HOA Audit vs Review vs Compilation — Which Does Your Board Need?

TL;DR: An audit offers independent verification of HOA financials with the highest assurance; a review provides limited analytical procedures with moderate assurance; a compilation simply presents numbers without any CPA opinion. Most states and governing documents mandate a specific level annually based on association size or budget thresholds—typically an audit above $500,000 to $1 million in annual revenue.

_Last reviewed: July 2026 · 6 min read_

Your HOA treasurer just asked whether the board needs an audit this year, and three board members offered three different answers. One state statute, two sentences in your CC&Rs, and a stack of invoices later, you still don't know whether you're legally covered or burning money on the wrong service.

Okoniq Property Hub keeps every financial report, CPA engagement letter, and year-over-year comparison in one timeline so your board never debates which level of assurance you filed last cycle.

What are the three levels of financial assurance for HOAs?

The American Institute of CPAs defines three engagement types that produce HOA financial statements: audit, review, and compilation. Each delivers a different depth of verification and a different price tag.

An audit is the most rigorous. The CPA independently tests material account balances, inspects internal controls, confirms bank balances with third parties, and issues an opinion on whether the financials present the association's position fairly in all material respects. Expect $5,000 to $15,000 for a mid-size HOA and 30 to 60 days of fieldwork. Many states require an audit when annual revenue exceeds $500,000 or when the association has more than 50 units—check your statute.

A review sits in the middle. The accountant performs analytical procedures—ratio comparisons, trend analysis, inquiries of management—but does not verify account balances with external sources or test controls. The CPA issues limited assurance: "we are not aware of any material modifications needed." Reviews cost $2,000 to $5,000 and take two to three weeks. Several states allow reviews for associations below the audit threshold.

A compilation is the least expensive and offers zero assurance. The CPA takes your numbers, formats them into GAAP-compliant statements, and attaches a disclaimer: "we have not audited or reviewed these financials and express no opinion." Compilations run $1,000 to $3,000 and can be completed in a week. They satisfy disclosure requirements but provide no independent validation—useful for small associations in states with no statutory mandate or when your CC&Rs simply require "annual financial statements prepared by a CPA."

Link your engagement letters to the relevant fiscal year in Okoniq's record-keeping system so the next board can see exactly which service you purchased and when the three-year retention clock started.

Why does an audit provide the highest assurance?

The CPA independently verifies material accounts and controls, meaning the auditor doesn't just accept the treasurer's Excel file. The firm samples invoices, traces bank deposits, confirms reserve account balances with the bank, reviews vendor contracts, inspects meeting minutes for unusual transactions, and tests compliance with your reserve study funding plan.

Auditors also evaluate internal controls—who can sign checks, whether two signatures are required above a dollar threshold, how you segregate deposit duties, whether the management company reconciles accounts monthly. If the auditor finds a material weakness—say, one person controls both check-writing and bank reconciliation—the opinion letter will flag it, and lenders or buyers reviewing your financials will see the deficiency.

Most lenders require an audited balance sheet before approving a condo conversion loan or a large capital line of credit. If your association plans to borrow $500,000 for a roof replacement, the bank will ask for the most recent audit. A review or compilation won't satisfy underwriting.

The cost reflects the work: CPAs spend days on-site or in remote sessions, and you'll pay hourly rates for senior auditors ($150 to $250 per hour) plus partner review time. Budget 40 to 80 hours for a 100-unit association with $1.2 million in annual assessments. Track the invoice and engagement timeline so your successor treasurer knows the audit cycle and can plan next year's RFP.

What does a review offer that a compilation doesn't?

A review is less thorough than an audit but includes analytical procedures the compilation skips entirely. The CPA calculates financial ratios—current ratio, reserve funding percentage, delinquency rate—and compares them to prior years and industry benchmarks. If your operating expenses jumped 40 percent year-over-year, the accountant will ask management to explain the variance. If reserve contributions dropped from 85 percent of the recommended level to 50 percent, the CPA will inquire whether the board passed a deferral resolution.

The review report states, "Based on our review, we are not aware of any material modifications that should be made to the accompanying financial statements in order for them to be in accordance with accounting principles generally accepted in the United States." That phrase—"not aware of"—signals limited assurance, not the positive opinion an audit delivers.

Reviews work well for mid-size associations whose state statute allows them and whose CC&Rs don't mandate a full audit. California Civil Code § 5305 requires an audit or review for associations with annual revenues over $75,000, depending on the number of units; Nevada and Florida have similar tiered thresholds. Check your jurisdiction's statute before assuming a compilation suffices—boards have been sued by owners for failing to meet the statutory floor, and directors' and officers' insurance may not cover willful noncompliance.

Tag the engagement letter with the statute citation in your document archive so the next board can verify compliance in 30 seconds instead of re-reading the civil code.

When is a compilation the right choice?

A compilation works when state law and your governing documents require "financial statements prepared by a CPA" without specifying assurance level, or when your association is small enough—typically under 30 units and under $200,000 in annual revenue—that the cost of a review outweighs the benefit. The CPA takes your trial balance, formats it into a balance sheet and income statement, adds footnotes explaining accounting policies, and attaches a one-paragraph disclaimer.

