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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