auditor-internal

Every condominium corporation has an accounting or, if it is small, a bookkeeping service handling their finances. In most condos, this task is assumed by the property management's accounting department, which is known as the "back room".

The management company is required to have an internal auditor who is responsible to check for and prevent fraud and theft by insuring adequate controls are in place. This auditor should be in regular contact with the corporation's manager and treasurer.

Yet the only place I saw mention of the internal auditor is in an external auditor's Representative Letter where he or she asks for assurances, in writing, that the required controls are in place and in an auditor's terms of engagement.

Terms of engagement
One external auditor listed the internal auditor's duties in his seven-page-long terms of engagement letter that he requested that the condo corporation's president sign.

Among the Management's Responsibilities listed in the letter was the heading:

Completeness of information

c)	Providing me with information relating to any illegal or possibly illegal acts, and all facts related thereto;

And then there is:

Fraud and error

a)	The design and implementation of internal control to prevent and detect fraud and error;
b)	An assessment of the risk that the financial statements may be materially misstated as a result of fraud;
c)	providing me with information relating to fraud or suspected fraud affecting the entity involving: i) Management, ii) Employees who have significant roles in internal control; or iii) Others, where the fraud could have a non-trivial effect on the financial statements.
d)	Providing me with information relating to any allegations of fraud or suspected fraud affecting the entity's financial statements communicated by employees, former employees, analysts, regulators or others;
e)	Communicating its belief that the effects of any uncorrected financial statement misstatements aggregated during the audit are immaterial, both individually and in the aggregate, to the financial statements taken as a whole;

So the management company has a person—or a department—that is responsible to monitor for signs of fraud and investigate allegations of fraud. They are also required to tip off the external auditor when any acts or suspicions of fraud are uncovered.

Interestingly, they are not required to tip off the victims—the owners.

Suggestion
It may be very wise for a condo corporation to separate the accounting part of the management job from the internal audit portion and to contract out the inside auditor function to an independent third party.

If the twelve or so condos Manzoor Khan managed did this, he would never had gotten out of the country with his huge bags of stolen loot.

Question your treasurer
A prudent owner should ask the corporation's treasurer, who is one of the board members, about the duties and findings of the internal auditor for the previous and current years.

I'd bet that your inquiries would be met with a stunned look and a shit-face grin as your treasurer will have no clue what you are talking about.