Q&A: Conducting an Audit

My condo board recently voted to approve an audit for the association, but I found out our own CPA—who has handled our finances for five years—will be conducting the audit. Is that a sound decision? Are there any legal issues with conflict of interest? What's the best way for the board to handle an audit, in reference to whom they hire?

—Conflicted in Chicago

“The answer to the question depends on what the CPA has been doing to help the association handle its finances over the last five years,” says Attorney Gabriella Comstock of the law firm of Keough & Moody, P.C. in Naperville.

“If the CPA is responsible for completing the association's every day or monthly financial obligations, then I would recommend that a different firm complete the audit. However, if the association or its management company is the one completing the everyday or monthly financial obligations of the association and the CPA over the last five years reviews the work of these persons to ensure all is in order, then I do not believe a different firm needs to be retained.

“The purpose of an audit is to allow someone separate from the control of the corporation to review the records to ensure accuracy and that all is being done properly. An audit adds credibility to the financial status of the association; hence, it is best if it is completed by an accountant who is not involved in the everyday bookkeeping of the association. I also recommend that the association retain a CPA who is familiar with community associations and how they work. While they are not for -profit corporations, they also differ from the traditional not for profit corporation. A CPA who is well-versed in association living is able to make recommendations to a community association that would benefit that corporation.”    

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