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WHO KNEW? Some Insights into Strata Audits

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5.2:  Audits, Auditors & Planning for the Unexpected

The First Step on the Strata Audit Trail is Always the Hardest

Many owners would be familiar with the confusion, and difficulty, in ensuring their body corporate financial statements are audited.

This just goes with the territory, however.  At every AGM, you have no choice but to navigate your way through the statutory (Will We or Won’t We Audit?) motion where YES means NO, and NO means YES.  (s.153 of the Accommodation Module Regulation)

The Second Step Does Get Easier…Usually

So…you have finally traversed the legislative hazards, and you have agreed (hopefully) there will be an audit at the end of the financial year.

The next step, once again at every AGM, is the statutory (Which Auditor?) motion.

This motion is straightforward:  the BCCM legislation clearly prescribes the three main elements of this motion, and all that you have to do is vote YES… or NO… or ABSTAIN.

These three main elements are:

You have Agreed to the Audit, You’ve Chosen the Auditor.  What Could Possibly Go Wrong?

Unfortunately, and as duly noted by Robbie Burns:

The best laid schemes o' mice an' men gang aft a-gley”   [often go awry] 

And this applies to the plans of bodies corporate as well.  In the several months following the AGM but before the end of the financial year, the named auditor may fall out of favour, or go out of business, or become ill or even die.  Who will do the audit?

Section 153 is quite prescriptive about who can appoint an auditor.  This is a decision for the owners, and only the owners. [see sidebar below]

So if a substitute auditor needs to be chosen, this will require an extraordinary general meeting (EGM)… unless the owners have already taken the precaution of naming a substitute auditor by way of a valid motion at the AGM.

You can see where this leading… a third step on the strata audit trail.

Take the Third Step… Appoint a Substitute Auditor… But Tread Lightly.

We have heard through the body corporate grapevine of at least one body corporate manager having already taken the initiative, and who now includes, in all clients’ AGM voting papers, provision for an alternative auditor.

This type of initiative should be encouraged and given full consideration by all bodies corporate and their professional advisers.

But a word of caution:  there are some potential minefields to be avoided when drafting this provision, and reference should be made to perceptive, informed strata professional to ensure your best intentions to avoid one problem do not inadvertently cause another.

Some potential minefields?  There currently is an adjudication application in play on this very issue, so it would not be appropriate to make comment here until it is resolved in the proper forum.

In the meantime, however, we suggest you confer with your committee and body corporate manager about the merits of this initiative.

If your body corporate has already taken this step, we would appreciate your sharing it with the UOAQ.  Audits are an important part of every strata community’s governance process, and we welcome the opportunity to pass on your experiences and learnings to other like-minded bodies corporate.

[Sidebar: we’ve heard from several owners, even committee members, that in their view the legislation is ‘just a guide’.  This could be a heartfelt, but uninformed belief, or it could be just an exercise in self-rationalisation.  Whatever the reason, it is difficult to accept this view, especially when you read the actual legislation.  Take, for example, section 153 regarding audits and auditors.  This section consists of 8 sub-sections, 6 of which include the word ‘must’.  One sub-section even includes it twice.  Another sub-section goes in the opposite, but no less adamant, direction, specifying what you ‘cannot’ do.  Section 153 does seem very prescriptive to us, and surely, neither ‘must’ nor ‘cannot’ should be read as meaning ‘maybe’].



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