HOA Audit and Review: Getting the Books Ready for the Association's CPA

What is an HOA audit?

An HOA audit is an independent CPA's examination of the association's yearly financial statements. The CPA tests the records and gives an opinion on whether the statements are fairly presented.

The association hires the CPA. The CPA is independent of whoever keeps the books. The audit or review is the last step of the yearly cycle in HOA accounting explained for board members.

HOA audit vs review vs compilation: what is the difference?

In an audit the CPA tests records and gives an opinion. In a review the CPA asks questions and analyzes the numbers, with limited assurance. In a compilation the CPA presents the statements with no assurance.

The same books feed all 3. The CPA does more testing at each level up.

When is an HOA audit required?

It depends on the state and the association's governing documents. Some set the level by the association's size or yearly income. Which level applies to your association is a question for its attorney.

Each state writes its own rule. 2 examples: California puts its rule in Civil Code section 5305, read on November 12, 2026, and Florida puts its rule in Statutes section 720.303, read on November 12, 2026. Each sets the level of CPA work an association must have and when. Your own state and your governing documents decide for your association, and the governing documents can ask for more than the state does.

Who does the HOA audit, and who gets the books ready?

The association's own CPA does the audit or review. The board hires the CPA. The bookkeeper closes the year, reconciles the accounts and hands over the package.

Why the 2 jobs are kept apart is in HOA bookkeeper vs CPA.

What does the CPA ask for in an HOA audit or review?

The year-end statements by fund, the general ledger, bank statements and reconciliations, the list of owner balances, reserve activity, the budget, board minutes, and large invoices and contracts.

The 10 documents, in the order the CPA usually opens them:

• The year-end balance sheet by fund: operating and reserve.
• Income and expense for the year, set against the budget.
• The general ledger: every entry of the year.
• Bank statements and reconciliations for every account at year end.
• The list of owner balances: who owes dues and how much.
• Reserve activity for the year: transfers in, interest, spending.
• The adopted budget.
• Board minutes for the year.
• Contracts and large invoices.
• The reserve study.

A question from the CPA or a missing record is a reason to look, never a verdict. Most are answered with one statement or one invoice.

How do you get an HOA's books ready for the audit?

Reconcile every bank account to year end, tie the owner balances to dues owed, roll each fund balance forward, match reserve payments to invoices, and gather the documents the CPA lists.

8 steps, in the order the work is done:

1. 1Reconcile every bank account to its year-end statement.
2. 2Tie the owner balances to dues owed on the balance sheet.
3. 3Roll each fund balance forward from last year's ending balance.
4. 4Confirm the 12 reserve transfers were made, one a month.
5. 5Match each reserve payment to an invoice and a board approval.
6. 6Record the bills that belong to the year and arrived after it.
7. 7Clear old uncleared items on the bank reconciliations.
8. 8Gather the 10 documents the CPA asks for.

How the reserve fund is rolled forward is in HOA reserve fund accounting.

Which numbers must agree before the HOA's package goes to the CPA?

Cash must equal the reconciled bank statements. Dues owed must equal the owner list. Each fund's ending balance must equal its starting balance plus the year's activity.

Here are the 4 tie-outs at Demo Ridge HOA. The sample month stands in for the year end.

The 4 tie-outs at Demo Ridge HOA, invented data

Each line on the right is a record the CPA can see: the owner list, the reserve bank statement, an invoice and a vote, the dues schedule. When all 4 agree, the package is ready.

What is the yearly timeline for an HOA audit or review?

Engage the CPA before year end. Close the books soon after it. Send the package, answer the CPA's questions, and present the finished report to the board.

1. 1Engage the CPA before year end, so the CPA knows the association and the dates.
2. 2Close the books after year end, the same way as any other month, with every account reconciled.
3. 3Send the package: the 10 documents, with the 4 tie-outs already checked.
4. 4Answer the CPA's questions. Each one is a request for a record or an explanation.
5. 5Present the finished report to the board, and keep it with the year's records.

The full year-end package is listed in the year-end handoff to the CPA.

What does an HOA audit cost?

The CPA sets the fee. A compilation is the least work and an audit the most. Reconciled books and a complete package shorten the CPA's time.

The bookkeeping cost and the CPA's cost side by side are in what HOA bookkeeping costs.