Some things are set in stone, but the Canadian compilation standard is not one of them. After nearly 35 years, the Auditing and Assurance Standards Board (AASB) has issued a new standard for compilation engagements. If you’re a business owner and typically hire a practitioner to compile your financial information, you should be aware of these changes.
Stay with us to learn more about the new compilation standard — the reasons behind the recent revisions, their benefits, and how they affect you.
The Canadian Standard on Related Services (CSRS) 4200, Compilation Engagements, was introduced last year. The new standard replaced the 1987 Section 9200 (Notice to Reader), Compilation Engagements and Assurance and Related Services Guideline AuG-5, Compilation Engagements – Financial Statement Disclosures.
The novel CSRS 4200 has brought numerous changes, including performance and reporting requirements. This standard clearly specifies what services fall under its scope and requires less documentation.
The CSRS 4200 Compilation Engagements standard went into effect on December 14, 2021. However, earlier applications were permitted.
There are a couple of reasons why the Section 9200 standard for compilation engagements had to be changed:
The following paragraphs outline the main changes the new CSRS 4200 introduces in terms of reporting and performance requirements. You can go through each one to determine how your compiled financial information will be affected.
The new standard narrows the scope of services included in the compilation engagement. It outlines what services are excluded and clarifies the conditions under which those exemptions apply.
For instance, a compilation engagement report does not have to be completed or issued if your financial information will only be included in the government-prescribed income tax return forms.
Mind that your practitioner can still complete a compilation engagement regardless of the scope exclusions under the CSRS 4200 if the management (you) desires the practitioner’s communication attached to the compiled financial information.
Before your practitioner accepts and continues a compilation engagement, the new CSRS 4200 compilation engagements standard requires the following:
The only other condition under which the practitioner can accept or complete a compilation engagement if neither term has been met is if the basis of accounting is a general-purpose framework. However, you (the management) must consider whether a review or an audit engagement would better suit the users’ needs.
The new standard requires that your compiled financial information contains a note on the basis of accounting applied during the preparation process. The note is supposed to help users, including third parties, comprehend a bit more about the entire process of generating the information.
It can be beneficial to discuss the accounting basis with the third party/users of the compiled financial information beforehand to determine whether it meets their needs.
Once you have established the basis of accounting, your practitioner will ask you (the management) to acknowledge this selection. You will also have to sign an engagement letter that confirms that you (the management) and your practitioner agree on all the following terms of engagement:
Apart from preparing the engagement acceptance and the engagement letter, your practitioner will have to:
The new standard introduces a new format of the compilation engagement report, too. The new document should include the following items:
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This blog is not meant to provide specific advice or opinions regarding the topic(s) discussed above. Should you have a question about your specific situation, please discuss it with your GBA advisor.
GBA LLP is a full-service accounting firm in the Greater Toronto Area, but we primarily service all of Ontario as well as the rest of Canada virtually, except Quebec. Our team of over 30, provides Audits and Reviews of financial statements, and Compilations of financial information, as well as corporate tax returns. We provide specialized corporate tax and succession planning for small and medium businesses, in addition to general advisory services. If you would like to schedule a call to discuss your accounting or tax needs with one of our team members, please complete the free no obligation meeting request on this page.