As part of the review/audit process, CPAs require a signed representations letter describing the management practices of the association. "Management" includes board members. The letter is one of the steps CPAs must follow to satisfy the review and auditing standards issued by the American Institute of CPAs. (See sample representation letter recommended by Thomson Reuters in their CPA's Guide to Homeowners Associations.)
Signatures. Typically, the signatures of two board members (usually the president and treasurer) and the manager are required. The representations are to the best of the knowledge and belief of the signers. Even though the financial statement is the association’s, the manager signs because he/she is the primary source of information in the statement. If directors refuse to sign, the CPA issues a draft report instead of a final signed statement.
Recommendation: Boards should be familiar with the representations in the letter. When associations are defrauded, it is usually because boards delegate too much financial responsibility to one director or the management company. It's always the "trusted" employee who has the opportunity to embezzle funds.
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