Quick Answer
An audit gives the highest level of assurance, a review gives limited assurance, and a compilation gives none. In California, Civil Code section 5305 requires a CPA review for any fiscal year in which gross income exceeds 75,000 dollars, unless the documents require more. Michigan condominium associations with annual revenue over 20,000 dollars must have an audit or review, unless members opt out by vote.
Audit vs Review vs Compilation
All three involve a CPA, but the work and the assurance differ.
| Service | What the CPA does | Assurance |
|---|---|---|
| Audit | Extensive examination of records under auditing standards | Reasonable assurance that statements are materially correct |
| Review | Limited inquiry and analytical procedures | Limited assurance |
| Compilation | Assembles financial information provided by management | No assurance |
These descriptions follow general California community association law guidance, which also notes that neither audits nor reviews guarantee that embezzlement will be detected. Audits cost more than reviews, and reviews cost more than compilations, because of the procedures involved. Ask CPAs for quotes rather than assuming a price.
California: Civil Code Section 5305
Under the Davis-Stirling Act, section 5305 says that, unless the governing documents impose more stringent standards, a review of the association's financial statement must be prepared in accordance with generally accepted accounting principles by a licensee of the California Board of Accountancy for any fiscal year in which gross income exceeds 75,000 dollars. A copy must be distributed to members within 120 days after fiscal year-end by individual delivery under section 4040.
If your documents require an audit, the documents control. For the full annual reporting picture, see the California annual disclosure checklist.
Michigan: Condominium Act Section 57
MCL 559.157 says a condominium association with annual revenues greater than 20,000 dollars must annually have its books, records and financial statements independently audited or reviewed by a certified public accountant, following AICPA standards. The same section allows the association to opt out of that requirement on an annual basis by an affirmative vote of a majority of its members by any means permitted under its bylaws. We confirmed this against the statute text as published on the Michigan Legislature site, so ask your attorney whether any later amendment applies.
The statute speaks of audited or reviewed statements, so a compilation alone would not meet it. Non-condominium associations in Michigan depend on their own documents and other laws.
Choosing the Right Level for Your Community
- Check legal minimums first: state statute and your bylaws or declaration.
- Consider size and complexity: larger budgets, large reserves and shared facilities may justify an audit even when a review is the minimum.
- Consider transition events: a change in management or board, or concerns about controls, can justify deeper work.
- Weigh cost against value: an opt-out vote may save fees in Michigan, but members should understand what they give up.
Choosing a CPA for Your HOA
Look for a CPA with community association experience who is licensed in your state and independent from your management company. Ask about their familiarity with reserve fund reporting and how they handle HOA financial management. Boards that keep clean books, reconciliations and reserve records make any engagement faster. See board member responsibilities for fiduciary duties.
Frequently Asked Questions
Does my HOA need an audit?
Only if state law or your governing documents require it. Many associations are required to have a review or audit depending on size and state. Confirm with your attorney.
Is a review the same as an audit?
No. A review provides limited assurance through inquiry and analysis, while an audit involves more extensive testing and gives reasonable assurance.
Can members vote to skip the CPA requirement?
In Michigan, the Condominium Act allows an annual opt-out by majority vote of members. California section 5305 contains no similar opt-out in the text we reviewed.
How long does the board have to give owners the review in California?
Section 5305 says within 120 days after the close of each fiscal year.
Does an audit prevent fraud?
No. It is not a guarantee, so keep strong internal controls such as separate duties and monthly reconciliations.
How APM Helps
APM manages community associations in Michigan and California and supports boards with organized financial records for CPA engagements. Learn about our association management services, see pricing, or request a free proposal.
This article is general information, not legal, tax or accounting advice. Laws and documents vary by community; ask your association's attorney or CPA about your situation. Last verified October 25, 2026.
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