What an HOA audit actually is
An HOA audit is a detailed, independent examination of an association's financial statements and records, performed by a licensed CPA. The goal isn't just to check that the math adds up — it's to confirm the numbers are accurate, complete, and compliant with applicable law and the association's own governing documents. An audit is the highest level of assurance a CPA can provide.
Audit vs. review vs. compilation
Not every association needs a full audit every year. A compilation is the lightest touch — the CPA organizes financial data into standard statements without verifying it. A review goes further, applying analytical procedures and inquiries to flag anything inconsistent, but stops short of independent verification. An audit is the most rigorous: the CPA independently verifies balances, tests transactions against source documents, and evaluates internal controls. Confirm with a CPA which service level fits a given association's size and governing-document requirements.
Texas requirements: HOAs vs. condos
Texas law treats condominiums and standard HOAs differently. Under the Texas Property Code's Uniform Condominium Act (Chapter 82), condominium associations must obtain an annual independent audit or review, and the cost is treated as a common expense. For most other Texas HOAs, state law does not mandate an annual audit — the obligation typically comes from the association's own bylaws, or from a formal petition by owners requesting one. Every board should check its governing documents directly, since bylaws can impose stricter requirements than state law does.
When to get one, even if it's not required
Even when an audit isn't legally mandatory, there are moments when getting one is simply good governance. A board should strongly consider commissioning an audit around a leadership transition, a change in management company, a significant jump in budget size, or a major capital project. Each creates a clean financial record at a pivot point — protecting the outgoing board, informing the incoming one, and giving owners confidence.
What auditors actually check
A CPA conducting an HOA audit works through the association's full financial picture: bank statements and account reconciliations, reserve fund balances, assessment income against owner records, vendor invoices and contracts, and meeting minutes and governing documents. The most common findings aren't fraud — they're missing documentation, reserve funds tracked incorrectly, budget discrepancies, and reconciliations that fell behind.
How a board should prepare
Preparation makes an audit faster, cheaper, and less disruptive. Before the CPA arrives, have on hand: current and prior-year financial statements, bank and reserve account reconciliations, the budget and reserve study, vendor contracts and invoices, governing documents and meeting minutes, and records of board approval for any major expenditures.
An audit isn't a sign something's wrong. It's the mechanism that proves nothing is — and for condo associations in Texas, it's the law, not a courtesy.
Frequently asked questions
It depends on the type of association. Condominium associations must obtain an annual independent audit or review under the Texas Property Code. Most other HOAs aren’t required to audit annually under state law, unless their own bylaws mandate it or owners formally petition for one.
A review is a lighter-touch service where the CPA applies analytical procedures and asks questions to spot inconsistencies, but doesn't independently verify the numbers. An audit goes further, testing transactions against source documents and evaluating internal controls.
Cost varies by association size, complexity, and CPA firm — get quotes from local CPA firms familiar with community association audits. For condominiums, Texas law classifies the audit or review as a common expense, paid from association funds.
The recurring issues are rarely dramatic: missing or incomplete documentation, reserve funds that weren’t tracked correctly, discrepancies between budgeted and actual spending, and reconciliations that fell behind schedule.
Yes, in several situations. Leadership transitions, a change in management company, a significant increase in budget size, or a major capital project are all good moments to commission an audit, even for a standard HOA with no legal mandate to do so.