The professional services firm, Brabo & Carlsen, LLP, Certified Public Accountants (Auditor), have been engaged by the Association to audit the operating fund and replacement fund, including the balance sheets, together with the related statements of revenues, expenses, and changes in fund balance and cash flows for the year then ended December 31, 2016 (Financial Statements). This 2016 audit will be the third year that the Auditor has been engaged by the Association to perform an audit of the Financial Statements. We understand the Auditor conducts approximately 40 annual audits of HOA’s in the Coachella Valley.
The objective of the audit being performed by the Auditor is to express an opinion on whether the Financial Statements are fairly presented, in all material respects, in conformity with U.S. generally accepted accounting principles. The Auditor is to conduct their audit in accordance with auditing standards generally accepted in the United States of America and will include tests of accounting records maintained by the three management companies hired by the Association, as well as other procedures that the Auditor considers necessary to enable them to express an opinion on the Financial Statements.
The procedures to be performed by the Auditor will include tests of documentary evidence supporting the transactions recorded in the general ledger accounts maintained by the three management companies and direct confirmation of certain assets and liabilities by written correspondence with selected owners, creditors and financial institutions. The procedures will not determine whether the funds designated for future major repairs and replacements are adequate to meet such future costs. Such determination is outside the scope of the audit engagement. The Auditor will also request written representations from attorneys engaged by the Association as well written representations from the President and Treasurer of the Board about the Financial Statements and related matters.
An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the Financial Statements. Therefore, the audit to be conducted will involve judgment about the number of transactions to be examined and the areas to be tested. An audit also includes evaluating the appropriateness of accounting policies used by the Association and the reasonableness of the significant accounting estimates made by the management companies that are responsible for the preparation of the accounting records and the unaudited Financial Statements. The Auditor will also evaluate the overall presentation of the Financial Statements.
The Auditor is required to plan and perform the audit to obtain reasonable assurance about whether the Financial Statements are free of material misstatement, whether from (1) errors, (2) fraudulent financial reporting, (3) misappropriation of assets, or (4) violations of laws or governmental regulations that are attributable to the Association or to acts by management or employees acting on behalf of the Association.
Because of the inherent limitations of an audit, combined with inherent limitations of internal control, and because the Auditor will not perform a detailed examination of all transactions, there is a risk that material misstatements may exist and not be detected by the Auditor, even though the audit was properly planned and performed in accordance U.S. generally accepted auditing standards. In addition, an audit is not designed to detect immaterial misstatements, or violations of laws or governmental regulations that do not have a direct and material effect on the Financial Statements. The Auditor will inform the Board of any matters that come to their attention.
The Auditor, in conducting the audit, will obtain an understanding of the Association and its environment, including internal controls implemented by the Association as well as the three management companies hired by the Association in 2016. The Auditor will obtain an understanding sufficient to assess the risks of material misstatement of the Financial Statements and to design the nature, timing and extent of audit procedures to be completed. An audit is not designed to provide assurance on internal controls or to identify deficiencies in internal controls. However, during the audit, the Auditor will communicate with the Board and those charged with governance of internal controls, matters that are required to be communicated under professional standards.
The 2016 Audit
The Auditor has prepared and delivered their written request for reports, schedules and documents from the three management companies.
Tyler Ingle, the Controller for the Association, will have the lead to coordinate providing all items requested to the Auditor.
The audit is expected to commence in late February or early March.
A draft of the audited financial statements will be reviewed by the Controller, FAC and the Board prior to issuance.
The audited Financial Statements together with the report of the Auditor is expected to be issued by April 15, 2017.
BY BILL WETHE
CHAIRMAN, FINANCE ADVISORY COMMITTEE