Is an audit required? What are the options?

As a unit owner in a unit title development (and assuming you go to the AGM!) you will be asked as to whether you believe the financial statements should be audited for the year. 

What is a Financial statement audit?

A financial statement audit is a regulated process carried out by licenced auditors where the result is an “audit opinion”. The audit opinion will advise the users of the financial statements as to the auditor’s opinion on whether the financial statements give a “true and fair view” of the financial statements. Another objective of an audit is to ensure that the reports are presented in accordance with Generally Accepted Accounting Practice (GAAP) which may include formal financial reporting standards.

The benefit of having a formal audit done is that the auditor is required to design procedures to enable them to give an opinion as to the financial information that is being presented. This can lead occasionally to procedures being done that the committee does not see any benefit in, while at the same time not looking at areas where the committee does see an internal control risk. The main function of an audit is not to detect internal control weaknesses or fraud, it is to give an opinion as to whether the accounts give a true and fair view of the financial performance and position of an entity.

The Accounting Hub is not a registered auditor and does not offer an audit service.

If you don’t want a formal audit but do want to have some checks on the accounts, what are your options?

One option is an “Agreed upon procedures” engagement which is where an accountant performs audit-like procedures but does not necessarily complete the full range of procedures required to sign an audit report.

The key difference with this approach in this case is that the committee is able to have input into the procedures that are done, for example, the committee may wish to check that the payments to suppliers match the invoices received from that supplier during the year or else that the bank accounts that payments are being made to are the supplier’s bank accounts (and not the accounts person’s!). 

In the case of an agreed upon procedures assignment, the committee will receive a report detailing the process that was followed and the results of that process.  In an audit an auditor just gives a report stating their opinion about the financial statements. An accountant providing an “Agreed Upon Procedures” engagement does not give an opinion on the results of their work, just the factual results of the procedures.

An agreed upon procedures report carried out by a Chartered Accountant (such as The Accounting Hub) is required to comply with the standard APS-1 from Chartered Accountants Australia and New Zealand.

Which should I vote for in my body corporate?

Both a financial statement audit and an “Agreed Upon Procedures” assignment have their place, and using one does not preclude using the other at a future date.

An agreed upon procedures report can be designed to give information to enable the committee to have a high level of comfort about the financial information that they are provided with and is most effective where the members of the committee have an opinion about the procedures that they see as being important to them.