hoa-financial-reporting-faq

What is the difference between an HOA audit, review, and compilation?

Discover the key differences between HOA audits, reviews, and compilations to improve your community's financial management. Learn more!

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Reviewed by:

D. Goren

Head of Content

Updated Jan, 12

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What is the difference between an HOA audit, review, and compilation?

 

HOA Audit vs Review vs Compilation

 

These three terms describe different levels of financial examination performed by an independent CPA (Certified Public Accountant). They all look at the HOA’s financial records, but the depth, cost, and level of assurance differ sharply.

 

Compilation

 

A compilation is the simplest and least expensive option. The CPA takes the numbers the HOA provides and organizes them into standard financial statements. The CPA does not verify the accuracy of the numbers and does not check for fraud, missing money, or errors.

  • What the CPA does: Formats and presents financial data.
  • What the CPA does NOT do: Investigate, confirm balances, or evaluate internal controls (controls = processes that protect money and reduce mistakes).
  • When it's used: Smaller HOAs or when the governing documents only require a basic report.

 

Review

 

A review is a middle‑level financial check. The CPA performs inquiries and simple analytical procedures to see if the financial statements make sense. The CPA gives “limited assurance,” meaning nothing seems wrong based on what they looked at, but they still do not dig deeply.

  • What the CPA does: Asks questions, compares numbers to prior years, looks for unusual changes.
  • What the CPA does NOT do: Verify documents, confirm bank balances, or look for fraud unless something obvious appears.
  • When it's used: Medium‑size HOAs or when documents require more than a compilation but not a full audit.

 

Audit

 

An audit is the most detailed and expensive. The CPA gives “reasonable assurance” that the financial statements are accurate. They test records, confirm bank balances, examine invoices, and evaluate internal controls. This is the only method that can realistically uncover misuse of funds.

  • What the CPA does: Tests transactions, examines source documents, confirms accounts with banks/vendors.
  • What the CPA does NOT do: Guarantee perfection, but it is the highest level of confidence available.
  • When it's used: Larger HOAs, high budgets, or when bylaws or state law require it.

In short: Compilation = least assurance, Review = limited assurance, Audit = highest assurance.

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