Financial statements 
“The jury could reasonably have wondered how accountants who were really seeking to tell the truth could have constructed a footnote so well designed to conceal the shocking facts.”
—Judge H. J. Friendly
United States Court of Appeals for the Second Circuit

In business corporations, there are the internal accountants and the external accountants. They have different functions.

Internal accountants
The internal accountants track receivables and expenditures and provide management with weekly, monthly, quarterly and annual reports so management can monitor the actuals compared to the budget and make timely corrections to insure that the corporation's divisions meet or exceed their financial targets.



The monthly financial reports are like an aircraft's dashboard's instruments, they tell management and the directors how well the corporation is performing.

External accountants
They are the independent accountants who examine the internal accounting records to insure that the figures are accurate and that there are invoices and receipts that match the cheques that were issued.

They report to the board of directors, the security regulators and to the stockholders.

Condo corporations
In condo corporations, the management back office and the treasurer assume the role of the internal accountants.

They prepare the monthly financial statements for the board who should review the statements prior to the board's meetings so they can take any corrective action required to insure the corporation meets budget.

Perhaps a minor increase in monthly fees or a small special assessment is needed to get the corporation back on track. Perhaps, a couple of minor purchases can be pushed out into the new year.

The board should not wait until the end of the fiscal year to realize that the corporation has financial difficulties.

Year-end financial statements
The owners must realize that the management company's back room and the board are responsible for the financial statements.

They determine how much detail is reported in the statements and how much they will hide. How much information is hidden depends on the character of the people involved and how badly they need to hide the true numbers.

Keep in mind that it is the board that approves the amount of detail that the financial statements reveals, or hides, and signs off on the financial statements before the owners see them.

The external auditor
The auditor has an important, if limited role to play in all of this.

The auditor compares the cheques to the receipts and insures that they match. To some degree that is all that he, or she, does.

The auditor, to a surprising degree, relies on the board to monitor the activities of the management's accounting department (back office) and for the board to look after the best interests of the unit owners.

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