The Body Corporate manager acts on behalf of the committee of management which comprises of lot owners or proxies of lot owners. The committee makes decisions on various financial matters pertaining to the management of the common property and provides directions to the Body Corporate manager to act on these directions via decisions made at committee meetings. The Body Corporate manager then acts on the committee’s guidelines and performs the tasks assigned. The body corporate audit looks at the financial aspects and decisions made at these meetings via the minutes of meetings.
A contract of appointment governs the management of the Body Corporate. Various contractors provide the services. These contractors hold contracts with the body corporate for services such as cleaning and maintaining common property. As part of the body corporate audit, we will run tests to determine two things. First, we check if the management fee complies with the appointment agreement. Second, we verify that contractor payments strictly follow their agreements.
Sometimes mixed-use buildings may have multiple Body Corporates and this might give rise to the requirement to run multiple body Corporate audits. Cost allocations and record keeping becomes a major focus of any body corporate audit engagement.
The body corporate’s responsibilities include managing the common property, repairs and maintenance. They also have to prepare the financial statements and keep proper financial records. Typically, prescribed body corporates have a mandatory requirement to carry out a body corporate audit of financial accounts every year.
Specifically, prescribed Body Corporates are those that have more than 100 lots. For example, this includes apartments, units, townhouses, storage, parking lots, retail, as well as commercial properties.
However, even if your body corporate is not a prescribed body corporate, an audit of the financial statements still provides assurance to the owners and managers of the owners corporation regarding the financial management of the body corporate. Consequently, managers can present the audited financial statements at the AGM’s.
The benefits of a Body Corporate audit are as follows:
- Obtaining an independent, expert opinion regarding the truthfulness and fairness of the financial statements
- Detection of any errors
- Ensuring compliance with accounting principles & standards
- Detection & prevention of any fraudulent activity
To complete an effective and efficient body corporate audit, you may need the following documents:
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General Ledger or access to accounting software
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Income and Expenditure Statement
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Balance Sheet
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Copy of the prior year’s audit report
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Trial Balance
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Receipts and invoices for revenue earned during the financial year under audit
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Copy of the plan of subdivision
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Members Register
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Invoices paid during the financial year
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Bank statements from the financial year under audit
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Insurance statement for the property under audit
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Minutes of all meetings held during the financial year under audit
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Approved budgets for the financial year under audit
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Contract of appointment of the manager
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Copy of Business Activity Statements (if applicable)
Online Body Corporate Audits:
You can carry out the entire audit process for a Body Corporate’s fund via correspondence. Cloud-based reporting and accounting have made this process much simpler. In the past, an auditor would spend hours in person with the manager of the Owners Corporation. One of our auditors will contact you to request preliminary information. We will use this information to prepare an audit plan. Based on this plan, we will request further documents. These could be copies of invoices, contracts and minutes of meetings and using these supporting evidences we can complete the audit of Body Corporate completely via correspondence.