Condominium corporations require exceptional bookkeeping to protect their financial health and ensure long-term success. A financial review helps ensure that the corporation properly maintains its budget and appropriately allocates funds. While preparing for an audit can seem overwhelming, there are steps you can take to streamline the process. Preparing in advance not only makes the audit run smoother, but it also helps ensure the auditor has everything needed to perform their job quickly and effectively.
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Does My Condominium Need an Audit?
One of the most frequent questions condominium corporations ask is whether they need to perform a yearly audit. While every Canadian province has different rules, all have specific requirements regarding condominium audits. In Alberta, all condominiums must submit yearly financial statements, but only those with twenty-five units or more are required to undergo an audit. The Condominium Property Act provides a framework for all residential and commercial condominium owners and managers, clearly stating that all qualifying corporations must "prepare or arrange for the preparation of audited statements and any budgets required under the Regulation, the Act, and these bylaws."
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It is important to note that even condominium corporations with fewer than twenty-five units can undergo an audit, and it is often strongly recommended. Although the process can be somewhat tedious, it is the best way to protect the financial integrity of a condominium corporation.
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Preparing for A Financial Audit
The auditing process does not have to be overwhelming or complicated if approached correctly. Let us explore some tips to simplify your next condominium audit.
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Maintain Effective Communication with the Auditor
One of the best ways to streamline the auditing process is to maintain effective communication with your auditor. Delays often occur when an auditor has difficulty reaching a client for questions or additional documentation. Your auditor will need to discuss numerous aspects of the corporation's yearly financial transactions with the condominium’s board or property management company.
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Since the pandemic, virtual communication has become the norm, with many turning to email instead of face-to-face meetings. While it can be faster, email can become frustrating, especially with a lot of back-and-forth exchanges. To increase efficiency, it is best to have property managers and board members available for teleconference meetings on platforms like Microsoft Teams or Zoom, or even phone calls. This way, you can schedule meetings for specific times to begin the audit review or address any questions the auditor may have.
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Maintain Comprehensive Records All Year Long
Preparing for a financial audit can seem like a monumental task if left until the last minute, which is why it is best to treat it as a year-long endeavor. The information required by the auditor is not limited to expenses; they will need to review records from multiple financial accounts throughout the year. They will examine items such as bank reconciliations, invoices, and other financial records for each month of the year.
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Since you already know the auditor will request these documents, keeping all information in an electronic file or as hard copies makes it easier to provide them as soon as requested. Additional records to keep on hand include legal correspondence, signed contracts, yearly budgets, special assessment documentation, reserve fund studies, email approvals or disapprovals, board minutes, finance reports, account reconciliations, and any financial schedules that occur throughout the year.
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Organize All Audit Information
Meticulously organizing and maintaining your financial data is essential when preparing for an audit. If your records are not organized, you are creating a difficult scenario for your auditor. The easier a contract or invoice is to locate, the faster and more efficient the audit will be. File all financial information neatly and logically. Many corporations use binders, filenames, and folders to easily identify condominium information. For those who prefer hard copies, storing documents in binders or folders labeled by month or vendor is an excellent option.
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The method of storage depends on the size of your corporation. While hard copies may work well for smaller condominiums, they may not be practical for larger ones. Electronic filing is becoming increasingly popular, as it provides easy access to all information. Even when storing documents online, it is still essential to organize all files properly. Use a similar method to physical filing by creating online folders for specific topics. Be sure to name them accurately so the auditor can quickly identify and review the information.
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Understand What Items You'll Need for the Auditing Process
One of the best ways to prepare for your audit is by knowing what items the auditor will need. Many professional accounting firms specializing in condominium audits will provide a comprehensive list of required items well in advance. This gives you time to gather the information and organize it so the auditor can review it without difficulty.
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Since many of the required items remain the same each year, you will have the tools and information ready for the following year's audit. Taking a proactive approach, such as building your files, organizing financial statements, and ensuring all parties are available to speak with the auditor when needed, will provide peace of mind and ensure you are adequately prepared.
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What to Do if You're Not Prepared for Your Audit
Sometimes, you may not be prepared for your yearly audit, whether due to being a new condominium company or unforeseen circumstances. Although not ideal, this situation can occur. Typically, you will need all monthly financial reports, including the year-end month, finalized before starting the audit. Delayed information from project contractors or regular vendors can slow the process, so it is important to request all information as far in advance as possible.
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Giving vendors ample notice allows them time to send all documentation, preventing delays. You may also experience setbacks if your reserve fund and regular expenses are not recorded by your year-end date or if your financial statements are inaccurate. Taking a proactive stance and communicating with your auditor is crucial, as they can often suggest ways to speed up the process. It is also important to disclose any significant financial events that occurred during the audited year and differ from the previous fiscal year. Providing a summary that outlines anticipated questions regarding these discrepancies before the audit begins can help expedite the process.
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Final Thoughts
Your audit will most likely occur at the same time every year, so it should not come as a surprise. Many auditing teams will set the date months in advance, giving you ample time to gather the necessary information. Planning your condominium audit ahead of time allows the auditor to schedule their staff's availability and helps you prepare all documentation. Implementing the steps outlined above will help you prepare for your yearly audit and ensure the process runs smoothly. By planning and organizing throughout the year, you can reduce stress and protect the financial health of your condominium corporation.
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S. Bir Professional Corporation is a CPA firm specializing in condominium audits within the Calgary and Edmonton Metropolitan regions. We simplify the audit, accounting, and financial process of condominium corporations and property management companies. We strive to make the lives of board members and property managers easier by providing exceptional service you can trust. Discover why our professional team is considered Alberta's foremost accounting firm with the highest level of quality and value.
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Email us at quote@sbir.ca for a condominium audit quote today!
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