Who hires the auditor?
The first auditing firm is hired by the management company and the
board of directors that was put in place by the developer.
Then, at the turnover AGM, the auditor gives his report and then the
Chair asks for a motion for the owners to vote to re-appoint the
auditing
firm and to authorize the board to set the firm's remuneration.
The motion is raised, seconded and the motion passed.
The accounting firm then becomes the condo corporation's auditor until
the next AGM where the owners either re-appoints the auditor for
another year or votes to hire a different auditing company.
Sounds pretty straight forward.
All of this happens so fast, the owners don't realize that it is the
board who is actually hiring the auditing company and it is the board
who decides how much to pay for its services.
That is not what the Act had in mind.
It is clear that the Act believes that the condo corporation will have
an AGM every year. This is not always the case. A small number of boards, once they
gain control of the corporation, will go years without holding an AGM
so the auditing firm
continues auditing the financial statements without a fresh mandate to
do so from
the owners.
(One corporation that is in terrible financial shape waited
five years before holding its second AGM. A few others that I know of,
hold AGMs every
two or three years.)
The owners don't see the financial reports annually so they can't see
how the condo is doing compared to the yearly budgets or get to
question the
auditor on the corporation's financial health.
Remuneration
The Act states that the owners set the audit firm's remuneration, not
the board. Therefore the board, or a committee (either nominated or elected by the
owners) should put the contract out for tender, examine three
proposals, perhaps
even
have the three firms make presentations to the owners and only then,
the
owners can make an informed decision.
However, if the owners do not demand their rights, the board will be
pleased to make these decisions for them.
Appointment of auditor added to proxy forms
I am starting to see a few management companies adding a section to the
AGM proxies asking the owners, who will not be attending the meeting,
to approve the re-appointment of the auditor for another year and for
the board to approve the auditor's remuneration.
I am extremely disappointed to see this as the absentee owners will
have no idea of what questions the auditor will be asked nor will they
be able to determine how well the auditor responds to those questions.
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