Condo Media - January 2018 - 55

Helpful Advice CPAs
AUDITS, REVIEWS,
AND COMPILATIONS
The difference between audits, reviews, and compilations is among the
most misunderstood issues regarding
community association financials.
This topic is best addressed by beginning with some definitions.
A compilation consists of the preparation of financial statements from
financial information provided by the
client. A review takes the compilation
an important step forward by adding
inquiries of management and analytical procedures to the procedures
involved in a compilation. An audit
introduces an additional level of financial statement scrutiny by including
the verification of certain items with
outside parties and the testing of selected transactions by examining supporting documents. An audit provides
the highest level of assurance that the
financial statements fairly present the
client's financial position and results
of operation in accordance with generally accepted accounting principles.

supplied to the CPA during the course
of performing the audit or review,
to the best of the client's knowledge. It is important to understand that "to the best of
ones' knowledge" is a very
different standard than an
absolute guarantee. The
points outlined in a standard representation letter
do not alter or add to any
of the basic responsibilities that come with being a
board member.
WHEN TO
CONSULT THE CPA
The topic of community association annual tax return filings is
beyond the scope of this article, but
remember that community associations (other than certain commercial
condominiums, timeshare associations, and cooperatives) have the right
to choose annually between two tax
returns, Form 1120 or Form 1120-H.
A well-informed decision requires a

The best resources to help identify appropriate candidates
are industry publications like Condo Media and other CAI
resources, community association managers, and lawyers
that specialize in community association law.
THE REPRESENTATION LETTER
At the conclusion of an audit or review, the CPA will present to the client
a draft of the financial statements and
a representation letter. A representation letter is a required document and
standards of the American Institute of
Certified Public Accountants (AICPA)
require a CPA to obtain a signed representation from the client before the
financial statements can be released in
final form. The representation letter
formally tells the CPA that, to the best
of the client's knowledge, no material
facts have been withheld from the
CPA and that no misrepresentations
are contained in any of the documents

great deal of knowledge. There is no
such thing as "one size fits all" advice
on this topic, and it is prudent to be
skeptical of any advice that suggests
which return to file without an understanding of the unique attributes of
your association.
One of the frustrations experienced
by all professionals is learning about
a client issue after it has happened,
rather than being consulted in advance. While community associations
generally do not have a great deal of
complicated transactions requiring
consultation with the association's
CPA or lawyer, the better managed associations tend to see their CPAs and

attorneys as part of the advisory team
and seek advice when appropriate. In
the vast majority of cases, proactive
planning is less costly than reactive
clean-ups of messes.
Among the issues that your CPA
should be consulted in before they
happen, rather than after the fact, include a change in types of investments,
financial and tax implications of nonroutine legal issues such as litigation,
the acquisition of and/or disposition
of units, entering into leases such as
for the installation of cellular antennas and laundry contracts, deciding
on fidelity insurance limits, the pros
and cons of special assessments versus
bank loans to finance major construction projects, choosing management
companies, etc.
Each member of a community association's team (manager, lawyer,
accountant, engineer, insurance agent,
vendors) has knowledge that can benefit the association.
■ KENNETH A. BLOOM, CPA,
IS A PARTNER IN THE ACCOUNTING
FIRM OF BLOOM COHEN
HAYES LLC.

January 2018

55



Table of Contents for the Digital Edition of Condo Media - January 2018

Table of Contents
Condo Media - January 2018 - Intro
Condo Media - January 2018 - Cover1
Condo Media - January 2018 - Cover2
Condo Media - January 2018 - Table of Contents
Condo Media - January 2018 - 2
Condo Media - January 2018 - 3
Condo Media - January 2018 - 4
Condo Media - January 2018 - 5
Condo Media - January 2018 - 6
Condo Media - January 2018 - 7
Condo Media - January 2018 - 8
Condo Media - January 2018 - 9
Condo Media - January 2018 - 10
Condo Media - January 2018 - 11
Condo Media - January 2018 - 12
Condo Media - January 2018 - 13
Condo Media - January 2018 - 14
Condo Media - January 2018 - 15
Condo Media - January 2018 - 16
Condo Media - January 2018 - 17
Condo Media - January 2018 - 18
Condo Media - January 2018 - 19
Condo Media - January 2018 - 20
Condo Media - January 2018 - 21
Condo Media - January 2018 - 22
Condo Media - January 2018 - 23
Condo Media - January 2018 - 24
Condo Media - January 2018 - 25
Condo Media - January 2018 - 26
Condo Media - January 2018 - 27
Condo Media - January 2018 - 28
Condo Media - January 2018 - 29
Condo Media - January 2018 - 30
Condo Media - January 2018 - 31
Condo Media - January 2018 - 32
Condo Media - January 2018 - 33
Condo Media - January 2018 - 34
Condo Media - January 2018 - 35
Condo Media - January 2018 - 36
Condo Media - January 2018 - 37
Condo Media - January 2018 - 38
Condo Media - January 2018 - 39
Condo Media - January 2018 - 40
Condo Media - January 2018 - 41
Condo Media - January 2018 - 42
Condo Media - January 2018 - 43
Condo Media - January 2018 - 44
Condo Media - January 2018 - 45
Condo Media - January 2018 - 46
Condo Media - January 2018 - 47
Condo Media - January 2018 - 48
Condo Media - January 2018 - 49
Condo Media - January 2018 - 50
Condo Media - January 2018 - 51
Condo Media - January 2018 - 52
Condo Media - January 2018 - 53
Condo Media - January 2018 - 54
Condo Media - January 2018 - 55
Condo Media - January 2018 - 56
Condo Media - January 2018 - 57
Condo Media - January 2018 - 58
Condo Media - January 2018 - 59
Condo Media - January 2018 - 60
Condo Media - January 2018 - 61
Condo Media - January 2018 - 62
Condo Media - January 2018 - 63
Condo Media - January 2018 - 64
Condo Media - January 2018 - Cover3
Condo Media - January 2018 - Cover4
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