Not every association needs an audit. Most need to check.

Audit and review are not the same engagement

An audit is the higher level of assurance: a CPA tests internal controls, independently verifies account balances, and provides an opinion that the financial statements fairly represent the association's position. A review is lighter — the CPA performs analytical procedures and inquiry, providing limited assurance, without the same depth of independent verification. A review costs meaningfully less than an audit, which is exactly why the threshold that triggers one versus the other matters to a board managing a limited operating budget.

How the trigger is typically structured

States that impose a mandatory requirement usually key it to one or both of two figures: the association's annual revenue and its number of units or lots. A common structure sets a revenue threshold that triggers a review, a higher revenue threshold that triggers a full audit, and in some states a separate unit-count threshold that operates independently of revenue — meaning a large association with modest per-unit dues can still cross the audit trigger purely on unit count, even if the raw revenue figure looks unremarkable.

Where the CC&Rs fill the gap

In states with no statutory audit trigger, or for associations below the statutory threshold, the CC&Rs frequently impose their own requirement — sometimes an audit every year, sometimes only when a specified percentage of the membership petitions for one. A board should check both layers separately: passing below the statutory threshold doesn't mean the association is off the hook if the CC&Rs impose a stricter standard of their own.

Below the threshold isn't the same as no oversight

An association that falls below every applicable trigger still typically owes owners some form of annual financial reporting — a compilation, at minimum, or the treasurer's reconciled statements — even without a mandatory audit or review. Skipping outside financial oversight entirely because the association is technically exempt is a choice the board can make, but it's worth weighing against the same internal-control argument that applies to combining the secretary and treasurer roles: an outside set of eyes on the books, even a modest one, is one of the cheapest protections against an undetected shortfall.

Membership can sometimes waive or force the requirement

Several states let the membership vote to waive a statutory audit requirement in a given year — useful for a small association trying to control costs — but that waiver typically has to be renewed and documented annually, not assumed to carry forward silently. The reverse also exists in some states: a specified percentage of owners can petition to force a review or audit even when the association falls below the mandatory threshold, which is a mechanism boards should be aware exists before treating "we're below the line" as the final word.

A worked example: crossing the threshold without noticing

An association budgeted for a review-level engagement for years, comfortably below its state's audit-triggering revenue threshold. Then it approves a significant assessment increase to fund a deferred capital project, and the resulting annual revenue crosses into audit-trigger territory for the first time. If nobody on the board re-checks the threshold after approving the new budget, the association may proceed with the same review-level engagement it always uses — which no longer satisfies the statutory requirement now that revenue has moved. This isn't a hypothetical edge case; it's the single most common way associations end up out of compliance on this specific requirement, because the trigger is tied to a number that changes whenever the budget does, and nobody owns the job of re-checking it every year.

Building the re-check into the annual budget process

The fix is straightforward: whoever finalizes the annual budget should also confirm, as a standing last step, whether the newly-approved revenue figure crosses any audit or review threshold — before the engagement letter for the year's CPA work goes out, not after the wrong-level engagement is already underway. This is a five-minute check against a number the board already has in front of it, and it's considerably cheaper than discovering after the fact that a full year's financials need to be re-examined at the higher assurance level to satisfy the statute.

An audit is a governance tool, not just a compliance cost

Boards sometimes frame the audit or review requirement purely as an expense to minimize, which misses half of what the engagement actually does. An outside CPA's independent look at the books is one of the few checks available against an undetected error or shortfall in a volunteer-run organization with limited internal financial expertise — treating it strictly as a box to check, rather than as real oversight the board benefits from, is a missed opportunity even in years the association technically falls below the mandatory threshold.

Comparing engagement quotes before committing

Once the board knows which engagement level it actually needs, it's worth getting more than one CPA quote rather than automatically renewing with whoever handled last year's engagement, particularly for a first-time audit after crossing a threshold — audit fees for community associations vary meaningfully by firm, and a firm with genuine experience in this niche is often both more accurate and, over time, no more expensive than a generalist firm learning the association's books for the first time.

What a complete audit-determination file should contain

• The current state statute's revenue and unit-count thresholds.
• The CC&Rs' own audit or review requirement, if any.
• The association's current revenue and unit count, documented for comparison.
• Board minutes recording the threshold determination each year.
• Any membership waiver or petition affecting the requirement, with its vote count.

When to get professional help

A CPA experienced in community-association accounting should confirm which engagement level — compilation, review, or audit — actually matches your association's current numbers before the board budgets for one. An association attorney should be consulted if the board is considering asking members to waive a statutory requirement, since the waiver procedure itself is often more specific than boards expect.