When does an HOA need an audit vs a review vs a compilation
July 13, 2026 · 3 min read
Every year a board treasurer hears the same three words from a CPA and has to pick one: audit, review, or compilation. They are not interchangeable. They represent three levels of assurance, three levels of work, and three very different fees. Choosing the wrong level either wastes association money or leaves the board exposed. This guide explains the difference in plain terms.
Educational only, not accounting advice. Common Elements Accounting is a marketing service that connects boards with CPA firms that specialize in community association work. We do not prepare financial statements or perform engagements. Your specific obligations depend on your governing documents and state law, so confirm with a licensed CPA.
The three levels, from most to least
A compilation is the lightest engagement. The CPA takes the numbers the association provides and assembles them into a proper financial statement format. The CPA does not test the numbers, confirm balances, or express any opinion on whether they are accurate. A compilation says, in effect, "here are your figures presented correctly," nothing more.
A review sits in the middle. The CPA applies analytical procedures and asks management questions to provide limited assurance that nothing appears materially wrong. It is not a deep verification, but it is real professional scrutiny. A review is often the practical sweet spot for a mid-sized association.
An audit is the most rigorous. The CPA independently tests transactions, confirms bank and reserve balances with the institutions directly, examines supporting documents, and issues an opinion on whether the financial statements are fairly stated. It carries the highest assurance and the highest cost.
What usually decides the level for you
Boards often assume the choice is theirs. Frequently it is not. Three things tend to make the decision:
- Governing documents. Many declarations and bylaws specify the level of financial statement the association must obtain each year, sometimes tied to a budget threshold.
- State statute. Several states set financial reporting requirements based on annual revenue. Larger associations are commonly pushed toward a review or a full audit by law.
- Lenders and buyers. If the association is seeking a loan, or if unit buyers' lenders scrutinize association finances, an audit may be effectively required regardless of what the statute says.
Before assuming a compilation is fine, read your governing documents and confirm your state's revenue thresholds. The cheapest engagement is not a bargain if it violates your own bylaws.
Cost versus assurance
The fee climbs steeply from compilation to review to audit, because the hours climb. A compilation might take a fraction of the time an audit demands. The right question is not "what is cheapest," it is "what level of assurance does this association actually owe its members, lenders, and itself." A large association sitting on substantial reserves has a different answer than a self-managed 12-unit building.
When to step up a level voluntarily
Even when the law permits a compilation, a board should consider a review or audit if any of these apply: the association recently changed management companies, there is turnover in who handles the money, a special assessment or large reserve drawdown occurred, or owners have raised questions about the books. Independent scrutiny protects the board as much as the members.
If you would like a CPA who specializes in HOA and condo engagements to help you determine the right level for your association, tell us about your community. Free for boards.