Maroof HS CPA Professional Corporation, Toronto

CSRS 4200 Compilation Engagements

CSRS 4200 (Compilation engagement report) replaced Sec 9200 (Former Notice-to-reader)

Compilation of Financial Statements

The Auditing and Assurance Board issued a new standard, ‘CSRS 4200 Compilation Engagements’ for the first time in almost 30 years!

CSRS 4200 replaced Notice to reader report under Section 9200 engagements with Compilation engagement report. Section 9200 is still valid but only for the fiscal years ending before December 14, 2021. There is a lot of confusion surrounding ‘Notice to the reader’ under sec 9200 and CSRS 200 compilation engagements. Given the volume of questions from the clients, Non-CPA bookkeepers and other tax preparers, we discussed this matter with CPA Ontario’s practice advisory.

Important: If you are a CPA or a Non-CPA, you must check the legal and other regulatory implications specific to your practice. CPA Canada’s CSRS 4200 implementation tool is available here.

Key information about CSRS 4200

CSRS 4200 compilation engagements, no doubt, provide more transparency and a higher value to the users of the financial statements.

  • There is a very clear definition of “Compilation engagement” under CSRS 4200.
  • CSRS 4200 issues a report as ‘Compilation engagement report’ instead of ‘Notice to Reader’ under Sec 9200
  • Management must make certain acknowledgements regarding the use of financial statements
  • A note must be attached to the financial statements describing the basis of accounting. Previously the readers of financial statements were not able to identify the basis of accounting. It does not have to be general-purpose necessarily.
  • CSRS 4200 requires minimum documentation at the practitioner’s end.
  • CSRS 4200 is applicable for the periods ending on or after December 14, 2021. For the periods ending before December 14, 2021, either the compilation engagement report or Notice to the reader can be issued.
  • Compilation engagement report now refers to the compliance with relevant ethical requirements. This makes it difficult for the Non-CPAs to perform these compilation engagements.
  • The new report also refers to the responsibilities of both management and the practitioner.

What about section 9200 engagements?

Section 9200 is only applicable to the engagements for the periods ending before December 14, 2021. If the financial statements are for the period ending on or after December 14, 2021, CSRS 4200 is applicable.

How does CSRS 4200 affect a Non-CPA accountant or tax preparer?

A Non-CPA practitioner can still issue the ‘Notice to Reader’ under section 9200 provided the period is ending before December 14, 2021.

A Non-CPA can also perform a CSRS 4200, as there is no such restriction in the province of Ontario. 

However, there is a real difficulty imposed on such professionals. A compilation engagement report, now, refers to the responsibilities of both management and the practitioner. The reports referred to the compliance with relevant ethical requirements, and that’s challenging part for Non-CPAs given there is no code binding them. A compilation engagement report now includes the below paragraph:

“We performed the engagement in accordance with Canadian Standard on Related Services (CSRS) 4200, Compilation Engagements, which requires us to comply with relevant ethical requirements. Our responsibility is to assist management in the preparation of financial statements.”

The management acknowledges that the users of the financial statements have agreed to the selected accounting framework and/or they have access to further information. This can cause serious risk management issues for practitioners as, in practice, these financial statements are often sent to multiple lenders. In case of an adverse event, this may open up a Non-CPA to liability.

With regulatory bodies spending more and more resources on awareness, many lenders such as banks already require the compilation engagement report or notice to reader be issued by a CPA firm only. For all such issuers of CER, a word of advice, make sure to discuss with your client that a lender may refuse to accept such a report. The last thing you want is a client accusing you of misleading him and your insurance does not want to cover you. And, yes, compilation engagements can bring claims. 

Update: Many accountants who are not CPAs in Ontario have frequently asked in response to the same post. if they can issue CER? The short answer is Yes, however, do your own due diligence if you meet the requirements of CSRS4200. 

Why should I get a compilation of financial statements performed by a CPA firm?

No doubt, there are many talented Non-CPA accountants and tax preparers there!

Getting financial statements compiled from a CPA firm offers many benefits to the clients. The most important of which is recourse available to clients in case of negligence at the practitioner’s end. CPA firms are subject to strict ethical and regulatory requirements, minimum professional liability cover and practice inspections. Members also need to comply with continuing professional development requirements every year among other requirements. An added advantage is the credibility it gives to financial statements even if there is no assurance provided in the report, that’s the reason most lenders require the financial statements to be prepared by a CPA.

Get your financial statements compiled from Maroof HS CPA Professional Corporation.

Maroof Hussain Sabri

Maroof Hussain Sabri

Maroof is a CPA, CA in the province of Ontario and Alberta in Canada. He is also a licensed CPA from New York & North Dakota in the United States. He lives in Toronto.

Liked this Post?
You can share the post and subscribe for more interesting content.

Maroof Hussain Sabri

Maroof Hussain Sabri

Maroof is a CPA, CA in the province of Ontario and Alberta in Canada. He is also a licensed CPA from New York & North Dakota in the United States. He lives in Toronto.

Like this Post?
You can share it…

2 thoughts on “CSRS 4200 Compilation Engagements”

    1. Maroof Hussain Sabri

      Dear Shafeeq
      Based on my latest inquiry from the CPA Ontario, it appears that issuing a compilation report (in Ontario) is not a restricted activity. However, if you are not a CPA and planning to issue a Compilation engagement report, you must do your own analysis if you can comply with CSRS4200 or not! Further, you also need to advise your client as most of the financial institutions do require a report to be issued by a CPA firm.
      I, once had a discussion with another accountant who issued such a report and later on the client accused him of misleading. Be mindful of the engagement letter and the report wording that specifically mention about the third-parties relying on that report.

Leave a Comment

Your email address will not be published. Required fields are marked *

Need Help?

If you have a generic question, you can submit a comment at the end of this post. If you’d like a formal consultation or advice, getting a quote is very simple!

GO TO:

RECENT POSTS

Do You Have A Tax Question?

Write to us and if there are more requests, we may post an answer for you.

Subscribe Now!

Please subscribe to our mailing lists for occasional informational notifications.

Looking for Tax Help?

If you are looking for specific tax advice, start the process now!.

Do you have a Tax Question

Write to us and if there are more requests, we may post an answer for you.

Subscribe Now!

Please subscribe to our mailing lists for occasional informational notifications.

Looking for Tax Help?

We are here to help!

If you are looking to hire our services, you can start the process here.

Scroll to Top