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Confused about Audits, Reviews and Compilations? The following might help you to understand the relative difference in meaning and intent of the auditing or accounting engagements. Much of the information here has come from a brochure prepared and distributed by the Certified General Accountants Association of British Columbia.
We will recommend either an audit, review, or compilation to you only after discussing with you the purpose of your financial statements, and your financial goals.
Each of the engagements described below relies on accounting records provided by you. If you also require assistance with the completion of those records, we would be happy to offer our bookkeeping services to you.
Audited financial statements are the accepted means by which corporations report to their shareholders, to bankers, to creditors and to government. Federal and provincial legislation in Canada generally requires a limited company to prepare annual financial statements for audit by a qualified independent auditor. Some companies may be exempted from the audit requirement if all shareholders agree, in writing, to waive the appointment of an auditor.
The audit consists of an examination of the accounting records and other evidence supporting the financial statements. The auditor will gather the evidence necessary to determine whether the financial statements present a fair picture of the company's financial position and its activities during the period being audited. The auditor's report will include a professional opinion on the financial statements.
Small, closely held companies will generally only have an audit if there is a requirement from a third party, such as a securities commission, or if the shareholders are unable to agree that an audit should be waived. More often, such private companies can rely on the lower level of assurance provided by a review, rather than an audit.
We may recommend an audit if: your bank or other lender requires an audit, your insurance company requires an audit, your shareholders require or desire an audit, a regulatory body requires an audit.
When an audit is not required, or when the shareholders have waived the appointment of an auditor, financial statements may be prepared on a review basis. While in an audit the accountant will express an opinion on the fairness of the financial statements, a review leads to a more limited assurance that the financial information conforms to Canadian generally accepted accounting principles.
The review procedures include making inquiries concerning all relevant information, comparisons to financial data for the current and prior periods, and discussion covering the information received. As well, the financial statements are reviewed with responsible client officials.
A company will generally engage an accountant to prepare a review of financial information to provide some assurance to creditors, potential lenders, potential business purchasers, and/or minority or inactive shareholders that the financial statements are worthy of belief.
We may recommend a review if there are no requirements for an audit and:
- You rely on banks or other lenders for financing
- Your financial statements may be relied upon by potential purchasers of the business
- There are minority or inactive shareholders
- A review would enhance our ability to provide you with financial planning or tax planning services or advice regarding your accounting system
A compilation engagement provides no assurance from the accountant on the financial information. The objective of a compilation engagement is to compile unaudited financial information into financial statement format based on information provided by the client.
Unlike audited or reviewed financial statements, compiled financial statements may not include all disclosure required by some users, and may not include a statement of cash flows or explanatory notes.
In a compilation engagement, the accountant will report that he has "not audited, reviewed, or otherwise attempted to verify the accuracy or completeness" of the information and will caution users of the information that it may not be appropriate for their purposes.
Generally, a compilation engagement is only appropriate for internal use by management or for restricted use, such as income tax.
Although no assurance is provided by the accountant to the user of the financial information, a CGA will not be associated with financial information he or she knows, or has reason to believe, is misleading or incorrect.
We may recommend a compilation if:
- You require interim financial statements to supplement your annual review or audit
- The business is small
- The business is owned by members of one family
- There are no lenders or insurers who will rely on the financial statements
- Your needs for financial planning, tax planning, and accounting system advice are very limited
- You require the financial statements primarily for your own use and for tax purposes
We provide a wide range of bookkeeping services on a weekly, monthly or yearly basis.
Some of the services we provide include:
- processing of payroll, including calculation of monthly payroll remittances
- preparation of Records of Employment
- preparation of T4 reports
- preparation of T5 reports
- preparation of WCB reports
- preparation of union dues reports
- preparation of GST/HST returns
- processing accounts payable invoices and cheques
- processing accounts receivable invoices and customer deposits
- monthly reconciliation of bank accounts
- monthly reconciliation of trust accounts
- preparation of job costing reports
- preparation of monthly financial statements
- setup of a bookkeeping system that best suits your needs
- assistance with all aspects of bookkeeping