New Compilation Report

Introducing A Successor to the “Notice to Reader”

On December 14, 2021, the accounting world will witness a significant shift. The traditional “Notice to Reader” (NTR) will be replaced by a new Compilation Report. This change means that accountants will delve deeper, asking more questions before finalizing the report. The primary reason? The new standard mandates that the information presented should not appear “misleading.” 

If you’re a small or medium-sized business owner, you might already be acquainted with the “Notice to Reader” or “NTR” as per the existing standard (Section 9200). However, this is about to change. The term “practitioner” refers to a professional accountant licensed by CPA Canada or a Provincial CPA body to offer public accounting services. 

The Auditing and Assurance Standards Board (AASB) has rolled out a fresh standard for compilation engagements, known as the Canadian Standard on Related Services (CSRS) 4200, Compilation Engagements. This standard will be in effect for compiled financial data for periods concluding on or post-December 14, 2021. 

What’s New in the Compilation Engagement? 

With the introduction of the new compilation standard, practitioners are expected to undertake more comprehensive and rigorous tasks. As a business proprietor, anticipate your accountant to probe deeper before finalizing the compilation report. Here’s a brief overview of the process: 

• Engagement Acceptance: Before taking on the engagement, the practitioner will inquire about the intended use or users of the compiled data. If a third party, like a lender, is involved, they should either be in a position to seek more details from you or have an agreed-upon accounting basis with you. 
• Accounting Basis: Unlike the NTR, where there’s no obligation for the practitioner to discuss financial statement preparation, the new standard necessitates a note detailing the applied accounting basis. This aids third parties in comprehending the preparation of the compiled financial data. 
• Engagement Letter: The new standard introduces a revised engagement letter, outlining the roles and responsibilities of both the practitioner and management. 
• Entity Knowledge: Practitioners are now required to gain insights into the entity and its operations. This involves understanding the business nature, operations, accounting systems, and records. 
• Management Discussions: Practitioners will engage in discussions with management about significant judgments, especially if the practitioner has aided in preparing the compiled financial data. 
• Compilation: After compiling the data, the practitioner will review it, ensuring it doesn’t seem “misleading.” Any ambiguities will be clarified, and management might be asked to address certain issues.