The accountant does not express an opinion or assurance on the financial statements prepared via compilation engagement because no procedures are performed to validate the accuracy or completeness of the company’s raw financial data provided. As a result, the Notice to Reader financial statements are prepared with a disclosure statement that an audit engagement or a review engagement was not performed, and accordingly, it does not contain an audit opinion or a review conclusion. In the past, compiled financial statements were issued by default when the CPA prepared the corporate taxes. This is no longer a requirement under the new compilation engagement standard CSRS 4200, as the corporate tax returns can now be prepared with internal financial information only without the Notice to Reader.

Banks, financial institution, and creditors often require NTR financial statements provided by the accountant to verify and evaluate the credibility and trustworthiness of a business before they will provide a loan or credit. The accountant is required to ask management about any information that appears to be misleading and to point-out and discuss areas where a judgment call has been made about information in the compiled financial information. However, management is ultimately responsible for the final version of the compiled financial information. Always check the requirements of the external party you’re dealing with to confirm whether a compilation report is necessary. If you’re a corporation in British Columbia, it’s also important to be aware of ongoing compliance obligations. To emphasize this, every page of NTR financial statements is required to be very cleared marked as “Unaudited”.

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  • Further, the financial statements need not necessarily be in accordance with a financial reporting framework such as ASPE and instead may be prepared on another basis of accounting, such as a cash basis.
  • Compilation Engagement Reports are produced by accountants at the request of management and all information contained in the financial statements is still provided by management.
  • Generally, these are sufficient if your financial statements are only used to prepare your corporate (T2) tax return.
  • Since we were not asked to issue an opinion or conclusion on the figures, it was not required to stipulate how the financial results were determined or measured.
  • Notice to Reader financial statements can be used to provide critical insights into the company’s financial performance, so you can leverage its strength while identifying weaknesses for improvements.

These types of Financial Statements are valuable for management because they involve a knowledgeable CPA assisting management with the preparation of the financial information in accordance with a basis of accounting selected by management. After completing this course you will be able to prepare a draft set of financial statements for a Notice to Reader engagement using Jazzit. The introductory paragraph will contain a reference to a note to the report and the note describes the basis of accounting applied in the preparation of the compiled information. Even if a business has a sophisticated financial or accounting team in-house, they must use an external CPA to create and sign a Notice to Reader. Typically, a review engagement is requested by stakeholders in a company (bank, shareholders, etc.) to ensure that the amounts within the financial statements is plausible. Whereas in a Notice to Reader, there is no assurance provided, a review engagement provides a low level of assurance from the CPA.

It is considered the most basic level of engagement compared to reviews or audits because the accountant does not give any assurance about the accuracy or reliability of the financial information. The accountant is not required to verify any numbers or provide assurance on the accuracy of the content within the statements. Users of financial information that do not require a review or audit or the detailed disclosures that accompany such engagements. Compilation Engagement financial statements are useful for many businesses in the preparation of their corporate tax return. Reviewed financial statements must comply with Generally Accepted Accounting Principles (GAAP) and therefore are held to more strict presentation guidelines.

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A notice to reader (NTR) accompanies an un-audited set of finance statements compiled in accordance with basic accounting principles. Even though the report provides no assurance, it is still relied on by lenders and third party and so providing more in-depth reviews and documentation is required when preparing the compiled financial information. CPA uses their professional judgement and considers the reasonability of the information provided by the client. In addition, bookkeepers usually do not record transactions that are outside the daily business such as sales, business expenses or payments.

Compilations and Notice to Readers (NTRs)

Previously, with Notice to Reader engagements, there was no mention of what basis of accounting was used. Since we were not asked to issue an opinion or conclusion on the figures, it was not required to stipulate how the financial results were determined or measured. This meant that two businesses in exactly the same industry, having exactly the same operating results, could have shown different profitability (if one used the cash basis of accounting, and the other used the accrual basis, for example). Interestingly, despite the prevalence of these statements on the market, there has always been a disconnect between what business owners and users thought accountants did to issue NTRs, versus what the standards required from us.

The report aims to present your financial data clearly and concisely, making it easier for external users to understand. It is also very clearly noted on the cover letter to these financial statements that “Readers are cautioned that these statements may not be appropriate for their purposes”. NTR Financial Statements or Notice to Reader Financial Statements may ring a bell if you’re a business owner who’s ever applied for a bank loan, but to others, or to new business owners, the term “NTR” or “Notice to Reader” may sound foreign in the beginning. In contrast, the financial information is compiled on an NTR based on the information provided by the business without the additional procedures and standards mentioned above. Effective December 14, 2021, the Auditing and Assurance Standards Board (AASB) released a new Canadian accounting standard, CSRS 4200, which affects the way how Notice to Reader financial statements will be issued and used going forward. Notice to Reader financial statements can be great resources for improving investors’ confidence as it would allow them to analyze the company’s current financial position and assess the future growth potential of the business.

