So, there was once a woman who went to the doctor, and he delivered some shocking news: she only had six months to live. Stunned, she asked, “What should I do?” The doctor replied, “Marry an accountant.” Confused, she asked, “Will that help me live longer?” He said, “No, but it’ll feel like a lifetime!”
As we approach the end of the Club’s fiscal year—coinciding nicely with the end of the calendar year—it’s time to talk about something nearly as exciting as watching paint dry: annual audits! Yes, our financial operations will soon be scrutinized by an independent accountant. Let’s dive into the process, its features, and the amusing world of accounting.
First, a quick story to give you insight into my qualifications—because who doesn’t love learning about me? Early in my career, I shifted from the audit department of my accounting firm to management consulting. When such a transfer happens, partners like to take you to client meetings to explain how great you are. So, there I was, as the partner told the client that my move would improve both departments. I sat there thinking, “Is that a compliment?”
Now, let’s get serious about what makes an independent accountant, well, independent.
First and foremost, they need qualifications and experience. They must have a degree in accounting, economics, or finance, several years of experience, and pass a rigorous exam to become a certified public accountant. These dedicated folks wander into the finance department, poking around your accounting records. These are the people actuaries invite to their parties to liven up the festivities!
So, what does our noble independent accountant do? Simply put, they test the accounting records, review financial statements, and provide an opinion on whether the financial statements accurately reflect the entity’s financial position. If everything looks good, they give a “clean opinion,” which in accounting lingo translates to “it’s all good, folks!”
Now, if you’re wondering about our Club’s track record, we’ve been in the clear with “clean opinions” on our financial statements in the past, and let’s keep that trend going—no one wants a “dirty” opinion, unless it’s rendered by Buddy Hackett!
Here are a couple of important things to keep in mind about the audit process:
1. Independence: The accountant must be independent. They can’t benefit from their work, nor can they hold any management role. Independence is both a perception and a fact—like a good pair of bifocals! To paraphrase those outstanding litigators (wink wink) at Morgan and Morgan, “Perception Matters.” You see, independent accountants can sometimes give management a “pat on the back” for great accounting records. While this is often true, it can lead to a perception of a lack of independence. Assessing their independence is a key job for the Board of Directors along with making sure the Winkler gate works every other time.
2. Fraud Detection: Keep in mind that audits and opinions are not designed to catch intentional fraud. The accountant will test management controls that are supposed to prevent fraud; however, these tests are based on samples—just like opening a bag of mixed nuts and hoping for more cashews. You might get a few questionable pieces in there!
Heritage Palms takes audits seriously. We have retained qualified accountants and the Board assesses their independence and reviews their performance annually. The Board also makes the accountant available for questions and answers in a public meeting—kind of like “Ask the Audience,” but with no phone-a-friend involved!
And finally, let me take you back to the 1980s (the era of great hair and even greater music), when I was auditing a nursing home in western Kentucky. Nursing homes don’t typically rake in the dough, so we were crammed into a housekeeping closet. I looked up from my paperwork to see a gentleman in a wheelchair approaching. He asked if we were auditors, and when I confirmed we were all accountants, he deadpanned, “Figures never lie, but liars figure.” With that, he rolled away, leaving me wondering whether I should be offended or if he was just keeping it real! Anyway, it reinforced my “auditor’s skepticism” and I never forgot his comment.
So, here’s to year-end financial festivities—may our statements be clean, our audits be swift, and our accountants have a great sense of humor! Happy Holidays everyone!
