Audits vs. Financial Reviews: What’s Required?

For condo boards, HOA directors, and property managers across Canada, ensuring financial transparency and accountability is a cornerstone of effective governance.

Yet, the terms “financial audit” and “financial review” are often used interchangeably, leading to confusion about what each process entails, when they are required, and how they impact the financial health of a condominium or homeowners’ association.

This article provides a comprehensive guide to understanding the differences, legal requirements, and best practices for financial audits and reviews in the Canadian condo and HOA context.

Understanding the Purposes of a Financial Review versus Audit

There are some key differences to be aware of when considering a financial audit versus a financial review for a condo/strata corporation or HOA.

The Main Differences

A financial audit is a thorough, independent examination of an organization’s financial statements and records, conducted according to established accounting standards. The goal is to provide assurance that the financial statements are free from material misstatement and accurately reflect the corporation’s financial position.

A financial review, on the other hand, is less intensive. It involves an accountant performing limited procedures to provide a moderate level of assurance that no material modifications are needed for the financial statements. Unlike an audit, a review does not involve examining underlying transactions or testing internal controls in depth.

Key distinctions

• Level of Assurance: Audits provide high assurance; reviews provide moderate assurance.
• Scope: Audits are more comprehensive, involving detailed testing; reviews are limited to inquiry and analytical procedures.
• Cost and Time: Audits are generally more expensive and time-consuming than reviews.

Who Conducts the Audit or Review?

Both audits and reviews must be performed by licensed professionals:

• Audits: Conducted by Chartered Professional Accountants (CPAs) with audit qualifications.
• Reviews: Also conducted by CPAs, but the practitioner may not require the same level of audit-specific credentials.

In both cases, independence from the board or management is crucial to maintain objectivity and credibility.

What are the Differences in Costs?

There are some major differences when it comes to costs:

• Audits: Typically cost more due to the depth of work involved. Fees can range from $3,000 to $10,000+ for a standard condo or HOA, depending on size and complexity.
• Reviews: Generally less expensive, often ranging from $1,500 to $5,000.

Factors influencing cost include the number of units, complexity of finances, and geographic location.

How Often Should Either Be Done?

• Audits: Many provinces require annual audits for condo corporations, especially those above a certain size or budget threshold. This is typically mandated to be a yearly occurrence.
• Reviews: May be permitted in place of audits for smaller corporations or where allowed by bylaws or provincial legislation. They can also be done be-annually if a strata or condo corporation is concerned with certain aspects.
• Best Practice: Even when not legally required, annual financial reviews are recommended to maintain transparency and stakeholder confidence.

When is a Financial Audit Required?

In Canada, the requirement for a financial audit is primarily governed by provincial condominium legislation. For example:

• Ontario: The Condominium Act mandates annual audits for all condo corporations, regardless of size, unless all owners agree in writing to waive the requirement.
• Alberta: The Condominium Property Act requires annual audits unless a waiver is passed by a special resolution of the owners.
• British Columbia: The Strata Property Act requires annual financial statements, with audits only mandatory if requested by a 3/4 vote at an annual general meeting.

HOAs, which are less regulated than condos, may not have statutory audit requirements but are often governed by their own bylaws or declarations.

Summary Table: Provincial Audit Requirements

Recommended Resource: Condo Fees in 2025 Across Canada: Data & Insights

When is a Financial Review Required?

A financial review is typically required when:

• The corporation’s bylaws specify a review rather than an audit.
• Owners have unanimously waived the audit requirement (where permitted).
• The organization is small, with limited financial activity, and stakeholders agree a review is sufficient.

Reviews are more common for self-managed or smaller HOAs and condos, or where cost constraints make audits impractical.

Specifics for Condos versus HOA Audits & Reviews

• Condos: Subject to provincial condominium acts, which often mandate annual audits unless waived. Financial transparency is paramount due to the shared ownership structure.
• HOAs: Requirements are dictated by the governing documents (bylaws, declarations). Some provinces have minimal regulation for HOAs, so internal policies or member votes often determine the need for audits or reviews.

Key Differences:

• Condos have stricter statutory requirements.
• HOAs may have more flexibility but should still prioritize regular financial oversight to maintain trust.

Conducting a Financial Audit

The audit process involves extensive testing, verification, and analysis of your corporation’s financial activities. Auditors don’t just review documents—they actively investigate transactions, confirm balances with third parties, and assess your internal controls to identify potential weaknesses or fraud risks.

Documents to Gather

Preparing for a financial audit requires assembling comprehensive documentation spanning your corporation’s entire fiscal year. The auditor will need access to virtually every financial record to conduct their examination properly.

Documents:

• Annual financial statements
• Bank statements and reconciliations
• General ledger and trial balance
• Invoices, receipts, and expense documentation
• Minutes from board meetings
• Contracts and agreements
• Reserve fund studies and related schedules

Annual financial statements form the foundation of the audit. These include your income statement, balance sheet, statement of changes in fund balances, and cash flow statements.
Bank statements and reconciliations for all accounts provide crucial verification of cash balances and transactions. Auditors will typically confirm balances directly with your financial institutions and trace transactions between your records and bank statements.
Your general ledger and trial balance offer detailed transaction-level information that auditors use to understand your corporation’s financial activities. These documents help auditors identify unusual transactions or patterns that require further investigation.
Invoices, receipts, and expense documentation support all expenditures made during the fiscal year. Auditors sample these documents to verify that expenses are legitimate, properly authorized, and accurately recorded.
Minutes from board meetings provide context for major financial decisions and help auditors understand the reasoning behind significant transactions or policy changes.
Contracts and agreements with vendors, service providers, and other parties help auditors assess ongoing commitments and potential liabilities that should be reflected in your financial statements.
Reserve fund studies and related schedules are particularly important for strata and condo corporations, as these documents outline long-term capital replacement plans and associated funding requirements.

