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Managing a body corporate means keeping a close eye on the scheme’s finances. One important part of that process is deciding whether to have your accounts audited each year.
Here’s a straightforward guide to help committees understand what an audit is, why it matters, and how to manage the process.
What is an audit?
All bodies corporates must keep proper accounting records and prepare a statement of accounts each financial year. This statement sets out all income and expenses for the year.
An audit is an independent review of those financial records and statements.
The auditor’s role is to check:
- Whether the records give a true and fair view of the body corporate’s financial position
- Whether there are any material errors or inconsistencies in the accounts
An audit does not assess whether the budget was appropriate; it simply ensures the records accurately reflect what occurred.
When do you need to consider an audit?
For schemes registered under the Standard Module, Accommodation Module, or Commercial Module:
- At every annual general meeting (AGM), there must be a motion to decide whether or not to audit the accounts.
- This audit motion is unique as it’s the only motion where the body corporate can vote not to do something.
- If you want the accounts audited, you must vote NO to the motion not to audit.
For schemes under the Small Schemes Module, there’s no requirement to include an audit motion each year as it’s optional.
For Specified Two-lot Schemes, there’s no bank account and no audit requirement.
Why consider an audit?
While the legislation makes auditing the default position, some bodies corporate choose to opt out to save costs. However, an audit can be worthwhile if:
- There are concerns about certain expenses or spending patterns
- Owners want extra assurance that financial records are accurate and transparent
- There has been a history of disputes or concerns about the handling of funds
Who can be the auditor?
An auditor must:
- Be independent of the body corporate committee and body corporate manager
- Have the required qualifications – a registered company auditor or other approved qualifications, and at least two years’ auditing experience.
- Not be a committee member, the body corporate manager, or an associate of either.
What happens during an audit?
The auditor will:
- Review the body corporate’s accounting records and financial statements
- Request supporting documents and ask questions of those involved in managing the accounts
- Prepare a certificate stating whether the accounts are a true and fair reflection of the scheme’s financial position and list any deficiencies found.
A copy of the auditor’s certificate must be included with the notice for the next AGM.
In summary
Even if your body corporate isn’t legally required to audit each year, doing so can give owners confidence in the scheme’s financial health.
Ensure the audit motion is included in your AGM agenda where required and understand the voting process so owners can make an informed choice.
An audit is an independent review of those financial records and statements of the body corporate to give a true and fair view of the body corporate’s financial position and determine whether there are any material errors or inconsistencies in the accounts.
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