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Annual Audit Process Efficiencies
Audit Process Efficiencies:
Engagement Letter – Sign Early
Obtain board approval of the CPA’s engagement letter three to six months before year-end and transmit to the CPA.
Scope Changes – Early Communication
Let your auditor know as early as possible if there has been a change in the scope of the audit. Scope changes include management/accounting transitions, new special assessments, new loans, new litigation.
Documentation Flow – Ensure All Of Your Documentation Is In Place
You should have documents to support every transaction, and every balance sheet account. Ensure documents and reports are provided to the auditor as completely and as early in the process as possible. Gather, save, and share documents related to significant transactions.
Irregular Transactions – Have Supporting Documents Ready
The auditor will need supporting documents for non-regular transactions such as laundry rent/commission agreements, cell tower leases, other rental income leases, insurance claims – reimbursements and expenses, special assessments, loans.
Investments – Obtain A Transaction History Report
If your association has investments in treasuries, mutual funds, stocks, bonds, municipal bonds, the auditor will need to determine market value and cost, together with realized and unrealized gains and losses. Ensure you obtain a transaction history report for the whole year from the investment advisor or brokerage. For income tax purposes, it is vital to present accurate gain or loss amounts. Often, brokerages provide annual tax reports which should be provided to the auditor and tax return preparer.
Changes in Management – Ensure All Documents & Reports Are Transitioned
Obtaining all accounting report, transaction documents, agreements, contracts, governing documents and many other documents from prior management is vital to successfully completing an audit; let alone completing an audit efficiently. We recommend a checklist is used to ensure all association reports and documents are transitioned.
Responses to Auditor Inquiries – Complete In Timely Fashion
Complete and timely responses to auditor inquiries can ensure the audit is completed efficiently and with less email exchange.
What are Typical Causes for Incomplete Audits?
Missing bank or investment statements, incomplete insurance claim documentation, incomplete prior management records, incomplete responses, poor tracking of special assessment activity.
Concluding the Audit
Upon provision of the draft audit report, auditors also provide boards and management with a representation letter. The representation letter is from the board and management to the auditor. Auditors cannot release final audit reports if the representation letter has not been signed and returned to the auditor.
By Newman CPA
Chapter Happenings Sponsor, February 2021
By: Jeremy Newman CPA. Newman Certified Public Accountant PC.
The Good News:
We can walk you through every step of the audit process. Our goal is to make the audit experience as easy as possible for you. Audits do not need to be challenging. Communication and complete documentation are vital.
Visit us online: www.hoacpa.com