The external auditor
“We will soon see that 2 plus 2 need not equal 4, if the managerial-accounting game plan calls for a lesser or greater number to come forth.
Those who prefer to ignore this possibility do so at their economic peril.”
—Abraham Briloff—Unaccountable Accounting

The external auditor’s job is to insure owners and prospective buyers that the corporation’s financials seem in order and they meet the accounting industry’s standards for condominium corporations. The auditor gives a professional opinion on the board’s financial statements subject to comments.

He also prepares the non-profit condo's corporation income tax forms and attends the AGM.

What the audit does not do
The audit is not a value-for-money audit of your condominium corporation designed to assess how well your money was spent.

If the board spent $500,000 for carpets when they could have been bought for $300,000 is not something the corporation's auditor would look for. That kind of audit is far more expensive than what the owners are paying for.

The audit is also not a forensic audit which is the application of accounting methods for the tracking and collection of forensic evidence for investigation and prosecution of criminal acts such as embezzlement or fraud

That kind of audit is undertaken only when criminal activity is strongly suspected and it is extremely expensive.

What the owners want to know: Is the board being competent and honest when they spend the corporation’s money? Unfortunately that is not a question the auditor can answer.

Looking at the past
When the owners receive their notice of an Annual General Meeting (AGM) it will include the auditor’s report and financial statements for the previous fiscal year. What the owners get is a historical report on what happened with their investments from six to eighteen months ago. (Maybe even older.)

There are a several problems with that data. First of all, it's months old and it may not accurately reflect the current financial situation.

Secondly, the board of directors and the property manager may have heavily influenced the manner in which that data is presented. In industry it is called massaging the numbers.

Finally, if there is really bad news in the statements it is often buried deep in the notes where owners don’t recognize its importance.

Incomprehensible
Let's look at what typically happens in a condo that has financial difficulties. The condo owners get the auditor’s report on the financial statements. They look through it and find that they cannot understand it as they may never before seen a corporation’s financial statements. The format is complicated and the wording is completely unfamiliar.

This is no slight on the owners. I have several years experience as a local union trustee and as the treasurer of a regional labour council. I took courses on how to perform my duties. Annually, the national union and the Canadian Labour Congress representatives audited my books.

I also have years of experience making budgets for high-technology production assembly lines and stockrooms. Yet my condo’s yearly financial reports baffled me and I needed to study them for a couple of hours before I could figure out what they meant.

I then asked a relative, who was an audit manager at one of the big international audit companies, to take a look at the auditor’s report and the financial statements. Not only did he point out a serious irregularity that I missed, he suggested that I make a formal complaint to the Standards Enforcement committee of the Charter Accountants of Ontario.
(We sold our unit instead.)

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