Audits/Auditor
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Short Answer
Every condominium
corporation having 25 or more units (or parcels of tied land) is required to
appoint an auditor who will prepare annual audited financial statements for the
corporation.
Definition
The Condominium Act, 1998 (the "Act") requires every condominium corporation to undergo an annual financial audit unless (a) the condominium has fewer than 25 units or parcels of tied land, (b) the condominium has held its Turnover Meeting, and (c) all of the owners consent in writing as at the date of the relevant annual general meeting to dispense with the audit requirement. In the event such conditions are not met, then at the annual general meeting the corporation is required to appoint an auditor for the new fiscal year. The audited financial statements and auditor's report are prepared after the end of that year, in time for board approval and to be included with the notice of meeting of the subsequent annual general meeting.
The first appointment of an auditor is to take place at the first meeting of the corporation. The first audit is an audit that is to be prepared and provided to the newly elected board of directors within 60 days of the date of Turnover Meeting, and covers the period running from the date of registration of the declaration and description to the day that is the end of the month in which the Turnover Meeting occurs.
An auditor must be a licensed public accountant under the Public Accountants Act. He or she cannot be a director, officer, employee or manager of the corporation and cannot have an interest in any contract to which the corporation is a party. The auditor also cannot be a partner, employer or employee of a person who is disqualified for any of the foregoing reasons.
If an auditor is not appointed by the corporation as required by the Act, then upon an application brought by any owner, the Superior Court of Justice can appoint the auditor. If the auditor resigns or the position otherwise becomes vacant, the board can appoint an auditor for the interim period until the next annual general meeting.
Amongst other things, the auditor's report is to include such statements as the auditor deems necessary to demonstrate that the condominium corporation's financial statements are not done in accordance with the Act. The report must also indicate whether the reserve fund is being managed and maintained in accordance with the reserve fund study.
The first appointment of an auditor is to take place at the first meeting of the corporation. The first audit is an audit that is to be prepared and provided to the newly elected board of directors within 60 days of the date of Turnover Meeting, and covers the period running from the date of registration of the declaration and description to the day that is the end of the month in which the Turnover Meeting occurs.
An auditor must be a licensed public accountant under the Public Accountants Act. He or she cannot be a director, officer, employee or manager of the corporation and cannot have an interest in any contract to which the corporation is a party. The auditor also cannot be a partner, employer or employee of a person who is disqualified for any of the foregoing reasons.
If an auditor is not appointed by the corporation as required by the Act, then upon an application brought by any owner, the Superior Court of Justice can appoint the auditor. If the auditor resigns or the position otherwise becomes vacant, the board can appoint an auditor for the interim period until the next annual general meeting.
Amongst other things, the auditor's report is to include such statements as the auditor deems necessary to demonstrate that the condominium corporation's financial statements are not done in accordance with the Act. The report must also indicate whether the reserve fund is being managed and maintained in accordance with the reserve fund study.
What you need to know…
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…as a Unit Owner
Owners approve the appointment of an auditor. While it is typical that a board of directors will specify only a single auditor to be appointed at an annual general meeting, it is permissible for alternatives to be recommended at the time the motion for appointment is made. Owners do not approve financial statements or the auditor's report. This is the board's responsibility. Any owner may require the auditor to attend a meeting of owners for the purpose of answering questions concerning the basis for the auditor's opinions set out in the auditor's report. An owner desiring to have the auditor attend such a meeting must give the auditor written notice of the meeting (and of the requirement to attend) at lest 5 days prior to the meeting. |
…as a Board Member or Manager
The auditor is entitled to attend any meeting of owners and has the right to speak in respect of any part of the business of the meeting that deals with the office of the auditor. Therefore, the corporation is required to provide the auditor with a copy of all notices of meetings including their agendas and attachments. The auditor must be given access at all times to all records, documents, accounts and vouchers of the corporation and can ask for information and explanations from any director, officer, employee or contractor of the corporation that the auditor feels necessary to prepare his or her audit of the financial statements and report. In a condominium corporation with more than 6 directors on the board, the directors may elect annually a group of at least three of them to be the Audit Committee which shall hold office until the next annual general meeting of the corporation. A majority of the committee must not be either officers or employees of the condominium. The role of the audit committee is to review the auditor's report and audited financial statements. While the auditor has the right to attend any meeting of the committee, and can cause the committee to convene for a meeting at the auditor's request, the Act does not state that the committee can require the attendance of the auditor. The board of directors approves the auditor's report and financial statements prior to presenting them to owners at the annual general meeting. Although these get presented to the unit owners at the annual general meeting, the owners do not approve these documents. Approval is evidenced by signatures at the bottom of the balance sheet of two directors duly authorized to execute the same. If information comes to the knowledge of the board after the annual general meeting, which would materially alter the audited financial statements, the board is required to amend them and to send the same along with an explanatory Statement of Facts to the auditor. If the auditor determines it is necessary, he or she will then amend the auditor's reports and submit that back to the board or Audit Committee. Copies of the amended report is to be delivered to all owners by the corporation, failing which the auditor is to send copies to the owners at the corporation's cost. An auditor's resignation must be in writing delivered to the corporation and is effective at the time set out in such written notice. If the auditor includes written representations, i.e., reasons or explanations, for the resignation, this document must be included in the notice of the next meeting of owners. However, this does not change the effectiveness or timing of the resignation. |
…as a Declarant
An audit of the financial records of the corporation covering the period from the date of registration of the condominium till the last day of the month in which the Turnover Meeting occurs is mandatory. The corporation does not have the ability to waive this requirement. The cost of such audit is paid by the corporation. Therefore, the declarant should ensure provision is made for it in the declarant's proposed first year budget for the condominium. On account of this audit, it behooves, and is to the benefit of, the declarant to keep the records of the corporation in complete and good order. The declarant should, upon registration of the declaration and description creating the condominium, ensure the corporation has at least two bank accounts in its own name - one for operating expenses, and one for the reserve fund. Starting from the same date, the declarant should also be paying common expense contributions for all units that remain owned by the declarant (in accordance with the budget and declaration - see the Condopædia article, Assessment of Common Expenses, for further information about this), as well as collecting the same from any already closed units or parcels of tied land, and all expenses that should be borne by the condominium ought to be paid from whichever of the accounts applies to the situation at hand. |