Financial Audits, Reviews or Compilation Which do you use?

All,

In trying to locate a CPA to perform an audit (mandated by our bylaws) for our Association, I've been learning the differences between an Audit, Review and a Compilation. I've also discovered that there is a huge difference between the cost of each one. For those who are unaware of the differences between them, here is a link to an article that briefly explains it.

After learning more then I ever wanted to know, I believe that our Association only requires a financial review vs. a full audit. I also believe that the "audit" that was performed previously was not an actual audit but a review passed off as an audit (but that's another issue).

I was wondering what other Associations required and/or were doing and why one process over the other?

Tim

In California:

Audit, Review, Compilation

Levels of Financial Review. There are three levels of review for financial statements.

1.Audit. If an association's governing documents require an audit, a licensee of the California State Board of Accountancy (a Certified Public Accountant) performs an extensive examination of the association's financial records and issues a statement as to their compliance with generally accepted accounting principles (GAAP). An audit provides a "reasonable level of assurance" that the financial statements are materially correct. As a result, audits are more expensive than reviews and compilations.
2.
Review. If an association's governing documents are silent regarding an audit, the Davis-Stirling Act requires a "review" of the finances for any fiscal year in which the association's gross income exceeds $75,000. Civil Code §1365(c). In a review, a CPA performs limited inquiries but does so in accordance with GAAP. The report is done with accrual accounting and the CPA gives "limited assurance" that the financial statement is materially correct.

3.Compilation. A compilation is the lowest level of review in which a CPA assembles information provided by an association. The CPA need not be independent and is required to perform very few procedures. Further, the CPA takes little responsibility for the financial statement and gives no assurance as to compliance with GAAP.

NOTE: Neither audits nor reviews guarantee that embezzlement will be detected by the CPA.

In referencing this thread, I discovered that an earlier link within the thread is no longer valid. Therefore, I offer the following:

What Is the Difference Between a Compilation, a Review and an Audit? A Brochure provided by American Institute of CPAs

difference between a financial statement compilation, review and an audit article by a CPA firm

Understanding Compilation, Review and Audit Article by a CPA

Guide to Review Engagements by the International Federation of Accountants (very dry and very confusing if you don't understand accounting)

The Colorado Common Interest Ownership Act (CCIOA), those HOAs which fall under that act, require an audit by a CPA when a) >$250,000 in annual income or expenses; and b)1/3 of owners request it. To my knowledge, the type of audit required is not defined. I believe HOAs "audits by a CPA" which I have seen are not an audit but rather a financial review done by a CPA.

CCIOA requires a financial review when 1/3 of the owenrs request it. A financial review does not require a CPA; it may be done by a person considered to have sufficient knowledge to do the review.

IMO, the better process is to monitor financials by providing all Board members monthly financial reports and quarterly bank statements via email.