Date published: 01/03/2022

What to ask the professional accountant: a compilation engagement, a review engagement, an audit or nothing?

In theory, your co-ownership doesn't necessarily need a Chartered Professional Accountant to present its financial information, whether it's financial statements, financial forecasts or financing applications. Competent administrators or a manager could do the work and present the required financial information well.

However, the need may arise if the co-owners have doubts about the work, skills or honesty of the board members. The internal reports submitted to the co-owners may also be absent or deficient.

Declaration of co-ownership

However, the declaration of co-ownership may contain a clause that requires the board of directors to have the financial statements of the syndicate of co-ownership audited by a chartered professional accountant.

Three types of financial reporting engagements

The professional accountant primarily performs three types of engagement related to financial reporting. It can either perform a compilation engagement, a review engagement or an audit.

The Compilation engagment (Notice to reader) consist in collecting the financial data from the condo and assembling them in financial statements, tables and / or Annex in an understandable manner. These financial statements do not have to comply with the accounting and auditing standards generally accepted for non-profit organizations. The professional accountant should, however, notify the reader of the limits of his report. The financial statement is accompanied by a notice stating this fact to the reader and each page of the financial statement clearly indicates that the data are "unaudited see notice to reader".

The Review engagement provides a higher level of assurance of the financial information than the compilation engagement. The professional accountant has to be independent, has to know the accounting standards applicable to condominiums and be aware of the particularities of the condo for which he accomplish the engagement. To be able to issue a review engagement report, the professional accountant proceeds mainly with information gathering and analysis. He also meets as needed with the leaders of the condominium, the manager and people responsible for bookkeeping. The accountant issues a report with an opinion of negative form stating that it found no irregularities that might suggest that the financial statements are incorrect. Each page of the financial statements will clearly indicate "unaudited".

The  Audit engagment provide the highest degree of assurance of the financial information. This is the financial statement that best meets the requirements of readers. In addition to ensuring that the financial statements fairly represent the financial situation of the condo, the auditor also ensures that internal controls put in place by the syndicate are useful and respected. For this engagement, the auditor applies mainly the same procedures as the review engagement, but must he obtain conclusive evidence and supporting documents.

Getting your financial statements certified, whether it is a review engagement or an audit, partially decreases the administrators’ responsibilities. Part of the responsibility lies with the professional accountant who has a professional liability insurance. Nevertheless, it is necessary that all facts and documentation are made available to the professional accountant.

To make an informed decision on the type of mission that suits your condo, you must consider the following factors:

  • The transparency and skills of the directors and the manager in place
  • The access to information and management reports presented
  • The speed of transmission of information
  • The financial capacity of the co-ownership

Transparency must be at the heart of the directors’ priorities. They work for all owners and administer the property of others. Reports should be understandable, complete and concise. Depending on the competence and involvement of the directors and the manager, it may be desirable to use an external expert.

Information must be accessible to owners in terms of sharing the financial information, but also in terms of communication of the data. It is not only about giving a bunch of information, it is also about ensuring that it is well communicated and understandable.

Another very important quality of financial reporting is that it must be submitted quickly to make the right decision. In some cases, the information is quickly outdated. Sometimes it is better to give administrators less accurate information than wait and that the information become outdated.

The level of credibility of professional accountants’ financial statements is proportional to the cost of the engagement. A compilation engagement is much less expensive than a review engagement, and a review engagement is cheaper than an audit.

Good reflection.

Aline Desormeaux, CPA auditrice, CA

Désormeaux Patenaude inc
1312 Sherbrooke est
Montréal, Québec H2L 1M2
Téléphone : 514 522-2232 EXT. 207
adesormeaux@dpcpa.ca

Chronic express the personal opinions of the author and in no way engage the responsibility of the site editor, CondoLegal.com Inc. The content and opinions expressed in a column are those of the author.

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