Compilation Engagement (Notice to Reader – Section 92001, / Compilation Engagement Report – CSRS 42002)

A compilation engagement is not an assurance engagement. The engagement does not require the Chartered Professional Accountant (CPA) to perform procedures to verify the accuracy or completeness of the information provided by management. Accordingly, the CPA does not express an audit opinion or a review conclusion, or provide any form of assurance on the financial information

This type of engagement involves the preparation of financial statements by a CPA along with an unaudited financial statement and statement “Notice to Reader” (1. Applies to Notice to Reader statement issued on or after January 1, 1988) or Compilation Engagement Report (2. Applies to statements issues after 2020, per the Auditing and Assurance Standards Board’s is proposed
standard CSRS 4200 The effective date is anticipated to be in the second half of the year 2020)

 Preparation of Financial Statements

The prepared financial statement requires no verification of the independence of CPA. The accountant takes the client information and puts it in the financial statement format without providing any assurance on the accuracy and completeness of the information. It has the lowest form of reliability of the different services on financial statements that can be provided by a Chartered Professional Accountant.

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Review Engagement

 

Typically, a review engagement is requested by stakeholders in a company (bank, shareholders, etc.) to ensure that the amounts within the financial statements is plausible. Whereas in a Notice to Reader, there is no assurance provided, a review engagement provides a low level of assurance from the CPA. The accountant will perform various analytical procedures, as well as discussions with the client, to ensure that the financial statement information is plausible. Should the CPA find that the amounts in the financial statements are plausible, a review engagement report is issued.

A review provides what is called negative assurance. This is a low level of assurance, meaning that nothing has come to the attention of the accountant that would leave them to believe that the financial statements are not, in all material respects, in accordance with Accounting Standards for Private Enterprises (ASPE) or International Financial Reporting Standards (IFRS), depending on which standards the company follows.

Audit Engagement

 

An audit engagement builds upon the procedures performed in a review engagement. In addition to the analytical and discussion procedures, the CPA will perform what is referred to as substantive procedures. Substantive procedures are more in-depth examination of the materials that back-up the amounts that make up the financial statements, i.e. physically examining invoices and purchase orders, physically observing that inventory exists, etc.

In addition to the substantive procedures, the accountant must obtain an understanding of the company’s internal controls and evaluate them for any significant deficiencies.

The CPA, or Auditor, will provide an audit report once the engagement is complete. The level of assurance is much higher than a review engagement, that the company’s financial statements are free of material misstatement.

Also included with an audit engagement is a Management Letter. This is a letter that is provided to management, along with the Audit Report, that provides an evaluation of the company’s internal controls, any recommendations to improve controls, and any other significant findings.

Currently do not provide audit or review engagements, If you require audit or review engagements for your company, please call us we will refer to our partner firm and setup an appointment for a consultation.

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