What a review provides
In a review, we perform procedures to obtain limited assurance that no material modifications should be made to the financial statements for them to conform with generally accepted accounting principles. Reviews are performed under the AICPA's Statements on Standards for Accounting and Review Services, in the section titled Review of Financial Statements (AR-C 90).
A review relies mainly on inquiry and analytical procedures. It does not test records against outside evidence, as an audit does with bank confirmations or invoice testing. For that reason a review does not result in an opinion. Our report states a conclusion: whether we are aware of any material modifications the statements need.
The accountant who performs a review must be independent of the association. Florida's rule for condominium financial reporting also calls for reviews to be performed by an independent, Florida-licensed CPA.
Audit
Reasonable assurance
Tests records against outside evidence, such as bank confirmations, and issues an opinion.
Review
Limited assurance
Inquiry and analytical procedures. No opinion is expressed.
Compilation
No assurance
Statements presented from the association's records, without testing.
For a fuller comparison, see audit vs. review vs. compilation.
When an association uses a review
- Florida's revenue tier. Condominiums and HOAs with total annual revenues of at least $300,000 but less than $500,000 must prepare, at a minimum, reviewed financial statements.
- An owner vote in place of a required audit. Owners can vote to use a review instead of a required audit, but not for consecutive fiscal years. The vote requirements differ between condominiums and HOAs. See changing the level of the report.
- A higher level than the minimum. An association may always prepare a higher level than its minimum, for example a review in place of a compilation.
An HOA with 1,000 or more parcels must be audited regardless of revenue. Governing documents, lenders, or insurers may also require an audit. See Florida reporting requirements for the full rules.
What the review involves
Each review is planned around the association's size and its records. Typical procedures include:
- Understanding the association's operations, its management arrangement, and its accounting practices.
- Asking management and the board about the association's accounting, significant transactions, actions taken at meetings, and subsequent events.
- Comparing the year's results with the prior year and with the budget, and asking about unexpected differences.
- Analyzing relationships in the numbers, such as assessment revenue compared with the number of units and the assessment rate.
- Reading the financial statements and notes for consistency with what we learned.
- Obtaining written representations from management at the end of the engagement.
A review does not include confirming balances with banks, testing transactions against invoices, or evaluating internal control.
What the board receives
- The accountant's review report, with our conclusion. It does not express an opinion.
- A balance sheet, a statement of revenues and expenses and changes in fund balances, a statement of cash flows, and notes. Operating and reserve funds are presented separately.
- For condominiums, the reserve disclosures required by Rule 61B-22.006, F.A.C.
The association delivers the report to owners. For deadlines and posting rules, see Florida reporting deadlines.
Records typically needed
Requests vary with each association. Most reviews draw on the following: