Audit, Review and Compilation
Today’s accounting and auditing standards have become more complex than ever before. The Canadian Institute of Chartered Accountants (“CICA”) and Accounting Standards Board recently adopted International Financial Reporting Standards (“IFRS”) as the financial statement reporting framework for all Canadian Publicly Accountable Enterprises. The CICA allows privately owned businesses to adopt Accounting Standards for Private Enterprises (“ASPE”) or IFRS and non-government not-for-profit organizations to adopt Accounting Standards for Not-for-Profit Organizations or IFRS. However, certain regulated industries have specific guidelines as to which standard must be applied.
AUDIT
By completing an audit, Ivan provides a high level of assurance that the financial statements (or financial information) present fairly, in all material respects, the financial position and the financial performance of an organization. Ivan performs his audit in accordance with Canadian generally accepted auditing standards.
Some of the procedures completed by Ivan when performing an audit are:
- Verifying account balances, transactions and business cycles
- Obtaining an understanding and testing certain internal controls and processes
- Evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management
- Evaluating the overall presentation of the financial statements
- Obtaining reasonable assurance about whether the financial statements are free from material misstatement, whether due to fraud or error.
Lending institutions, creditors, shareholders, potential investors and government regulators may require organizations to have an audit completed by a CPA, CA on annual or interim basis.
REVIEW
Less extensive than an audit, but more involved than a compilation, Ivan’s review engagements consist primarily of enquiry, analytical procedures and discussion related to information supplied to him by management. If the financial statements (or financial information) or supporting information appear inconsistent, unreasonable or questionable, he may need to perform additional procedures to satisfy himself that nothing has come to his attention that causes him to believe the financial statements (or financial information) are not, in all material respects, in accordance with Canadian ASPE or IFRS.
Reviewed statements for private and not-for-profit organizations includes the same note disclosure and financial statement (or financial information) presentation as an audit. Reviews can be a good medium between an audit and a compilation, providing the negative assurance to users from a CPA, CA, without the extensive procedures and cost of an audit.
Similar to an audit, lending institutions, creditors, shareholders, potential investors and government regulators may require organizations to have a review completed by a CPA, CA on annual or interim basis.
COMPILATION
Also known as a Notice to Reader, this type of engagement does not provide any assurance to the user. Information is provided by management, and the financial information is compiled by Ivan. The compilation states that this type of report may not be appropriate for the user’s purposes, as it is not an audit or a review engagement. The financial statements do not have to be in accordance with ASPE or IFRS, however they cannot be false or misleading.
This type of report is commonly prepared for filing annual income tax returns, lending institutions that have provided small loans, and shareholders.