604-576-8540 info@malikcpa.ca

Offering a practical answer to financial reporting in Canada, a compilation engagement requires none of the lengthy and detailed processes of verification typically involved with audits and reviews, and can be an affordable alternative to other, more comprehensive financial assurance services.

Businesses furnish their accounting professional with the information they need to prepare a financial statement, and because it doesn’t require that the accountant verify how accurate or complete the information they have been provide with, is, it makes a compilation engagement report less costly than other services.

What makes a compilation engagement different from other engagements?

Varying significantly in both their purpose and their scope, engagements in accounting practices here in Canada can involve, reviews, compilation engagements and audit engagements. When compared to reviews and audit engagements, however, compilations differ in the level of assurance they provide, and the extent of the work undertaken.

Compilation engagements give no assurance, while reviews offer a moderate level, and audits a much higher level.

No procedures to test or analyse the information given to the accounting professional by the business are carried out during a compilation engagement, and the accountant does not give their opinion or own assurance on any of the financial statements.

Review engagements typically provide assurance of a limited nature (following some degree of inquiry and analysis), that is equal to half of an audit, but more than a compilation.

During an audit, financial information is corroborated and verified by the accounting professional, and their opinion is then given as to whether the financial statements represent the company’s financial position and performance, fairly.

Who typically benefits from a compilation engagement?

Small businesses often find compilation engagements more beneficial than larger enterprises, as they typically have no need for audits or reviews of a more comprehensive nature. They provide them with a service that is still extremely useful, but without the price tag commonly attached to assurance engagements.

When might a compilation engagement be required?

As already touched upon briefly above, compilation engagements are necessary when a business wants its financial statements to be compiled in a structured format, and this may be for internal purposes or to help satisfy requests from third parties without carrying out an audit or providing assurance at review level.

How can compilation engagements help with loan applications?

In many instances, a financial lending institution will ask for financial statements when a business is applying for a loan, or simply for monitoring purposes. When carried out with the help of a qualified accountant, a compilation engagement can help satisfy such requirements by showing that the business is fiscally responsible, and able to meet the obligations of any financial agreements.

Does your company need a compilation engagement?

There are several criteria that can help determine whether a business needs a compilation engagement, the most significant of which involves a lack of statutory requirement for a reviewed financial statement, or an audit, to be undertaken.

It may also be that a business doesn’t have the required level of expertise and understanding to put financial statements together themselves, in which case they may find it helpful to seek a compilation engagement.

Once you understand what sets each type of engagement apart from the other, you can work with Surrey accounting firms to choose the type of engagement that best meets your requirements, and the expectations of stakeholders.