Who decides whether the condo auditor is to attend the AGM?
Most condo corporations have their auditor attend the AGM to present the audit and answer any questions on same. Other corporations don’t and, instead, have a director or manager present the audit report. In this blog post we explore all questions related to auditors including whether the auditor is required to be present at the AGM and who decides whether the auditor is invited to attend the AGM.
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Does every corporation need an auditor?
The Condo Act requires the appointment of an auditor on an annual basis.
One of the very few exceptions to this is if your condo consists of less than 25 units and, as of the date of the owners meeting, all of the owners have consented in writing to dispense of the audit until the next AGM. This dispense is required on an annual basis. So, if you have 25 units or more, you require an auditor.
Job of the auditor
Each year, the corporation prepares its financial statements to be presented to the owners at the AGM. This is usually done with the manager’s assistance. The job of the auditor is to examine these financial statements on behalf of the owners and to make an annual report on them. Both the financial statements and the auditor’s report must be presented to the owners at the AGM.
In the context of their examinations, auditors have a right to access, at all times, all records, documents, accounts and vouchers of the corporation and are entitled to require any necessary information or explanation from directors, officers, employees or the manager of the corporation.
Ultimately, the auditor has to include in their report any statement that they consider necessary if the corporation’s financial statements are not in accordance with the requirements of the Condo Act or if the financial statements do not present fairly, in all material respects, the financial position of the corporation. The auditor must also report on whether the operations out of the reserve fund fairly present the information contained in the reserve fund study.
Who appoints the auditor?
Auditors are not appointed by the board or by management. Auditors are appointed by and for the owners. This is done at each annual general meeting. The auditor holds that office until the close of the next annual general meeting – or stated otherwise, the board cannot remove them before the term is up.
There are instances where the courts are called to appoint an auditor. That usually takes place when an auditor has not been appointed by the owners for whatever reason.
Removal of an auditor
Since the auditor is appointed by owners, only owners can remove an auditor before the end of their term. However, a strict process must be followed when such removal is contemplated. This process includes giving the auditor at least 30 days notice before the meeting where a vote will take place to remove them. The auditor has a statutory right to make written representations to the corporation on their proposed removal. They also have the right to be present and address the owners.
Do note that this strict process only applies when owners intend on removing an auditor before the end of their term (the end of the following AGM). It does not apply when the owners are selecting a new auditor at an AGM.
The auditor must be independent
It is crucial for an auditor to be (and to be seen) as independent. For this reason, the Condo Act is clear: the auditor cannot be a director, officer, employee or a manager of the corporation. They can also not be an employer, employee or partner of any of these. It is interesting to note that the Condo Act does not disqualify an owner from acting as an auditor… I find that quite odd and suspect that an auditor would not act in this capacity if they were an owner of the corporation.
Finally, the auditor cannot have an interests in a contract to which the corporation is a party.
Must the auditor be present at the AGM?
Ultimately, the auditor has a statutory right to attend a meeting of owners and to be heard on any part of the business of the meeting that concerns the auditor. For that reason, the corporation has an obligation to give the auditor notice of all meetings of owners and of all other communications relating to the meetings that owners are entitled to receive.
Having said that, the Condo Act does not require the auditor to be present. What is required is that the auditor be granted the possibility to attend and speak to the owners.
Who decides whether the auditor is to attend the AGM?
There are three entities entitled to request the auditor’s presence at the AGM:
- The auditor
As stated in the section above, the auditor has a right to attend an owners meeting. No one can prevent them from being present.
- The corporation
The corporation can require the auditor to be present. This is, in fact, done in the vast majority of cases. If the corporation wants the auditor to attend, they must provide them with at least 5 days notice. In such case, the auditor must attend. Naturally, it makes more sense to give them much more notice to ensure they are available. In most cases, you want to schedule your AGM in consultation with the auditor to make sure they are available.
- The owners
Any owner (even just a single one) may require the auditor (or a former auditor) to be present at a meeting of owners for the purpose of answering questions concerning the basis of the auditor’s opinion in the auditor’s report. This is an important right as the auditor is appointed by and for the owners. It is therefore not up to the board (or management) to decide whether to invite the auditor. A single owner can make that request by sending a written notice to the auditor and to the corporation. The notice must go out at least 5 days before the meeting. Again, to make sure the auditor is available, owners are best to send their notice with ample notice (don’t wait for 5 days before the meeting).
At the meeting of owners, the auditor shall answer all inquiries concerning the basis upon which the person formed the opinion in their report.
As indicated on a few occasions already, ultimately, the auditor is appointed by and for the owners. They are an independent third-party watchdog whose job it is to ensure that the the financial statements presented to the owners reflect, in all materiality, the financial position of the corporation. They should be given free and full access to the corporation’s records/information; they should be candid and open towards the owners and they have a right to attend and a duty to answer questions relevant to their office.