Audit consideration

BMSMA 2004, S45(1) of the Act states that “the books and accounts of the Management Corporation in respect of each financial year of the management corporation shall be audited”


Insight of what an auditor looks for when examining the accounts of an MCST

  • All resolutions of meetings that affecting the financial position should be carried out.
  • Assets, liabilities, income and expenditure items are fairly stated in the accounts.
  • Any material variances in income and expenditure items between last and current year are justified.
  • Cash-flow position
  • Long outstanding material items needs to clear up.
  • Segregation of Sinking Fund expenditure and Repair and Maintenance expenditure
  • Contingencies i.e. legal cases AGAINST MCST to be disclosed
  • Events occurring after year-end which affects audit year “Post Balance Sheet review”
  • Does the Management Council regularly review the financial statements?
  • Are set procedures adhered to? Action to recover unpaid contributions
  • Ensure carrying out of resolutions that affect financial position
  • Are internal controls adhered to:
  • Approval limits for expenditure
  • Calling for tenders/quotations for major expenditure
  • Reviewing quotations
  • Disclosure of interest in contracts
  • Every member of council who directly or indirectly, interested in a contract or proposed contract with the Management Corporation shall as soon as practicable after the relevant facts have come to his knowledge declared the nature of his interest at a meeting of the council (BMSMA, S 60))


Necessary documentation required for an annual audit

  • Financial statements, including Trial Balance, Balance Sheet, Income and Expenditure Statement, Bank Reconciliation.
  • General and sub-ledgers print out by month and total
  • Supporting Schedules for Balance Sheet and Income & Expenditure items,Draft tax computation information
  • All original supporting invoices /receipts attached with payment vouchers, bank statements, etc.
  • Notices of Assessment and correspondence between the MA and IRAS
  • Legal correspondence file
  • Minutes of meetings, AGM, Council Meeting and Sub-council meetings
  • Other correspondent files
  • Services Contracts


Fees

Generally, fees are charged on time based or pre-agreed base on number of units and kind of project. Generally, commercial is higher than the residential because
the issues are more complex.


Materiality Concept

Materiality is a relative factor, and any decision to set a materiality limit will require a “base” factor to be selected.

Basically, do not worry too much about “small things”! We do not want to waste resources checking why telephone expenses increased from $135 to $150.

Instead, we would require an explanation on why utilities have increased from $25,000 to $35,000 – was there a leaking pipe during the year ?

Then again, this applies only to “normal MCSTs” – other council members may want to question everything under the sun!


Management Letters

This is the result of our review of the financial statements and deriving some comments and recommendation for improvements.

Our review is not solely for the purpose of detecting fraud but is a “by-product” of our audit. We therefore cannot guarantee that our audit has uncovered all weaknesses or fraud.

The following are typical comments:

  • Management/Sinking fund in deficit
  • Long outstanding items in the accounts e.g. accruals, unidentified renovation deposits.
  • Unpresented cheques dated more than 6 months still unpresented
  • Major Sinking Fund expenditure not resolved at meetings
  • Payments without authorized/supporting documents to support
  • Waiver of late interest not been approved
  • C/f balance does not tallied with b/f in new accounting year· GST not accountable for or GST Form 5 reported amount not tallied with the GL account
  • Wrong classification of expenses accounts · Legal claim not reflected in the account
  • Non-existence fixed assets not written off, and no fixed assets register is maintained and no yearly inspection is conducted
  • Lack of tax information
  • Contributions failed to comply with BMSMA 2004 S(39) (1), S(39) (2)
  • Tax over assessed



Knowledge Base: 
MCST