Strata Audits in BC: When Are They Required?

When a BC council asks us "do we need to audit our books?", the honest answer is usually no, but they probably should anyway. The strata audit BC question is governed by one short section of the Strata Property Act, and the default answer is that audits are optional. That said, an audit is one of the cheaper forms of governance insurance a council can buy, and councils that have lived through a bookkeeping scandal almost universally wish they'd audited sooner. This guide walks through when audits are mandatory, when they're optional, what a review engagement is, and how to decide whether to commission one this year. We've sat at many council tables across the Sea to Sky and the audit conversation always comes up around year-end. Here's how to think about it.

What the Strata Property Act actually says

The governing section is SPA s. 105. It requires the strata to prepare year-end financial statements and present them at the AGM. It does not require those statements to be audited. The full audit obligation is triggered only in two cases:

• Owner-initiated: at least 1/4 of owners (by unit entitlement vote at a general meeting) vote in favour of having the financial statements audited
• Bylaw-required: the strata's bylaws specifically require an annual audit

That's it. There is no size threshold, no automatic audit by virtue of the strata being old or large. Most BC stratas have never been audited, and the legal default is that they don't have to be.

This is different from condominium corporations in some other provinces. Ontario, for example, requires an audit for any condo over a certain size. BC is in the minority of provinces that leaves the decision to owners and councils.

When is an audit a good idea anyway?

We've watched several patterns play out across Sea-to-Sky stratas. Stratas that audit periodically catch issues early and rarely have surprises. Stratas that go many years without any external review are the ones where late discoveries can become drawn-out forensic engagements. Our practical guidance:

• Smaller stratas: review engagement on a multi-year cadence. Full audit only if a specific issue arises.
• Mid-sized stratas: review engagement annually or biennially, periodic full audit.
• Larger stratas or those running significant capital projects: review engagement annually, more frequent full audits.
• Management change: full audit at the transition, regardless of strata size.
• Suspected error or irregularity: full audit immediately, possibly forensic if loss is suspected.

The point of regular review isn't to catch criminals (fraud is rare). The point is to catch the everyday errors that build up: misclassified expenses, fund transfers that lack documentation, bank reconciliations that never quite clear, depreciation calculations that drift from current accounting standards.

Audit vs review engagement

These are two different products from a CPA firm, and councils often conflate them. Here's how they compare:

A review engagement is the right product for most stratas most years. It gives a CPA's professional opinion that nothing has come to their attention to suggest the financials are wrong (which is meaningful) at a fraction of the cost and time of a full audit. Save the full audit for the year when something specific has prompted it, or when enough time has passed that a deeper check is warranted.

How to commission an audit or review

The council resolution authorizing an audit needs to be a majority vote (3/4 only if the cost requires CRF funding under s. 96). Typical workflow:

1. Get quotes from several CPA firms. Strata-experienced firms are worth a small premium. They know what questions to ask.
2. Define the scope in writing. Year ending what date, all accounts, both operating and CRF, what reports are expected.
3. Set a timeline. Audits usually run several weeks from engagement to final report.
4. Provide complete records. The manager pulls bank statements, reconciliations, GL detail, AGM minutes, bylaw amendments, and contractor invoices.
5. Review the management letter. This is the CPA's separate note to council on internal control gaps. Often more valuable than the audit opinion itself.

The management letter is the part most councils ignore but shouldn't. It lists the internal control weaknesses the CPA observed during the engagement: dual-signature thresholds, segregation of duties, documentation gaps. These are the easy fixes that compound over time.

What an audit will and won't catch

Audits are excellent at catching:

• Bookkeeping errors that have built up over time
• Misclassified expenses between operating and CRF
• Unreconciled bank items
• Missing supporting documents for material expenses
• Improper fund transfers between accounts
• Calculation errors in special levies or surplus refunds

Audits are less effective at catching:

• Outright fraud by management or council (requires forensic engagement)
• Kickbacks on contractor work
• Personal use of strata credit cards in small amounts
• Cash payments that bypass the books

The CRT has ruled on cases of this kind: once 1/4 of owners vote for an audit, the strata must commission one promptly and cannot stall the process. If your council is being asked for an audit and is dragging its feet, that line of decisions is the legal lever.

Audits and management transitions

Whenever your strata changes management firms, audit at the transition. This is the single highest-value time to audit. The outgoing manager hands over records under SPA s. 35, and the incoming manager establishes a baseline. Discrepancies found later are vastly harder to resolve than discrepancies found at the handover.

A baseline audit at transition costs the same as any other audit, but it provides a clean starting point for the new relationship. We recommend it for every council we onboard. For more on what a clean transition looks like, see our switching strata managers post.

Budgeting for an audit

Audits and reviews are operating expenses, paid from the operating budget at year-end. Plan for them at AGM time so the cost doesn't surprise anyone. Our strata budgets guide covers how to build this into the annual budget cycle.

If you've never read your strata's financial statements before commissioning an audit, start with our owner's guide to strata financials. It will help you interpret the CPA's findings when they arrive. And if your year-end surfaces a surprise surplus or deficit, our surplus and deficit rules post walks through how to handle it at the AGM.

Councils unsure whether an audit is warranted are welcome to reach out via /contact-us for an honest second opinion. Sometimes the answer is yes, sometimes a review engagement is plenty, and sometimes the issue is upstream of the books entirely.

How to read the audit opinion

When the CPA issues the audit report, it will contain an opinion paragraph. There are four possible outcomes and council should know how to read each:

• Unqualified ("clean") opinion. The financials are fairly presented. This is what you want and what most well-managed stratas receive.
• Qualified opinion. The financials are fairly presented except for a specific issue (usually one identified line item or a scope limitation).
• Adverse opinion. The financials are materially misstated. Rare, and a serious problem.
• Disclaimer of opinion. The CPA could not gather enough evidence to form an opinion. Usually indicates records are so incomplete that audit isn't possible. Also rare and serious.

Read the full opinion, not just the summary. A qualified opinion isn't the end of the world, but it does require council to understand what the qualification covers and what to do about it. A disclaimer or adverse opinion is grounds for a manager review.

Common audit findings in Sea-to-Sky stratas

Across the audits we've sat through with Sea-to-Sky stratas, the same handful of findings keep appearing:

• Inconsistent dual-signature application on cheques over the threshold
• CRF interest not allocated correctly between operating and CRF
• Insurance premium prepayments not amortized through the year
• Bank reconciliations performed but not signed off by council
• Capital expenditures not formally tied to 3/4 vote resolutions in minutes
• Year-over-year budget variances not analyzed in the management letter

None of these are catastrophic individually. Together they're a checklist of governance hygiene. Good councils fix them in the year following the audit and the next audit comes back cleaner.

For the day-to-day financial reporting that the audit is testing, see our financial statement guide, and for the governance duties of the council members commissioning the audit, see strata council duties BC.