If you manage a homeowners association, you’ve probably heard people throw around the words audit and review like they’re the same thing, but they’re not. Knowing the difference matters, especially when budgets get tight or when the board wants answers.
We will take a look at what each one really means and how they work.
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Two Jobs, Two Purposes
An audit and a review are both types of financial checkups. But one is more intense. Think of a review as a good once-over, while an audit digs deeper.
In a review, a CPA examines your financial statements to ensure they are accurate and consistent. They compare them to what they’d expect from a healthy HOA. If things look reasonable, they give a short report saying so. They don’t go line by line. They don’t test transactions or hunt for fraud. It’s a quick, affordable way to boost confidence in the books, especially if the board is handing things over to new members or answering owner questions.
An audit, on the other hand, is the full workup. The CPA does real detective work. They check bank records, contracts, and receipts. They test your internal controls. They ask tough questions. Then they issue a formal opinion: either everything adds up, or it doesn’t. If something’s off, they’ll flag it.
Audits are the gold standard, but they take time and money. Reviews won’t catch everything, but they’ll spot obvious issues and for a fraction of the cost.
Why HOAs Choose One Over the Other
There’s no single rule for when to do an audit or a review. Some state laws or HOA bylaws require boards to do one or the other. Others leave it to the board’s judgment.
In general:
- Reviews are common every year.
- Audits are often done every few years or when something big changes.
Let’s say your HOA just switched management companies. A review helps confirm the transition didn’t leave holes in the records. Or maybe you're planning a major capital project. An audit could give everyone peace of mind before signing off on those reserves.
That’s exactly what happened with one community.When they finally pulled the trigger, the audit showed missing reserve transfers and flagged a vendor’s pattern of late payments.
On the flip side, we’ve seen reviews save HOAs from spending money they didn’t need to. One community worried about missing funds. A review showed it was just a reporting delay. Problem solved; no audit required.
What CPAs Actually Do During Each Process
A review usually takes a few weeks. The CPA looks at your financials, asks your management team a few questions, and checks for anything that doesn’t pass the sniff test. If everything looks reasonable, they’ll issue a short letter saying so.
They won’t chase down receipts. They won’t test internal controls. This isn’t a deep dive. But it’s enough to spot obvious mistakes or signs of trouble.
An audit takes longer, usually four to eight weeks. The CPA requests documents, tests them, verifies balances, and makes sure your policies are being followed. They don’t just look at the financials. They examine how the financials were compiled.
They’ll issue a detailed report, including an opinion on whether your financial statements are accurate. If not, the report explains why.
What You Get Back and Why It Matters
At the end of a review, the CPA sends a letter saying nothing stood out, and your financials follow standard accounting practices. It's short, but it carries weight, especially with lenders or owners who just want a bit more trust in the numbers.
An audit gives you more. You’ll receive an opinion letter, a complete set of audited financial statements, and accompanying notes that explain any unusual items. It’s a stronger level of assurance. If you ever need to show financial responsibility, such as for a loan, grant, or legal matter, this is what you want.
Some boards use the audit as a reset. They use the findings to clean up policies, fix inconsistencies, and create better habits. It’s more than a report. It’s a chance to rebuild trust in how the HOA handles money.
But What If You’re Behind?
Plenty of boards fall behind. Sometimes, no one has reviewed the books in years. Sometimes a previous treasurer left things in a mess. It happens.
The good news? You can catch up. Start with a review. If it flags deeper concerns, then talk about an audit.
We worked with a self-managed HOA that hadn’t looked at its financials in three years. Dues were being collected, bills were being paid, but no one really knew what was going on. We helped them complete a review, which quickly identified three issues: a missing reserve transfer, an outdated collection policy, and late recording of deposits. They didn’t need an audit. They needed better processes, and the review helped them see that clearly.
Still Not Sure What You Need?
You’re not alone. Many board members don’t come from financial backgrounds. Even experienced ones sometimes confuse these terms.
Answering the following questions will usually point you in the right direction. If not, a financial professional can walk you through it.
- Are we required to do an audit or review by law or our governing documents?
- Have we had major changes lately, such as new management, board turnover, or big projects?
- Do we have concerns that need deeper answers?
Make Sense of the Numbers
You don’t need to overhaul everything overnight. Most of the problems we fix come down to missing policies and unreliable systems.
If that feels like you, we can help. If you need a second opinion, want to catch up on reviews, or just need cleaner books before audit time, we’re here.
The goal isn’t to impress. It’s to trust your numbers and help the board sleep better at night.
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