What new compilation standards mean for you
By Adynea Russell
Vice President, Private Enterprise
CPA Canada (The Chartered Professional Accountants of Canada) has updated the standards regarding compiled financial information. The new Canadian Standard Related Services (CSRS) 4200 – Compilation Engagements is intended to improve the usefulness of compiled financial information for companies and third-party users.
The updated rules more clearly define what work should be performed by a Chartered Professional Accountant (CPA) when engaged to perform a compilation engagement on financial information.
Why is the standard changing?
Users of compiled information often misunderstood the extent of the work performed by the accounting practitioner in compilation engagements. Previously, there was no information as to the basis of accounting applied in preparation of compiled financial information. Updating the standard provides greater clarity to the reader.
Five key items you need to know from CSRS 4200
01.
If you are giving your financial information, compiled by MNP, to any third party (like a landlord, government agency, insurance advisor, or bank), or may need to give this financial information to someone in the future, these standards must be followed.
02.
The new standard requires a basis of accounting note to be included as part of the compiled financial information. The basis of accounting note describes how the financial information has been compiled. Your MNP advisor will assist you to select the basis of accounting that best fits your needs.
03.
These new rules will likely require more communication between you and your MNP business advisor. Your advisor may need to know more about your business, your accounting operations, and your accounting records.
04.
The new standard requires you to take responsibility for the final version of the compiled financial information. This could be accomplished by signing the balance sheet you receive once reviewing the financial results.
05.
The compilation engagement report will look different from the notice to reader report you would receive prior to this standard change. This new report includes a description of your responsibilities and MNP’s responsibilities along with a reference to the basis of accounting note.
Required discussions and questions around specific areas of focus
You can expect your MNP engagement team to initiate and/or have more robust discussions around the following:
- whether the compiled financial information is intended to be used by a third party (e.g., your lender) and whether the third party has access to additional information;
- the expected basis of accounting to be applied in the preparation of the compiled financial information;
- your business and operations, accounting system, and accounting records; and,
- any significant judgments (ex. allowance for doubtful accounts) that the practitioner has assisted management with the preparation of the compiled financial information
Deeper conversations, better understanding
The new standard means that we may need additional information from you and that your compilation engagements will take more time to complete.
The creation of this new standard provides users a greater understanding of how the financial information was compiled and opens the doors for more conversations about how MNP can help you achieve your goals.
If you have any questions or concerns, please reach out to your local business advisor.