As your trusted advisors we want to inform you of changes that will impact the compilation engagement(s) (informally known as a “Notice to Reader”) we perform for your business. The following is intended to support you in your understanding of the new standards and to assist you in the discussions we will have as they pertain to your business(es).
For the first time in over 30 years, the Canadian Auditing and Assurance Standards Board has issued new compilation engagement standards to update and strengthen the requirements for accepting, conducting and reporting on compilation engagements, Canadian Standard on Related Services (CSRS) 4200, Compilation Engagements.
These new standards are effective for compiled financial information for periods ending on or after December 14, 2021.
Expected Changes to Your Compilation Engagement
Under the old standards, your trusted advisor would refer to your compilation engagements informally as “Notice to Reader” or “NTR.” Moving forward, you can expect to have these engagements referred to as compilations or compiled financial statements.
The following are a summary of changes you can expect to ensure your business’ compiled financial statements adhere to the new standards:
- Discussion of details related to your overall business, specific operations, accounting system, and accounting records.
- Discussing signiﬁcant judgments that we have assisted management within the preparation of the compiled ﬁnancial information. An example of a signiﬁcant judgment could include the determining allowance for doubtful accounts or how revenue is recognized and measured. These judgments are discussed to assist you in understanding their impact on the compiled ﬁnancial information and accepting responsibility for them.
Significant judgements are discussed so that you understand their impacts on the compiled financial information and accept responsibility for them.
- Reviewing questions that may arise if we believe the compiled ﬁnancial information appears false or misleading.
- Discussing the expected basis of accounting to be used in the preparation of your financial information and the related note disclosure.
Changes to Your Year-End Engagement Letter
The year-end engagement letter will be revised to include the following sections: objective, scope, intended use of the financial information, our responsibilities, and your responsibilities and acknowledgments as required by the new standard. In addition, the following information will also be included:
1. Disclosing if your financial information is expected to be used and/or accessed by a third party (i.e. your lender) and whether the third party has access to additional information.
Your acknowledgement of this third party access to information is required before the advisor can accept or continue working on the engagement.
2. The description of the basis of accounting applied to the financial statements. This description will document the agreed upon method in how the compiled financial information is to be prepared.
3. A draft of the compilation engagement report that will be attached to the compiled ﬁnancial information.