You are very welcome to this, the first instalment, of Query Of The Week. Each week our technical team respond to a massive number of client queries. The purpose of Query Of The Week is to share with you the most common questions that keep coming up time and time again.
In this Query Of The Week, Garret Wynne examines Transfer of Common Areas in Property Management Companies.
Property Management Companies – Audits & Accounting Engagements
If this Query Of The Week was of interest to you, you will also be interested in our upcoming Property Management Companies online CPD Course.
Full details for this online CPD Course can be found here.
| CPD Allocation | 1 Hour |
| Fee | €20 (or 1 CPD Club point) |
| Presenter | Garret Wynne – OmniPro |
| Category | Auditing & Accounting |
Query Of The Week – Video Transcript
A common query we receive here at OmniPro is in relation to Property Management Companies and the transfer of common areas. For many Property Management Companies the common area has not been transferred at the balance sheet date.
Previously, the common solution to this problem would have been to include an Emphasis of Matter in relation to this, to draw the users attention to the non-transfer of the common areas.
Now we are several years into the process and we have a continuous Emphasis of Matter. The question is, do I still need to include an Emphasis of Matter?
ISA706 states, an Emphasis of Matter is used whereby it’s to draw the user’s attention to information presented in the financial statements that is of fundamental importance to the user’s understanding and interpretation of those financial statements.
If there’s a proper disclosure note within the actual financial statements then there’s no need to include the Emphasis of Matter.
We do not see this as a fundamentally important issue at this point. The issue has been there for several years, it’s been disclosed for several years and users would be aware and would be up to date on the situation in relation to the transfer of the common areas.
When preparing accounts with this issue you should bear reference to ISA706 and the Other Matter paragraph. The Other Matter paragraph is used whereby appropriate or correct disclosure is not included in the financial statements and the auditor would include an Other Matter paragraph to draw the user’s attention to information that is not presented in the financial statement.
If a proper disclosure note is included that includes information in relation to the non-transfer of the common areas, then it is okay to issue an unmodified audit report.
If the correct disclosure is not within the financial statements, then the auditor should include the Other Matter paragraph within the audit report to draw the user’s attention to the non-transfer of the common areas.