HOA Audit Requirements: What Every Board Needs to Know

Managing a Homeowners Association (HOA) involves more than just collecting dues and maintaining the property. It also means ensuring that the community’s finances are accurate, transparent, and compliant with state regulations. This is where understanding HOA audit requirements becomes essential.

Whether you're a board member, treasurer, or property manager, knowing when and why an audit is required can protect your community, build trust with homeowners, and prevent costly penalties. At Dimov Audit, we’ve helped HOAs of all sizes navigate this process with clarity and confidence.

Here’s your complete guide to HOA audit requirements—what triggers an audit, how to prepare, and why partnering with an experienced CPA firm matters.

What Is an HOA Audit?

An HOA audit is a professional, independent review of a homeowners association’s financial statements, accounting procedures, and internal controls. It ensures that financial records are accurate, complete, and in compliance with both governing documents and applicable state laws.

Unlike an informal review or compilation, an audit provides the highest level of assurance that your HOA’s financial statements are free from material misstatement.

Here’s how an audit differs from other financial engagements:

• Audit: Comprehensive examination with opinion from a CPA.
• Review: Limited scope, mainly analytical procedures and inquiry.
• Compilation: Presentation of financials without assurance.

If your HOA is experiencing financial growth, internal turnover, or increased homeowner scrutiny, an audit may be the best option—even if not required by law.

When Is an HOA Audit Required?

HOA audit requirements vary depending on several factors, including state laws, the community’s governing documents, and board policies. Here are the most common triggers:

• State Statutes: Some states mandate audits for HOAs with annual revenues above a specific threshold.
• Governing Documents: Bylaws or CC&Rs may require annual audits regardless of revenue.
• Board Discretion: Boards can vote to conduct an audit for transparency or internal control purposes.
• Owner Request: In some states, a majority of homeowners can petition for an audit.

Dimov Audit helps HOA boards determine whether an audit is legally required and provides guidance based on both statutory and operational needs.

State-Specific HOA Audit Requirements

Because HOA laws vary widely by state, it’s important to understand what applies in your jurisdiction. Here are examples of state-specific audit triggers:

• California: Civil Code Section 5305 requires a financial review by a CPA annually if revenues exceed $75,000.
• Florida: HOAs with annual revenues of $500,000 or more must prepare audited financial statements.
• Texas: No mandatory audit requirement unless specified in governing documents.
• Arizona: A CPA must review or audit finances upon petition by a majority of homeowners.

Regardless of the state, Dimov Audit offers multi-jurisdictional expertise to ensure your HOA remains compliant and well-informed.

Why HOA Audits Matter

Audits aren’t just about satisfying legal requirements. They offer tangible benefits for HOA boards and the communities they serve. Here’s why an audit is worth the investment:

• Improved Transparency: Homeowners gain confidence knowing that finances are independently verified.
• Fraud Prevention: Audits uncover red flags and discourage misuse of funds.
• Stronger Governance: Identifies areas for improving internal controls and compliance.
• Dispute Resolution: Clarifies financial accuracy during board transitions or homeowner conflicts.
• Funding Opportunities: Helps meet lender or insurer requirements for financial integrity.

An audit sends a strong message: your board is committed to accountability and sound fiscal management.

What an HOA Audit Includes

An HOA audit is a detailed process, but with the right preparation and expert support, it doesn’t have to be stressful. Here’s what an audit typically includes:

• Engagement Letter: Outlines the audit scope, responsibilities, and deliverables.
• Planning and Risk Assessment: Auditors evaluate risks based on revenue sources, controls, and past issues.
• Fieldwork: Detailed testing of transactions, bank reconciliations, reserve accounts, and vendor payments.
• Internal Control Review: Identifies gaps in financial processes and recommends improvements.
• Audit Report: Provides an opinion on whether financial statements are presented fairly in accordance with GAAP.

At Dimov Audit, we tailor our audits to the size and complexity of your HOA, ensuring efficiency and compliance at every step.

Documents Needed for an HOA Audit

Proper documentation is essential for a successful audit. Here are the key documents your CPA firm will likely request:

• Balance Sheets and Income Statements
• General Ledger and Trial Balance
• Bank Statements and Reconciliations
• Reserve Fund Reports
• Budget and Variance Reports
• Vendor Contracts and Invoices
• Board Meeting Minutes
• Governing Documents (Bylaws, CC&Rs)
• Prior Year Audit Reports (if applicable)

Organizing these materials in advance will streamline the audit process and reduce delays.

Common Red Flags in HOA Finances

During an audit, certain financial practices often raise concerns. Understanding these red flags can help boards proactively address issues:

• Lack of Segregation of Duties: One person controls too many financial functions.
• Unauthorized Transactions: Expenses not approved by the board or outside the budget.
• Missing Reserve Contributions: Failing to fund reserves as required by governing documents.
• Late or Incomplete Bank Reconciliations: Increases risk of error or fraud.
• Unrecorded Assessments: Assessments not properly invoiced or reported as receivables.

Dimov Audit helps identify and correct these problems before they become liabilities.

Choosing the Right CPA Firm for Your HOA Audit

Not all CPAs are equipped to handle HOA audits. You need a firm that understands the unique legal, financial, and operational requirements of community associations.

Here’s what to look for when selecting an audit partner:

• Experience with HOAs: Choose a firm that specializes in homeowner associations and community management.
• Knowledge of State Law: Your CPA should be familiar with HOA statutes in your jurisdiction.
• Transparent Process: Clear timelines, communication, and expectations from start to finish.
• Fixed Fees and No Surprises: Flat-rate pricing with no hidden costs.
• Responsive Service: Boards and management companies need fast, clear answers during an audit.

Dimov Audit offers all of this—and more. With hundreds of HOA audits completed nationwide, we bring deep knowledge, efficiency, and integrity to every engagement.

How Often Should HOAs Be Audited?

Even if not legally required annually, it’s good governance to audit your HOA at least every 1–3 years. This cadence supports:

• Regular Financial Health Checks
• Transparency for Homeowners
• Compliance with Lenders or Insurers
• Preparation for Capital Projects or Assessments

Regular audits reduce the risk of surprises and demonstrate strong financial stewardship to your community.

What to Expect After the Audit

Once your HOA audit is complete, the board receives:

• An Audit Report: Includes the CPA’s opinion on the financial statements.
• Findings and Recommendations: Suggestions to improve financial procedures or correct issues.
• Supporting Schedules: Details on reserves, assessments, and expenditures.

Boards should review these results during a meeting and, when appropriate, share summaries with homeowners. Dimov Audit helps translate technical results into clear, actionable insights for the board and the broader community.

Stay Compliant, Earn Trust

Understanding HOA audit requirements is about more than compliance—it’s about building trust, protecting assets, and making informed decisions for your community. Whether you're responding to a legal requirement or proactively seeking assurance, a professional audit adds credibility and peace of mind.

At Dimov Audit, we know how to navigate the complexities of HOA audits. Our team offers personalized service, deep experience, and a commitment to protecting your community’s financial well-being.

Ready to meet your audit obligations with confidence? Contact Dimov Audit today to schedule your HOA audit consultation.