Homeowners associations use CPAs to conduct audits of the HOA's
financial statements. Audit procedures have changed dramatically as a
result of many highly publicized accounting scandals in the past few
years. Although the types of fraud seen in those well-known cases
typically do not occur in HOAs, the changes in audit procedures apply to
all businesses, large and small.
The biggest changes result from the American Institute of Certified
Public Accountants' (AICPA) Statement on Auditing Standards No. 99. SAS
99 became effective on December 15, 2002. Its purpose is to improve
audit quality and the ability of auditors to respond
effectively to the potential for fraud. SAS 99 covers such new topics as:
Characteristics of fraud
Exercising professional skepticis
Assessing and responding to fraud
Examining journal entries for fraud
Evaluating significant unusual transactions
Communicating fraud to the client
The effect of SAS 99 is that the auditor will perform procedures to
determine unusual relationships between accounts and increase inquiries
of management. The auditor will also assess the risks associated with
management override of internal controls and journal entries. The
auditor will inquire of the board of directors, bookkeepers, property
managers, and others to determine if any has knowledge of fraud or
suspected fraud. The auditor will also examine programs and controls in
place at the HOA or the management company to prevent, detect, and deter
fraud. At the conclusion of the audit, the Board, manager and bookkeeper
will be asked to sign a letter of representations which vouches for the
correctness of the financial statements.
HOAs are corporate entities which should maintain professional and
honest books. SAS 99 will help auditors ferret out those that have ill
motives.
----------------------------------------------------------------------
Written by Richard Thompson
posted by Las Vegas # 12:39 PM 
