“Sometimes an auditor losses business for the right reasons.” Michael Strachan
When and why you need an audit or a review engagement of financial statements?
- Banks may require you to provide audit or review financial statements in support of the lending agreement.
- Governing body may require an audit or review of your financial statements or trust accounts to fulfil your statutory obligations.
- Stakeholders and funding organizations may require your charity / foundation / not-for-profit society to provide assurance in support of the funding requirements.
- You may want assurance on the credibility of financial information
- You wish accountant’s advice to improve the bottom line and operations. As we conduct the engagement, we gain better understanding of your business that provides insight and advice to you.
Because we must perform more works to satisfy the objective of an audit or review, these are more costly than compilation. Most owner-operated businesses requires a review engagement on financial statements.
The highest level of assurance that an accountant can provide is an audit opinion. Audit will enhance the reliability of information through activities such as internal control, internal and comprehensive auditing as well as through external third-party assurance services.
The next level of assurance that an accountant can provide is a review engagement. This gives the financial statement users “negative assurance” that nothing has come to the accountant’s attention that causes them to believe that the financial statements are not presented fairly. A review will include making enquires to management, applying analytical procedures and evaluating the evidence obtained.
New Review Standard CSRE2400 is effective for fiscal periods ending after December 15, 2017. That means, if your fiscal year end is December 31, 2017, as most businesses do, the new review standard will be applicable to your business. (Click here for update)
Without the benefit of any assurance on the reliability of the compiled information, we are engaged to collect, classify and summarize financial statements. The compiled information may not necessarily accord with accepted Canadian GAAP. Because we perform no works on assurance, the compilation is often cost less and may not be appropriate for their purpose.
Summary of Audit / Review / Compilation financial statements
|Nature of service||Audit||Review||Compilation|
|Objective||Express opinion on fair presentation||Add credibility – information is plausible||Arrange information in the form of financial statements|
|Comparative level of assurance provided||High||Moderate||None|
|Communication issued||Positive assurance opinion – “presents fairly”||Negative assurance: “nothing has come to my attention”||Caution on use: no opinion|