What is an audit?

The three engagements differ in depth. A compilation presents management's figures in proper form with no assurance. A review applies analytical procedures and inquiry, giving limited assurance. An audit tests the underlying records and gives an opinion, and is the only one that verifies rather than presents.

Which is required depends on the governing documents and, in several states, on the association's annual revenue, with thresholds set by statute. Where nothing is required, boards commonly choose a level appropriate to the size of the budget and the reserves at stake.

Timing matters for a different reason: an audit or review conducted shortly after a board or manager transition is the cheapest way to establish where things actually stood at the handover.