CSRS 4200 Compilation Engagements

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, there is no such restriction! 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 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.

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. 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.