Are there different types of financial statements in Canada?
In Canada a company can be asked to prepare financial statements with one of five levels of report; No Report, Notice To Reader, Review Engagement, Audit Report or Forensic Audit Report. The costs go up with each level of service.
Financial statements are required for a number of reasons such as accompanying tax returns, reporting to the shareholders and providing a basis for company valuations. Not all the information contained in the statements will be relevant for every situation. Therefore, there are different types of reports that are issued with the financial statements providing different assurance levels. No report means that the accountant has not looked at the financial statements.
A Notice to Reader is the most basic type of report. It is basically a copy of the financial information produced by the company. There is no assurance on the information contained in the statements. We as accountants will not have examined any of the underlying records or assessed the accuracy of the numbers, but rather will have compiled your financial records for financial statement presentation purposes.
A Review Engagement is a report on the plausibility of the accounting information. Our work is restricted to observation, discussion with management and analysis of the information presented. The statements have to comply with Generally Accepted Accounting Principles (GAAP). Review engagements are usually required by banks for low to medium level borrowing requirements.
An Audit is an evaluation of a company’s financial results and the systems used to produce those results. It involves detailed validation and assessment of the accounting information and internal controls of the company. Work includes that which was performed for a review but also extends to confirmation, inspection and computation. Again the statements have to comply with GAAP. Audits are usually required for high level borrowing requirements and publically accountable organizations, such as listed companies and charities.
A Forensic Audit is a focused audit at a highly detailed level of specific items. Generally there is suspicion of wrong doing when there is a Forensic audit.
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