Differences for HOA & Condo

While the fundamental audit process remains consistent, auditors adjust their focus based on the type of community association they’re examining.
Condos: Auditors typically place greater emphasis on reserve fund accounting and statutory compliance. Provincial condominium acts often impose specific requirements for reserve fund contributions, expenditures, and reporting. Auditors must verify compliance with these regulations and assess whether reserve funds are adequate for future capital needs.
HOAs: The audit scope may encompass a broader range of discretionary spending and membership dues structures. HOAs often have more flexibility in their operations, which means auditors must examine a wider variety of transactions and assess whether spending aligns with the association’s governing documents and member agreements.

Average Timelines & Involvement

Financial audits require significant time and cooperation from multiple stakeholders within your corporation.

Timeline: Most audits take 4–8 weeks from initial engagement to delivery of the final report. This timeframe can extend if auditors encounter complications or if your corporation needs additional time to gather requested documents.

Involvement: The audit process requires active cooperation from your board of directors, property management company, and sometimes legal counsel. Board members may need to attend meetings with auditors, provide explanations for unusual transactions, and authorize access to sensitive information.

Auditors frequently request clarifications or additional documents as their examination progresses. Your prompt response to these requests directly impacts the audit timeline and overall efficiency.

Conducting a Financial Review

A financial review offers a middle ground between a full audit and basic bookkeeping services. This process provides limited assurance about your financial statements through analytical procedures and inquiries rather than extensive testing and verification.
Reviews focus primarily on identifying material inconsistencies or unusual items in your financial statements. The accountant performing the review relies heavily on management representations and analytical comparisons rather than independent verification of transactions.

Documents to Gather

Financial reviews require fewer documents than audits, making them less burdensome for smaller corporations with limited administrative resources.

Documents:

• Financial statements
• Bank statements
• Board meeting minutes
• Budget & variance reports

Financial statements remain the primary focus, but the level of supporting documentation required is significantly reduced compared to an audit.

Bank statements provide basic verification of cash balances and major transactions, though the accountant may not perform the detailed reconciliation work typical in an audit.

Board meeting minutes help the accountant understand major decisions and transactions that occurred during the review period.

Budget and variance reports allow the accountant to compare actual results against planned activities and identify significant deviations that warrant further inquiry.

Differences for HOA & Condo

The review process adapts to the specific regulatory environment and operational complexity of different community associations.

Condos: Reviews may still emphasize compliance with provincial condominium acts, though the level of testing is less extensive than in an audit. The accountant focuses on obvious compliance issues rather than conducting detailed regulatory analysis.

HOAs: Reviews tend to be more informal, concentrating on the reasonableness of financial reporting rather than strict regulatory compliance. The accountant primarily ensures that financial statements present a fair representation of the HOA’s financial position.

Average Timelines & Involvement

Financial reviews require less time and involvement from your corporation’s stakeholders.

Timeline: Most reviews are completed within 2–4 weeks, making them attractive for corporations that need timely financial reporting.

Involvement: The process is less intrusive than an audit, primarily involving inquiries and analytical review by the accountant rather than extensive document requests and meetings.

Areas of Compliance to Keep in Mind

• Provincial Legislation: Ensure compliance with the relevant condominium act or property legislation.
• Bylaws and Declarations: Follow internal requirements for frequency and type of financial oversight.
• Disclosure: Audited or reviewed statements must be distributed to all owners and may need to be filed with regulatory bodies.
• Record Retention: Maintain all supporting documentation for the required period (often 7 years).
• Conflict of Interest: Ensure auditors/reviewers are independent and have no ties to board or management.

Other Provincial Resources

• CAO Guide on Condo Finances
• BC Strata – Information & Record Keeping
• Alberta Condo Document Information

Commonly Asked Questions

Who Pays for These?

The costs of audits and reviews are paid from the condo corporation’s or HOA’s operating budget. These expenses are typically included in annual budgets and funded by owners’ fees or dues.

What Happens After an Audit or Financial Review?

During an audit, the auditor presents findings and recommendations, with any significant issues potentially requiring corrective action by the board. In a review, the accountant provides a report pointing out concerns or areas for improvement. Both reports are shared and the board reviews these findings and any management letter that identifies areas for improvement in financial controls or procedures.

From there, actions may be taken to reduce deficiencies or address the community. The board is typically required to distribute copies of the financial statements to all unit owners, either by mail, email, or making them available for pickup.

What are Other Nuances to This for HOA & Condo Associations?

Some provinces allow owners to waive audits, but this typically requires unanimous or special resolution consent. Boards can also change auditors with member approval, although maintaining the same auditor helps preserve institutional knowledge. Additionally, major projects or unexpected expenses may lead to special assessments, which often require closer financial scrutiny.

When is a Forensic Audit Required?

A forensic audit is warranted when there is suspicion of fraud, embezzlement, or significant financial irregularities. This is a specialized, in-depth investigation conducted by forensic accountants and is more costly and time-consuming than standard audits or reviews.

Final Thoughts

For Canadian condo boards, HOA directors, and property managers, understanding the distinctions between financial audits and reviews is essential for sound governance and legal compliance. While audits provide the highest level of assurance, reviews offer a cost-effective alternative for smaller organizations.

Regardless of the approach, regular financial oversight builds trust, supports transparency, and protects the interests of all stakeholders. Always consult your provincial legislation and governing documents to determine your specific obligations—and when in doubt, seek guidance from a qualified CPA with experience in the condo and HOA sector.