Is your bank requesting financial statements?
You provided the financial statements, but now they are asking for a notice-to-reader attached to them!
In this post, we shall look into what are financial statements, what does notice-to-reader means? Who can issue Notice to Reader in Canada?
Effective December 14, 2021, CSRS 4200 replaces Sec 9200. Now, the Compilation engagement report replaces Notice to Reader.
What are Financial Statements?
Financial Statements show the financial position and performance of a business over a certain period. Financial statements include:
- Balance Sheet
- Income Statement
- Cash flow statement
If you use some bookkeeping software, you can find these under the reports section. If you do your bookkeeping yourself, you generally read a professional bookkeeper or accountant to post adjustments and finalize your financial statements. To know who can issue a notice-to-reader, please see the relevant section in this post.
In Canada, Financial Statements can be prepared as per the International Financial Reporting Standard (IFRS) or Accounting Standards for Private Enterprises (ASPE); the latter is not available for public companies.
Who can issue a Notice to Reader financial statements?
If you have good accounting knowledge, you can prepare your business’s financial statements yourself. Third parties such as banks, investors, or anyone else prefer these financial statements to be prepared by a professional accountant.
Accounting firms must be registered with Provincial CPA bodies. In addition, the registration of a professional accounting firm has its own requirements. In Canada, most provinces require their members (Chartered accountant or CPA) to issue Notice-to-reader only if they practice through a CPA firm.
They use the information provided by your company’s management to prepare Notice to Reader financial statements. They do not perform audits (or reviews) on any of the data that is provided. This is why a Notice to Reader financial statements offer no assurance to the readers. The name notice-to-reader signifies to alert users that the CPA or CA who prepared financial statements have not reviewed or audited the information provided by the management.
Your accountant or bookkeeper can be well versed with other accounting aspects, and they can even issue the financial statements, it depends on the users such as Bank whether to accept them. They can, however, use their accounting software to help you get monthly or quarterly financial statements. You can use these to understand potential issues and problem areas and address them accordingly. Accounting and bookkeeping software generally issue management accounts and reports which do not have to comply with IFRS or ASPE.
How can Notice to Reader Financial Statements Help?
What makes Notice to Reader financial statements worthier than the ones put together by your bookkeeper or your in-house accountant is the fact that the person or people involved in the preparation of these financial statements prepare the financial statements as per the standards issued by AASB.
This document’s authenticity is far more superior to a regular financial statement that is often made using accounting software. Even though there the document offers no assurance, it requires compliance with accounting standards and principles as set by AASB.
Why do Notice to Reader statements not include Corporate Tax Returns?
Corporate tax returns in Canada must be filed periodically. Financial statements are generally needed to complete the General index of financial information (GIFI) attached to the corporate income tax return for any corporation in Canada. A notice-to-reader is not required to prepare these tax returns. Generally, when a CPA firm prepares a corporate income tax return, it automatically issues notice-to-reader along with financial statements. Certain tax software and applications automatically prepare notice-to-reader; however, such notice needs to be signed by a professional accounting firm.
The need for Notice to Reader financial statements arises while engaging investors or shareholders, selling the company, or, most importantly, while applying for bank loans. You may require loans from banks at different stages of the company’s growth. Notice to Reader financial statements help banks know your firm’s financial position and creditworthiness.
How Can we help you?
Maroof HS CPA Professional Corporation is a professional accounting firm registered with CPA Ontario and CPA Alberta in Canada. We can issue notice-to-reader financial statements for the companies having their offices in Ontario and Alberta. We also provide corporate income tax preparation, corporate tax planning, cross-border tax issues, and other accounting services across the whole of Canada.