What is the Right Level of Assurance for your Business

There are three types of reports that can accompany a business’s financial statements. The purpose of these reports is to assure the reader that the statements are free from material misstatements. These are

  1. An Auditor's Report
  2. A Review Engagement Report
  3. A Notice to Reader or Compilation Engagement

1. An Auditor's Report

The goal of an auditor’s report is to enable a public accountant to issue an opinion on the fairness of the client’s financial statements. An audit provides “reasonable assurance” that the statements are free from material misstatements and are in accordance with Canadian accounting standards.

An audit is the most thorough level of assurance for any business. During this process, auditors will study and evaluate your internal controls, inspect documents, physically count assets and make inquires inside and outside the company to make sure that all requirements of the Canadian auditing standards are met.   

Is this the Right Level of Assurance for you?

It’s best to request an Auditor’s Report when there are complexities in your corporation’s ownership structure, financing agreements or regulated industries.

2. A Review Engagement Report

A Review Engagement is meant to determine if the financial statements are believable or not.

They provide limited assurance that financial statements confirm to the generally accepted accounting principles. They offer negative assurance which means that the accountant is only providing assurance that nothing has come to his/her attention that would indicate that the financial information presented is not in accordance with Canadian accounting standards.

Is this the Right Level of Assurance for you?

A Review Engagement is appropriate when a business has shareholders who are not involved in day-to-day operations, when the business is being sold or when the business is looking for financing.

3. Notice to the Reader or Compilation Engagement

A Notice to Reader or a Compilation Engagement basically putts together all of the information provided by a business owner into financial statements. There is no assurance in this process.

When an accountant does a compilation for you, he/she will clearly indicate that they provide no assurance as to the fairness of financial information or if the statements are in accordance with the Canadian accounting standards. These reports will only be used by the management or for income tax purposes.

Is this the Right Level of Assurance for you?

If you are the only user of the financial statements and monitor transactions yourself than this is the right level of assurance for you.

This level of assurance also means that the business does not have any third-party debt such as a mortgage or a bank loan.

Getting Advice

Keep in mind that there a lot of factors involved in deciding which type of assurance service is suitable for your business. Be sure to get in touch with a licensed public accountant who will guide you in making the best decision possible.

The team at Syed A.Raza Professional Corporation is well versed in audit, review and compilation engagements for all types of businesses. Contact us today and get a free consultation.

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