Legal

February 7, 2025 Published by South Alberta Chapter - By Sundeep Bir

How to Prepare for a Condominium Audit

From the Winter 2025 issue of the CCI South Alberta CCI Review

Condominium corporations require strong accounting to protect their financial health and ensure long-term success. A financial audit ensures the corporation maintains its budget and allocates funds appropriately. Preparing for an audit might seem overwhelming, but proactive steps can streamline the process. By preparing in advance, the audit can run smoothly and efficiently.

Does My Condominium Need an Audit?

A common question condominium corporations ask is whether a yearly audit is necessary. While rules vary across Canadian provinces, all have specific requirements. The Condominium Property Act clearly states that qualifying corporations must prepare audited statements and budgets as required by regulations, bylaws, or the Act itself.

All condominium corporations may choose to undergo an audit, and it is often recommended. While the process requires effort, it is an effective way to safeguard a condominium corporation’s financial integrity.

Preparing for a Financial Audit

An audit doesn’t have to be a complex process if approached correctly. Here are key tips to simplify your next audit:

1. Maintain Comprehensive Records Year-Round
Preparing for an audit should be treated as a yearlong effort. Auditors will require various financial records, including bank reconciliations, invoices, and more, for each month of the year. Keeping these records organized and easily accessible—either electronically or in hard copy—can significantly speed up the process.

Documents to maintain include:

• Legal correspondence
• Signed contracts
• Yearly budgets
• Reserve fund studies
• Special assessment documentation
• Board meeting minutes
• Financial schedules and reconciliations

Having this information readily available minimizes last-minute stress and ensures you can meet auditors’ requests quickly.

2. Understand What Items You'll Need
Being proactive about gathering necessary documentation can prevent delays. Many accounting firms provide a list of required items well in advance of the audit. Familiarize yourself with these requirements, as many remain consistent year to year.

Essential items often include:

• Financial statements
• Invoices and contracts
• Reserve fund reports
• Monthly and year-end reconciliations

By preparing and organizing these items throughout the year, you will ensure a more seamless audit process. Additionally, maintaining a checklist can serve as a reference for future audits.

3. Organize All Audit Information
Organized records are essential for a smooth audit. Disorganized financial data can slow down the process and frustrate both the corporation and the auditor. Use logical methods to file financial information, whether electronically or as hard copies.

For smaller condominiums, binders or labeled folders may suffice. Larger corporations often benefit from electronic filing systems, which provide easier access and scalability. Regardless of the method, ensure documents are clearly labeled and stored by categories like month, vendor, or financial topic. A wellorganized system helps auditors locate and review necessary documents efficiently.

4. Maintain Effective Communication with the Auditor
Effective communication is critical to a smooth auditing process. Delays often occur when auditors struggle to reach clients for questions or additional documentation. Auditors typically need to review various aspects of the corporation’s yearly financial transactions with the condominium board or property management.

Since virtual communication has become the norm, using platforms like Microsoft Teams or Zoom can improve efficiency. While email exchanges may suffice, teleconference meetings or phone calls are often more productive. Scheduling meetings at specific times allows the auditor to address questions or begin their review without interruptions.

What If You are Not Prepared for Your Audit?
Unforeseen circumstances, such as being a new corporation or delays with contractors, can leave you unprepared. While not ideal, this situation can be managed. Ensure all monthly financial reports, including the year-end statement, are finalized before the audit begins. Request documentation from contractors and vendors as early as possible to prevent delays.

If reserve fund expenses or financial statements are incomplete or inaccurate, communicate with your auditor immediately. Auditors can often suggest ways to expedite the process. It is also important to disclose any significant financial events or discrepancies compared to the previous fiscal year. Summarizing these events for the auditor can save time by addressing potential questions upfront.

Final Thoughts
Annual audits are predictable events that typically occur around the same time each year. Many audit teams schedule dates months in advance, giving you plenty of time to prepare. By planning, you allow auditors to allocate resources effectively while reducing stress for your corporation.

The key to a successful audit lies in year-round preparation. Effective communication, organized record-keeping, and proactive planning can streamline the process. Following these steps ensures your condominium remains financially healthy and well-prepared for its annual audit.

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Sundeep Bir, Partner, S. Bir Professional Corporation