Auditors and annual general meetings

As we emerge from the pandemic, some boards of directors are considering a return to in-person annual general meetings (AGM). As such, it is a good time to consider whether the physical attendance of an auditor is necessary and what alternative methods are available to condominiums.

The role of a condominium auditor

As a starting point, it is necessary to close what we refer to in the industry as the “expectation gap” between what a typical owner believes is an auditor’s professional duties as compared to their actual duties under the Condominium Act of Ontario.

Under the law, an auditor’s professional duty is to provide the owners with their opinion on whether the financial statements are materially correct so that the owners can determine whether they can rely on its contents. The auditor has no control over the financial decisions or operations of the condominium as that is the responsibility of the board of directors. The only power the auditor has is over the content of their report. If the financial statements are not materially correct, the auditor has the power to “qualify” or “deny” their opinion. By doing so, the auditor is able to inform the owners and other readers of any inaccuracies that they have observed.

Some mistakenly believe that an audit is supposed to detect all “wrongdoing” and catch every error. That is neither accurate nor realistic. The primary objective of an audit is to provide an opinion on the accuracy of the overall financial statements, but within a material variance.

At the majority of annual meetings, the auditors are requested to attend to speak to their opinions on the audited financial statements. In the context of a condominium AGM, the presentation given by the auditor is usually no more than 10 minutes in length during which they summarize the findings of their report. After their presentation, the auditor opens the floor to questions from the owners of the condominium.

Auditors are often asked questions about foundational financial concepts that are referenced in their report. This is because the financial literacy of the board of directors, management, and owners can be varied. Since an auditor’s responsibilities are technically limited to answering and commenting on their report, they cannot provide advice or guidance in their presentation regarding anything outside of the accuracy of the financial statement. Pursuant to their agreement, it is the management who have been contracted to prepare the books and records of the corporation. Therefore, it is important that technical and detailed questions about the contents of the financial statements be directed at and answered by management and questions about financial choices be directed to the board of directors.

After the auditor responds to all questions, the auditor is excused from the meeting because any other business during the meeting is outside of the auditor’s scope of work. On average, the auditor will be present in the meeting for about 10-20 minutes.

The practical considerations of the format for an auditor’s attendance at an AGM

There has been an explosion in the number of condominiums in the last 20 years. Ontario, more specifically the Greater Toronto Area (GTA), has the largest number of condominiums within Canada. There are over 12,000 condominium corporations in Ontario as of today. As a result of the exponential growth of condominiums, there is also a shortage of essential suppliers required to service the many condominium corporations in Ontario, including certain maintenance contractors and professional managers. There is also a shortage of auditors that specialize in this industry.

I have consulted with several firms that audit a large quantity of condominium corporations in Ontario. There is a common consensus that it is simply not possible for the auditors to attend every annual general meeting in person. The shortage of staff combined with the increased traffic, especially in the GTA, has made it impossible to facilitate an auditor physically attending every AGM.

In light of the above, the following are alternative options that a board of directors can consider in respect to an auditor’s attendance at an annual meeting:

1. Virtual attendance model: During the pandemic, condominium AGMs were conducted virtually. What started out as a forced measure has revealed itself to be the most efficient way for an auditor to attend annual meetings. Given that the auditor is required for only a short period of time at a given meeting, the auditor can easily log on and off at the requested time, and within seconds attend another condominium’s AGM.

2. Hybrid attendance meeting: If there is a desire to have an in-person component to a condominium’s meeting, a hybrid model to the annual meeting should be considered whereby attendees can attend both virtually and in person. This would not only accommodate the virtual attendance of an auditor, but also assist with any issues with making quorum, a common problem that occurs at in-person AGMs.

3. Virtual attendance by auditor only: Even if the meeting is entirely in person, the board of directors or management can provide the option for the auditor to attend virtually by simply setting up a computer for the auditor to present via videoconference. In my experience, this format has worked well in meetings where this has been implemented, as long as the venue has a solid internet connection.

4. Teleconference attendance: Another option is to allow the auditor to call into the meeting on a phone and broadcast their presentation using a microphone. While the owners cannot see the auditor, it is equally as effective at disseminating the short summary of the audit report and providing responses to the owners’ questions.

5. Written or pre-recorded presentation: A final approach is for the board of directors or management to read a written summary of the auditor’s presentation to the owners at the AGM or for the auditor to pre-record their presentation that is shared with the owners at the AGM. Of course, this would mean the auditor would not be able to answer questions in real time. However, the board of directors or management could either attempt to answer the owners’ questions or compile a list of questions for the auditor to answer shortly after the meeting.

If none of the above formats are acceptable to the board of directors, they could still request that the auditor physically attend the AGM to present their report. However, given the difficulties caused by this approach, it is increasingly becoming a standard policy for auditing firms to charge an additional fee for this level of service. The fee is intended to compensate the auditors for the additional time required for travel and the attendance as compared to if an alternative format was implemented.

There are many aspects of our lives that have become a “new normal” in light of the pandemic. If your condominium has an auditor who acts for many hundreds of corporations, they are likely no longer going to be able to physically attend every condominium’s meeting. The board of directors of each condominium needs to start considering well in advance of the AGM how they want their auditor to present their report and subsequently communicating their preference to the auditor so that they can plan accordingly.

Stephen Chesney, F.C.P.A, F.C.A., is a partner with the firm YalePGC, LLP in Richmond Hill and currently specializes in the auditing of Ontario condominium corporations.


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