How to Prepare for Your Year End Audit or How to Make Your Auditor Happy

The year is over and it is time to think about new year’s resolutions, preparing to file federal and state tax returns and organizing your records for your year end audit.

Which is worse, filing your annual tax return or preparing to meet with your auditor? Your annual audit is something you should look forward to as oppose to dreading like the plague. The annual audit should provide you information about the year and help you plan for the future. It should be a cooperative effort between the Board of Directors, where applicable, the management company, and the auditor. The annual audit will be a more pleasant experience if you prepare and organize the information in advance of the auditor appearing at your office.

This article is intended to provide you with a comprehensive check list of the type of records your auditor will need to have on hand in order to complete the audit. Not all associations will maintain all these records but the data included therein should be available in some format.

Financial Records

  • Financial statements including a balance sheet and income statement
  • Cumulative general ledger
  • Paid invoices
  • Checking account bank statements along with the monthly bank reconciliation and canceled checks
  • Investments statements and notices from the bank regarding interest and rollovers
  • Form 1099-INT
  • Accounts receivable subsidiary ledger
  • Schedules for all balance sheet accounts
  • Budget (current year and subsequent year)
  • Reserve schedule
  • Developer billings (where applicable)
  • Prior year audit trial balance and adjustments
  • Prior year management letter
  • Paid invoices for at least three months subsequent to year end

Management Records

  • Board of Directors minutes
  • Insurance policies
  • Contracts (i.e. management, landscaping, trash, pool, etc.)
  • Board resolutions
  • Governing documents
  • Prior year audit
  • Prior year tax returns

Before the auditor commences work, you should plan on discussing any unusual transactions that happened during the course of the year or subsequent to year end that may relate to the year under audit. We would also suggest having an exit conference with your auditor in order to discuss material adjustments and management letter comments.

You should use the annual audit as a tool to help you to understand the past, improve procedures and processes, and plan for the future.