The accountant does not test numbers, confirm balances, or assess internal controls. If your treasurer accidentally recorded a $50,000 special assessment as operating income instead of a liability, the compilation will reproduce the error unless the CPA spots it during data entry—and the engagement contract explicitly says they won't look for mistakes.

Compilations satisfy disclosure requirements for owners who want to see where their dues went, but they won't help you catch fraud or catch a lender's attention. If your management company handles all bookkeeping and you've had the same firm for a decade with no red flags, a compilation may be adequate. If you recently transitioned the board or discovered missing reserve transfers, pay for the review.

Some associations alternate: audit in odd years, review in even years. Check whether your state statute or CC&Rs allow that cadence—many do not. Colorado, for example, requires an annual audit for large associations with no alternating provision.

What legally dictates the minimum level your HOA must file?

State statutes and your CC&Rs set the floor; you can always exceed it, but falling short exposes the board to personal liability claims. In California, Civil Code § 5305 requires an annual review of the association's financial statements for associations with annual revenues of $75,000 or more, and an audit for those with revenues of $500,000 or more—unless a majority of the members vote to waive the requirement at the annual meeting. In Florida, statute requires an audit for condominium associations with annual revenues exceeding $500,000 unless 75 percent of the voting interests vote to waive it in favor of a review or compilation.

Your CC&Rs may impose a stricter threshold. If the declaration says "the association shall obtain an annual audit by an independent CPA," a review or compilation won't satisfy your contract with the owners, even if state law would allow it. Pull the recorded declaration and check the exact wording—boards have been ordered to redo financials at their own cost when they relied on verbal advice instead of the written covenant.

Lenders and prospective buyers scrutinize the level of assurance when underwriting a unit purchase. If your association consistently files compilations in a state that recommends reviews, resale certificates may trigger additional lender questions, and buyers may request a price concession to offset perceived risk. Upload each year's engagement and final report to your digital record vault tagged with the fiscal year so title companies can pull the correct document in 24 hours instead of emailing the treasurer.

How should your board file and retain these reports year over year?

Keep the CPA engagement letter, the final signed report, the management representation letter, and any management comments or internal control memos together for each fiscal year. Most states require retention of financial records for at least three years; California and several others mandate seven. Even if your statute is silent, the IRS allows three years for routine audits and six if substantial underreporting is suspected, so seven years is the safe horizon.

Tag each report with the fiscal year, the engagement type (audit / review / compilation), the CPA firm name, and the date the board accepted the report. If your association switches management companies or the board turns over, the new treasurer needs to see at a glance which years have been audited, which years were reviewed, and whether any findings are still open. Board transition checklists often skip financial engagement history, and the new board ends up ordering a redundant audit or missing a compliance deadline.

If your association is underfunded on reserves, the CPA will note it in the report footnotes or management letter. Link that finding to your reserve study and any board resolutions deferring contributions so future boards understand the full context when owners ask why reserves are at 40 percent of the recommended level. Transparency in the file prevents the same question from being re-litigated every election cycle.

Some states and most FHA lenders require associations to post the most recent audit or review on the community website or make it available for owner inspection. Check your statute and your open meeting laws to confirm whether financial reports fall under mandatory disclosure. If so, redact individual owner account details and publish the balance sheet, income statement, and CPA opinion on the members-only portal within 30 days of board acceptance.

FAQ

How much does an HOA audit cost in 2025?

Most mid-size HOAs with 50 to 150 units and $500,000 to $2 million in annual revenue pay $5,000 to $15,000 for a full audit, with CPAs billing $150 to $250 per hour for 40 to 80 hours of fieldwork, analytics, and report preparation. Smaller associations may see $3,500; large master-planned communities with multiple entities can exceed $25,000.

Can an HOA board waive the audit requirement?

In many states, yes—if statute allows and a supermajority of owners votes to waive at the annual meeting. California requires a majority vote; Florida requires 75 percent of voting interests. Your CC&Rs may prohibit waiver entirely, so check both the statute and your governing documents before putting the question on the ballot.

What happens if we file a compilation when state law requires an audit?

The board may face personal liability claims from owners who argue that noncompliance with statutory financial reporting caused harm—for example, if a treasurer embezzled funds that an audit would have detected. Directors' and officers' insurance often excludes coverage for intentional violations of statute, so filing the wrong engagement type is not a risk worth taking to save a few thousand dollars.

Do reserve studies and audits cover the same thing?

No—a reserve study projects future capital replacement costs and recommends annual funding levels, while an audit verifies that the association's current financial statements are materially accurate. The auditor will check whether reserve contributions match the study's recommendation and whether reserve funds are properly segregated, but the audit does not replace the study or update the component inventory.

How often should an HOA switch CPA firms?

Many associations rotate firms every five to seven years to preserve auditor independence, though there is no legal requirement to do so. If the same CPA audits your books for 15 consecutive years, the firm may become too familiar with management or overlook emerging risks. Request proposals from three firms every few cycles and evaluate cost, industry experience, and willingness to attend board meetings to present findings.

This is educational information, not legal or accounting advice. Consult your association's CPA and attorney to confirm which engagement type your state statute and CC&Rs require, and whether your current financials meet those thresholds.