Condo Audits Explained: What Canadian Condo Owners Need to Know

As a condo owner in Canada, you contribute to the financial health of your building. A financial audit, or more specifically, an audit of financial statements, ensures that your condo corporation's finances are transparent and accurate. It's an independent review by a qualified accountant to determine if the financial statements are relevant, accurate, complete, and fairly presented.

These audits are conducted by professional accounting firms, who possess the expertise to assess financial reporting. This provides you with an independent opinion on the financial information shared by your condo corporation.

Why Your Canadian Condo Needs an Audit and the Auditor's Role

In many Canadian provinces, including Ontario, the Condominium Act mandates audits. This is to protect your investment and ensure that your condo fees are managed responsibly. The auditor is appointed to represent you, the unit owners, and to provide an unbiased assessment of the condo's financial operations. They present an "audit report" along with the financial statements at the Annual General Meeting (AGM).

The auditor's key responsibilities include:

1. Ensuring financial statements adhere to Canadian Generally Accepted Accounting Principles (GAAP).
2. Conducting procedures according to Canadian Generally Accepted Auditing Standards (GAAS) to support the audit report.

GAAP sets the standards for financial reporting in Canada. This includes principles like accrual accounting, recording assets at cost, and disclosing significant matters like lawsuits and reserve fund adequacy.

GAAS outlines the procedures the auditor must follow. This involves assessing internal controls, verifying account balances, and ensuring all financial transactions are properly recorded. This includes verifying bank balances, testing accounts receivable and payable, checking common element fees, and confirming that expenditures are properly documented and benefit the corporation.

Crucially, the auditor typically attends the AGM to review the financial statements and answer your questions. This is vital, as many condo treasurers may not have professional accounting backgrounds. The auditor's role is to explain complex financial information in a clear and understandable way.

What an Auditor Cannot Tell You

It's important to understand the auditor's limitations. They can't provide detailed explanations for every specific expenditure.

Example:

You might ask, "Why did we spend $8,000 on flooring for the guest suites? Is that reasonable?"

While this is a valid question, the auditor can only confirm that the money was spent on that project. They do not approve or decide how the condo corporation spends its funds.