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"Some things never change. But the compilation standard isn't one of them." - CPACanada

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The Auditing andAssurance Standards Board (AASB) has issued a new standard for compilation engagements effective for periods on or after December 14, 2021. The changes affect a variety of stakeholders, including businesses that engage a practitioner to compile financial information.

‍What is a compilation engagement?

A compilation is an engagement in which a practitioner assists management in preparation of compiled information and attaches a compilation engagement report. The compilation engagement report of CSRS 4200 will replace the existing Notice toReader communication in Section 9200 of the CPA Canada Handbook.

‍Why was a new standard needed?

The new engagement report more clearly communicates the respective responsibilities of management and the practitioner, and the nature of a compilation engagement, including a description of the basis of accounting applied in its preparation.

‍What changes can you expect in a compilation engagement?

Discussions with your practitioner regarding:

• The use of the compiled information.  Your practitioner will ask if the compiled 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.
• The business and operations, accounting system and accounting records.
• Compiled financial information that may appear misleading.
• Significant judgments that the practitioner has assisted management with in the preparation of the compiled financial information, such as the allowance for doubtful accounts or revenue recognition and measurement of revenue.

Reporting and communication changes:

• A new compilation engagement letter.
• The client’s compiled financial information will now include a note describing the basis of accounting applied to assist users in understanding how the compiled financial information was prepared.
• A new compilation engagement report will be attached to the compiled financial information.
• The client must acknowledge that they take responsibility for the basis of accounting and final version of the financial information.

‍What will the new compilation report look like?

The new compilation report will include additional information that is not in the Notice to Reader communication:

• Management and practitioner responsibilities.
• An expanded explanation of the limitations of the compiled information.
• The compilation engagement report may include an explanation of any reasons why the practitioner may not be considered independent of the reporting entity.

‍What are the next steps?

Discuss with your practitioner the accounting services you will need moving forward and schedule your engagement in advance.  It is also useful to consider any third parties that may request your financial information.

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