Hello Compilation Engagement Report. Goodbye Notice to Reader.
After almost 35 years, CPA Canada has introduced a new standard for compilation engagements, which updates and strengthens the requirements and guidance for accepting, conducting and reporting on compilation engagements.
The new standards have to be applied for all engagements related to financial information for periods ending after December 14, 2021.
The following are the main changes:
- a new Compilation Engagement Report will be issued instead of the current Notice to Reader report, which provide an expanded explanation of the roles played by the accountant and management in preparing the financial statements, and makes it clear that the engagement is neither an audit nor review and that the accountant does not provide any form of assurance on the financial information.
- the Compilation Engagement Report will be dated on the date that management approves the financial statements.
- financial statements will now include notes to the financial statements that explain the basis of accounting used to prepare the financial statements.
- management will be required to acknowledge responsibility for the final version of the compiled financial statements. This acknowledgement will be in addition to our current practice of having client’s approve the draft financial statements by signing the balance sheet.
As a result of the introduction of the new standard, we will be sending new engagement letters to all clients for whom we provide compilation services.
Finally, this may be the time for clients to consider whether they need a formal set of financial statements, whether for themselves or for their financial institutions. For those clients who do not need formal financial statements, we will still need the financial information necessary to prepare corporate tax returns but can consider not issuing a set of financial statements.
Please review your situation and advise us if you will no longer need a formal set of financial statements at your earliest convenience.