagement begins! Possibly, the CPA will refer you to a Forensic Accountant rather than the standard GAAP/GAAS audit.)
  7. When there is a lot of political infighting among the board members or there is a transition from one board to another which is not pleasant, such as the case of a recall.
  8. When the developer turns over control of the Association to the homeowners. (Even when not required by the state law.)
  9. When the Association is having financial difficulties. It may seem strange that the Association should spend more money when it is losing money. But, it may be that the Association needs a professional to spend some extra time on the books to ensure that everything is being properly recorded. When an Association is in financial trouble is when they need help the most.
  10. Associations with over $500,000 in annual assessments.