Can Owner’s Community Be Audited?

Legal News

This question could have been asked by you as a property manager, lawyer, real estate agent, investor, president of your Community of Owners or, simply, as the owner of a property located in any urbanization in Spanish territory.

In order to answer the question, it is necessary to know the accounting standards and resolutions of public Spanish bodies, which is why I wanted to share my experience on the review of Financial Statements of the Communities of Owners.

First of all, it should be noted that in March 2016 the Accounting and Auditing Institute (ICAC) published in BOICAC 105, the query raised by some auditors and the corresponding response.

The query raised was the following:

“Regarding the audit of the annual accounts, or other financial statements or accounting documents, of certain entities in which the regulatory regulations that apply to them, according to their legal nature, do not expressly establish a regulatory framework for financial information for their preparation and presentation.”

The ICAC is the Autonomous Body, attached to the Ministry of Economy, Industry and Competitiveness, which regulates the auditing activity, being the highest authority in accounting matters in Spain

The ICAC’s response was that, in the case of owner’s communities, the review and verification of the financial statements that they prepare will not be considered an account audit work subject to the regulations that regulate the audit activity. Therefore, the performance of the auditors regarding the work of reviewing the financial statements of the Communities of Owners was made clear. A review work of a Community of Owners cannot be identified as an account audit because it does not have an accounting regulatory framework.

Once the question has been resolved, it should be noted that, however, there is the possibility of conducting a review by issuing a “report on agreed procedures on financial information”, the purpose of which may be to perform specific substantive tests such as those carried out by auditors. Auditing corporations’ issue Professional Action Guides that help auditors to carry out these assignments, such as the one issued by the Institute of Chartered Accountants of Spain (ICJCE).

It is important to underline the importance of a work of this scope so that the owners know if they are carrying out the correct actions for the good management of the Owner’s Community. Such as:

  • Compliance with the resolutions adopted at the General Meetings.
  • The correct calculation of the participation fees paid by neighbors.
  • Correct applications of discounts or surcharges.
  • Verification of bank reconciliation, correct accounting of expenses and of the approved budget.

All these verifications and procedures are part of the different actions that the auditor can perform for the Owner’s Community.

Also, based on my experience, I consider that the work of an independent professional tends to substantially improve the relationship between neighbors, the Board of Directors and Administrators in those cases in which there are internal conflicts in relation to the accounts, since they intervene by providing expert judgment alien to the interests of the Community.

Considering the benefits of this work in the financial and accounting control of the Owner’s Community, it is highly recommended that all parties involved in a Community of Owners do not hesitate to turn to the auditors if they deem it necessary.

Antonio Gamero
Gerente Departamento de Auditoría
ajg@uhy-fay.com

 

 

 

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