William, you are correct that an audit should be independent of the MC. I know of no MC which is qualified to do an audit. They are normally able to prepare budgets. Most so called accountants for HOAs are really only bookkeepers and that is all that most HOAs need (unless required by the Declaration or State Statute).
To be specific (and I am not an accountant, just a bookkeeper who has learned a little accounting from my wife who has a degree in accounting and finance and many years experience as a controller) here are a few items involved in an audit:
Inspection and evaluation of all capital assets - determine the assests exist, their value is accurately represented, depreciation schules been done properly, and more.
Contact a statistically representative sample of financial institutions, vendors, and other parties which are listed as sources of income and expenses. Verify independently that each item of income and expense agrees with the current records. If a discrepency is found expand the sampling.
INTERNAL CONTROLS - review the procedures which have been set up; evaluate procedures used to determine degree of compliance; determine compliance with laws and regulations; and many other key items.
There are other important items and details within each of the above which a CPA follows when doing an audit. Usually an HOA only or their accountant does a bookkeeping review not even a financial review. I am just starting to appreciate what an audit really entails. And to think that I used to laugh at accountants and call them bean counters. No more, not since I married one!
