1. COMMUNITY ASSOCIATION
AUDIT PROCESS
DeLeon & Stang, CPAs and
Advisors
Allen P. DeLeon, CPA
Janet Gorden, CPA
allen@deleonandstang.com
LUNCH-N-LEARN

2. Speaker biography – Allen P. DeLeon, CPA
 Partner with DeLeon & Stang, CPAs and
Advisors
 Over 25 years community association
auditing experience
 Member of the Community Association
Institute (CAI)
 Chair of the Maryland Association of CPAs

3. Speaker biography – Janet Gorden, CPA
 Senior auditor with DeLeon & Stang
 Over five years community association
auditing experience
 Member of the Community Association
Institute (CAI)

4. Agenda
 Introduction
 Overview of community association audit
process
 Engagement and audit planning
 Audit fieldwork
 Concluding the audit
 Audit reports
 Board approval and other issues

5. WHAT DO YOU THINK AN AUDIT IS?
 List your ideas.

6. OVERVIEW OF COMMUNITY
ASSOCIATION AUDITS
 Why are audits necessary?
Most by-laws require annual audits
Protects the Board of Directors
Provides confidence on the financial
statements
Available to new members through re-
sale package

7. ENGAGEMENT AND PLANNING
 Engagement letter
 Client prepared materials list
 Risk assessment and evaluation of internal
controls
 What is audit materiality and how is used
during the audit?
 Auditor Independence
 First year audit issues

8. AUDIT FIELDWORK
 Gathering audit evidence.
 Testing account balances
 Analytical review
 Gather footnote information and support
 Receivable, bank and investment confirmations
 Record audit adjustments and document any waived
adjustments

9. CONCLUDING THE AUDIT
 Preparation of the financial statements
 Balance sheet
 Income statement
 Statement of Members’ equity
 Cash flow statement
 Draft footnote disclosures

10. CONCLUDING THE AUDIT(continued)
 Supplementary statements
 Replacement reserve fund
 Reserve study
 Budget to actual reports
 Commitments and contingencies
 Related party transactions
 Subsequent events

11. AUDIT REPORTS
 Auditors’ Opinion & Financial statements
 SAS No. 115 letter with management
comments
 SAS No. 114 – communication from the
auditor
 Representation letter

12. AUDIT REPORTS (continued)
 Different types of audit opinions
 Unqualified
 Exception
 Disclaimer

13. ADVICE TO BOARDS
 Review the draft audit report and ask
questions
 Pay attention to the SAS No. 115 letter for
significant control deficiencies or material
weaknesses
 Review audit adjustments and make sure
they are recorded by management company
 Sign representation letter within 60 days

14. RECENT AUDIT TRENDS
 Allowance for bad debts and delinquent
assessments receivable
 Going concern
 Borrowing from replacement reserve fund
 Out of date replacement reserve studies
 Inadequate budgeting – resulting in operating
fund losses

15. RECENT AUDIT TRENDS (continued)
 Books kept on cash basis
 Filing incorrect tax returns – 1120 vs. 1120H
 Not recording prior year audit adjustments
 Lack of fidelity insurance
 Not recording all year end accruals
 Not recording insurance claims

16. FUTURE ACCOUNTING AND AUDITING
STANDARDS
 Clarity project
 Going concern
 Private company accounting standards
 OCBOA accounting standards
 Review or compliation
 IFRS – merging US and International
accounting standards

17. QUESTIONS