Thinking about your co-op or condo as a financial entity doesn't produce the same warm feeling as thinking
about it as a home; but the fact remains that it is a financial entity in which you and your fellow shareholders or unit owners have invested. Audits, reviews and compilations are three types of financial reports prepared by an accountant. Each provides a different level of information about a property's financial condition, and all three can play an important role in conscientious financial oversight. Keeping up with how your investment is doing money-wise lets you know where you stand today so that you can plan appropriately for the future.
The Financial Audit
Of the three financial reports, audits are the most common. Typically produced at year-end, audits provide the highest level of financial statement and they present an objective, reasonable basis for expressing an opinion about a property's financial condition. Most co-ops and condos are required, by either the attorney general or the property's offering plan, to produce an annual financial audit and to share it with the shareholders or unit owners.
A thorough audit contains a line-by-line categorization of income and expenses, and independent confirmation of the property's financial activities during the period in question. Also included are required disclosures (the narrative footnotes at the end of the audit that explain significant line entries); disclosures of concentrated risk or economic dependencies (such as the presence of a sponsor); disclosures of commitments and financial contingencies unique to the property and disclosures of various accounting policies. Audits are almost always prepared on an accrual basis, showing all items that are either owed to, or owed by, the corporation in addition to cash activity.