The auditor’s report
"When the
reader is supposed to be intelligent enough to see through your deception of the reader, you have the wrong idea of what reader
intelligence is about."
—Andrew Sullivan
After reading the auditor’s report that is included in
the AGM package, some of the owners go to the
AGM where the
auditor stands up and makes a fifteen-minute oral report using the same
wording he used in his report.
Right from the start, the owners are
lost; they do not understand much of what he is saying. Then the
auditor, fulfilling his obligations under the Act, asks if
there are any questions. Usually there are very few; it can’t be
otherwise. (By the way most directors cannot read the financial statements.)
Even if the owners can sense that there is something wrong
with the condo’s finances they do not know how to properly express
those doubts and even if they could, the auditor may not be able to
answer them.
The
standard report
The standard unqualified report consists of at least three paragraphs. The first
paragraph clarifies the responsibilities of management and the
auditors, and is referred to as the introductory paragraph. The second
paragraph describes the nature of the audit and is called the scope
paragraph. The final paragraph is the opinion paragraph, which is a
concise statement of the auditor's opinion based on the audit. The
auditors' report is addressed to the owners and potential buyers of the
condo corporation.
The Introductory Paragraph
The introductory paragraph emphasizes that the board of
directors is
primarily responsible for the financial statements and that the
auditors are just rendering an opinion on the financial statements.
The Scope Paragraph
The scope paragraph describes the nature of the audit,
that it was
conducted in accordance with GAAP and provides reasonable assurance
that the financial statements are free of material misstatement.
The Opinion Paragraph
In the opinion paragraph, the auditors are expressing
their opinion
that the numbers present the financial position of the corporation as
it existed on the last day of the fiscal year.
Explanatory Language
Certain circumstances require auditors to add explanatory
language to
the standard report. Adding the additional language is not regarded as
a qualification because it does not lessen the auditor’s reporting
responsibility for the financial statements.
Additional paragraphs may say that the condominium corporation did not
collect all the condo fees that it is owed and therefore the reserve
fund is underfunded. A paragraph may state that the corporation has not
conducted an initial reserve fund study within the first year of
registration or that the reserve fund study needs to be updated.
Another paragraph may say that the corporation transferred monies from
the reserve fund to the operating fund to pay for shortages. There may
be a note saying the developer has not paid the corporation its first
year’s deficit as required by the Act. There could be a note saying
that a company controlled by one of the directors has been awarded
contracts to perform work for the corporation.
All additional paragraphs need to be read very carefully and the
auditor questioned on them at the AGM.
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