Are your financial records as they should be?
The Owners Corporations Act requires prescribed owners corporations (see glossary for more information) undertake an annual audit. Non-prescribed owners corporations may undertake an annual audit.
Appointing an auditor
While not a legislative requirement, we recommend that a third-party, independent, qualified auditor be engaged to audit the records. We advise readers to be wary of any owners corporation manager wishing to undertake the audit themselves. It should be noted, however, that the owners corporation manager should appoint the auditor themselves, for insurance purposes.
Auditors in the marketplace have a range of experience and prices. A simple audit of a small owners corporation, or say around 10 lots, should only take a few hours and cost around $1,000.
Larger owners corporations require much more thorough inspections and many more hours work, and so we would expect to pay between $2500 and $5000 for the audit. An owners corporation with an annual turnover of over $150,000 that spends only $2000 on the annual audit may contain irregularities that are not discovered because not enough hours were spent looking at the financial records.
Audit certificates should be tabled at each and every AGM for a prescribed owners corporation.
The Owners Corporation Directory also believes that audit certificates, once received, should be tabled at the AGM. We do not think it appropriate that members be asked to vote on whether the financial statements are a true and accurate record, when there is no accompanying audit certificate to state as such.
Occasionally an auditor will find errors with the financial records and issue a qualified audit certificate. The owners corporation should in this circumstance investigate the reasons for this and seek to rectify any problems.
In the event that the accounting records are correct, and the error lies with the financial statements not representing an accurate summary of the accounting records, the auditor may look to rectify the statements themselves and subsequently issue a non-qualified audit certificate, usually for an additional fee.
Melb OC has no affiliation with any auditors.