August 2024 CT

Agreed Upon Procedure Reports for Sponsor Transition By Mohammed Salyani, CPA, FCCA(UK), WilkinGuttenplan

A ssociations are deemed to be going through tran sition when control of the board is transferred from the sponsor or developer to the unit owners. This usually occurs when 75% of the units have been conveyed. At such time elections are normally held and all but one seat on the board is filled by unit owners. In this article we will not be going through the legal aspects of transition, nor will we be discussing the physical aspects of the buildings. Those would be handled by the association’s attorney and engineer respectively. This article will cover the financial aspects of transition. However, input from both the associ ation’s attorney and engineer are critical for this report and we will cover why that is the case in the section to follow. During the course of transition, normally associations will hire an independent accountant to prepare what is known as an Agreed Upon Procedures Report to help in the

process. So, what is an Agreed Upon Procedures report or AUP report as we normally refer to? It is exactly what the name implies. The one crucial factor to understand is that an AUP report is quite different from an audit. A com mon misconception is that the accountant is performing a transition audit but that is not the case. For an audit, the accountant gives an opinion as to whether the financial information contained in the report is complete and free from any material omissions or misstatements. There are certain procedures that the auditor should follow to arrive at that opinion. In an AUP report the accountant offers no such opinion and must ensure that the report does not give the reader any such impression. The accountant is simply performing certain procedures as documented in the engagement letter, reporting their findings and providing a conclusion based on the same. CONTINUES ON PAGE 16

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