The objective of a compilation engagement is to compile financial information into financial statement format based on financial information supplied by the client. It is not necessary to adhere to an appropriate accounting standard.
A Notice to Reader communication, which is stamped or printed on each page or attached to the financial information, is a clear warning as to the limited use of the compilation engagement. If the Notice to Reader communication is not stamped or printed on each page of the financial statements, then each page of the financial information or statements should identify the nature of the engagement by carrying the following reference: “Unaudited – See Notice to Reader.”
A compilation engagement is appropriate only where the client and other users do not need financial information that: conforms in all respects to Canadian generally accepted accounting principles, audit or review assurance is not required, and all users of the information understand and accept its limitations.
A compilation may be applicable when management does not require information derived from the entity’s financial statements to assist in informed decision making. Still, the Code of Ethical Principles and Rules of Conduct for professional accountants requires that the professional accountant disclose in the Notice to Reader, the nature of any activity, or relationship, and the nature and extent of any interest, in respect of the compilation engagement, which would be seen by a reasonable observer to impair independence. It is important to note that Certified General Accountants must not be associated with financial statements which they know, or have reason to believe, are false or misleading.
A Notice to Reader would include this statement:
We have not performed an audit or a review engagement in respect of these financial statements and, accordingly, we express no assurance thereon. Readers are cautioned that these statements may not be appropriate for their purposes.