  • A Notice to Reader is a disclaimer attached to financial statements in a Compilation Engagement, stating that the accountant has not audited, reviewed, or verified the information and provides no assurance on its accuracy or completeness.
  • These financial statements can highlight the business’ credibility or satisfy a specific requirement.
  • This notice clarifies that the accountant has not audited, reviewed, or verified the information and, therefore, offers no assurance.
  • As the information provided is not required to be produced following GAAP (generally accepted accounting principles), users are left to trust the business owners honesty and record keeping provided as accurate information.

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When filing a corporate tax return, the CPA may prepare financial statements to ensure that the company does not overpay taxes due to overstated income or understated expenses. This was a mandatory requirement in the past, but the accounting standard update (CSRS 4200) that came into effect on December 14, 2021 has made this optional. While no level of assurance is provided, the accounting firm must still comply with professional standards and abide by basic accounting principles. The accountant must apply professional judgment and consider the reasonability of the information provided by the client. It is important that business leaders share with their accountant/practitioner what the intended use of the compiled financial information is, and whether it will be shared with any third party users.

MMCGAPC’s experienced staff can help you determine what type of business financial statements in Winnipeg best meet your needs. We can guide you through the process and help provide clarity to the readers of your business financial statements. NTR financial statements cannot be prepared internally the business owner or the in-house bookkeeper from the accounting system. Note that this accountant can be the same accountant who does the business’ bookkeeping and year-end tax returns.

In this blog post, we’ll help you better understand Notice to Reader financial statements, when you need one, and how they can benefit your business. Furthermore, we are required to understand whether the users of the statements are in a position to request additional clarifying information from management. He has been practicing accounting and offering independent financial and business advice for over 15 years. A CPA | Entrepreneur | Environmentalist I am CPA & CPA,CA(ON & AB Canada) having 10years of experience in accounting, finance, tax, auditing & business consultancy. Understanding the Notice to Reader or Compilation Report matters because it sheds light on the financial health of a business.

While the NTR does not provide any assurance, a review engagement (or reviewed financial statements) provides a limited level of assurance on the financial information. Specifically, the CPA performs the work in accordance with Canadian generally accepted standards for review engagements. In recent years, Notice to Readers were increasingly being shared with, and relied on, by lenders and other third parties despite them providing no level of assurance regarding the accuracy of the information in the financial statements. The accountant does not verify the exactness or the completeness of the information supplied and does not give any opinion.

The accountant will review the numbers and financial documents provided by the company, look for consistency in the documents provided, analyze account balances, and ask for clarification or more details if necessary. Alternatively, this could simply be a stack of all your invoices from your sales for the year, a shoebox full of receipts for all your expenses, and copies of your bank statements. The new standards require that the basis of accounting be disclosed in a note to the financial statements.

No, a notice to reader ntr compilation engagements compilation report must be prepared by a qualified accountant, typically a CPA (Chartered Professional Accountant). While you or your bookkeeper can maintain your financial records and produce internal reports, only a professional accountant can issue a compilation report because it adheres to specific accounting standards. A compilation engagement/report is a financial statement prepared by an accountant that presents information provided by a business in a structured format. Unlike audits or reviews, a compilation does not involve verifying the accuracy of the information or providing any assurance about its reliability. The NTR financial statements are comprised of a balance sheet, an income statement, and may include a cash flow statement.

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A more thorough Review or Audit assurance engagement may be required to satisfy the needs of lenders and other third parties in the future. Many investors require audited or reviewed business financial statements, but Notice to Reader financial statements may suffice if you are a small business or a start-up. Well the big thing is, for any small business, their financial statements, prepared by a professional accountant, are the “window” through which potential financiers or even clients can look into your business. They are the starting point for determining what has been happening in this company over the past fiscal year, and what kind of shape it’s in.

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Business owners should discuss with their accountants on whether a Notice to Reader report should still be prepared. Our team of accountants compile the information from the financial statements provided and assembles the report into a standard financial format. This package includes the Notice to Reader Report, a balance sheet and income statement; possibility of notes too for financial statements. Minimal work is done to confirm the integrity of the financial statements are authentic to the business activities. As the information provided is not required to be produced following GAAP (generally accepted accounting principles), users are left to trust the business owners honesty and record keeping provided as accurate information.