Miresh Thasan, Senior Manager, Kraft Berger LLP CPA’s
New standards on compilation engagements have been released by the Auditing and Assurance Standards Board, which are effective for fiscal periods ending on or after December 14, 2021. The new Canadian Standard on Related Services (CSRS) 4200, Compilation Engagements will replace Section 9200. These compilation engagements were also previously informally referred to as “Notice to Reader” or “NTR” under Section 9200.
What are the key changes and what does it mean for you?
If you engage a practitioner to compile financial information, this will be applicable to you. The following changes can be expected:
- Your accountant will ask you about the intended users of the financial statements (for example, banks, lenders, investors, etc.).
- If the compiled financial information is intended to be used by a third party (for example, a current or prospective lender), management must acknowledge:
- That the third party is in a position to request and obtain further information from management: or
- Has agreed with management’s selected basis of accounting.
- With the assistance of your accountant, a basis of accounting will need to be selected and disclosed in the notes to the financial statements. Most common bases of accounting for compilation engagements are:
- Cash basis of accounting with selected accruals and accounting estimates
- Specified basis as established by creditors or regulators
- A new engagement letter will be issued.
- Your accountant will ask more questions about the entity, including its operations, accounting system/records, and areas that require significant judgement (such as accounting estimates or selection of accounting policies).
- A new compilation engagement report will be attached to the financial statements. The title of the report “Notice to Reader” will be replaced by “Compilation Engagement Report.” The new report will clearly describe management’s responsibilities, the practitioner’s responsibilities, and the limitation of a compilation engagement.
- Before issuing the compiled financial statements, your accountant will require your approval of the statements. The compilation engagement report will be dated using your approval date.
Please reach out to your Kraft Berger LLP representative if you have any questions. We will work with you to ensure we make this transition as smooth as possible.
Additionally, feel free to refer to the following resources. These are detailed summaries of the changes to compilation engagements, prepared by the Chartered Professional Accountants of Canada (CPA Canada).
Compilation Engagements – Management Briefing
Compilation Engagements – Third Party Briefing