BUILDING CONTRACT AUDIT WORK PROGRAM

PROJECT TEAM (LIST MEMBERS)

Project Timing Date Comments

Planning

Fieldwork

Report Issuance

OBJECTIVES
The objective of this audit is to:
• Ascertain the extent of compliance with terms of the leasing and management contract currently in effect
between the professional building and the management company.

SCOPE
The scope of this audit will:
• Ascertain the reliability and integrity of books, records and other financial data.
• Ascertain the extent to which the professional building assets are safeguarded from losses.
• Review and appraise the soundness, adequacy and application of accounting, financial and other operating
controls.

AUDIT STEPS

INFORMATION GATHERING
• Obtain and review the leasing and management contract between the professional building and the
management company.
• Obtain copies of the latest financial statements and trial balance for the professional building.

GENERAL
• Perform an overall analytical review on both the latest financial statements and the latest trial balance.
• Review all board of directors’ minutes for the period under review. Assure that all significant changes in the
administration of the building, such as rental increases, are formally approved and recorded in Board minutes.
Similarly, assure that all changes adopted by the Board are reflected in the books of account.
• Review the leasing contract between the professional building and management company. Judgmentally test
for compliance in all areas not already covered by steps in this audit program.

CASH ACCOUNTS
• Identify cash accounts and review control procedures over the accounts to determine appropriateness and
accuracy.
• Verify that only authorized withdrawals or disbursements are made from such account(s).
• Verify compliance with ABC policy 16-d, cash/investment management – participation, if applicable.

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• Determine that rent receipts and other miscellaneous receipts per book are compared to deposits per bank
statement and determine that independent verification and reconciliation of such are regularly performed.
• Review the most recent bank reconciliation for all bank accounts.
− Determine that all outstanding checks are listed in detail and that all deposits in transit are listed
in detail.
− Test clerical accuracy of manual check register/checkbook and bank reconciliations.
− Determine that bank reconciliation ties to the general ledger cash balance.
• Review bank reconciliations for other months.
− Ensure that beginning cash balances in check registers equal cash on the previous month’s
balance sheet and tie to the previous month's bank reconciliation.
− Investigate cause for any checks/deposits outstanding longer than 30 days. Document causes.

ACCOUNTS RECEIVABLE
• Review a sample of leases that have expired in the past year to confirm that they are current and that the
terms are consistent from one tenant to another.
• Review control procedures over monthly reconciliations of accounts receivable and determine appropriateness
and accuracy.
• Verify the number of tenants from which rents or other receivables are due.
• Based on signed leases and rental schedules examined, recompute the amount of rental income for the period
under review. If any leases provide for the pass-through of operating expenses or taxes, confirm that there is
support for the amounts calculated. Reconcile it to the books of account.
• Verify the collectability or estimate the probability that the rent receipts or other receivables are collectible.
− For all charges, compare individual tenant records to accounts receivable aging. Verify charges
on aging with individual tenant records for a minimum of 20% of the number of active tenants.
− Review aging for delinquent tenants. Confirm that appropriate action has been taken on all
delinquent accounts.
• Review “other income” accounts and test as deemed necessary.

PROPERTY AND EQUIPMENT

• Determine that assets are accounted for and properly classified on the books.
• Determine that total costs of assets are properly accounted for by selecting a key item sample of major
additions for the year and examining approved invoice support.
• Review procedures for calculating depreciation and verify the accuracy of recorded depreciation.

OTHER ASSETS
• Obtain/develop an analysis of the accounts included in other assets. Comparing appropriate periods, review
variances in such accounts and obtain explanations for significant changes between periods.

LIABILITIES AND EXPENSES

• Verify that liabilities are properly distinguished as current versus long-term (test and verify the due date of
selected obligations).
• Verify that liabilities are properly recorded (look for omitted/understated/contingent liabilities).
• Verify the number of liabilities for the period just ended.
• Randomly select a representative sample of disbursements (including any payroll checks) completed during
the period under review and perform the following:
− Trace check number, date, payee, and amount to the cash disbursements journal or check
register.

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 − Examine appropriate support and authorization for the disbursement.
− Examine a purchase order and receiving documentation, where applicable, noting the agreement
of terms with vendor invoice.
− Note cash discounts taken, if available.
− Examine canceled checks, noting agreement with a journal of pertinent items. Review check
signatures and endorsement for propriety.
− Review account distribution for reasonableness. Ensure proper posting to the books of account.
• Review the most recent filed tax return, if applicable. Test items as deemed necessary.

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