Is It Normal for a Building to Have a Financial Statement That Isn't Audited?

Aug. 13, 2015 — Why would a building have a financial statement that is not audited? Should we be concerned?

An annual financial statement reports on your building's financial condition and cash flow. This report is relied on by shareholders or unit-owners, by prospective purchasers, and by lending institutions. Almost all co-op and condo bylaws require an inspection of books of accounts in the form of an annual report. Most require that the annual report be audited and issued by an independent certified public accountant. When the bylaws do not call for the auditor to "certify," the co-op or condo board has the option to have its accountant issue a report that simply compiles or reviews the property's books and records.

It is in the building's best interests to have an independent accounting firm prepare an audited financial statement so that the independent CPA can report that, in his or her opinion, there are no misstatements in the audited report, and that the information is presented fairly and accurately. The CPA cannot make that representation if the report is merely a compilation or review. A certified audit gives the building the greatest level of credibility for both new buyers and lenders, and qualifies the building to receive the most favorable financing options from banks and creditors.

Gary Ziprin is CFO of Midboro Management.