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Understanding CPA Services in the Canadian Financial Landscape

unaudited report

In the dynamic landscape of business, entities and their stakeholders rely on financial information for decision-making. As a business owner or manager, comprehending the diverse reporting needs of users is crucial.

 

In this blog, we’ll delve into the three levels of financial statement services provided by Certified Public Accountants (CPAs) in Canada—Audit, Review, and Compilation. Understanding these services and their associated ethical principles is fundamental to making well-informed decisions.

Levels of Service: Audit, Review, and Compilation

1. Audit Services

A review engagement provides limited assurance that financial statements are plausible and free from major misstatements.

Activities:

  • a. Nature of Involvement: Application of Canadian generally accepted auditing standards.
  • b. Objective: To form an opinion on the preparation of financial statements in accordance with a financial reporting framework.
  • c. Level of Assurance: Reasonable.
  • d. Basis of Presentation: Financial reporting framework (IFRS Standards, ASPE, or ASNFPO).
  • e. Benefits:
    • I. Strongest indicator of financial statement credibility.
    • II. Identifies deficiencies in internal controls, potential process improvements, and tax-reduction strategies.
  • f. Example Scenarios: Financial reporting framework (IFRS Standards, ASPE, or ASNFPO).
    • I. Shareholders, investors, or potential investors making investment decisions.
    • II. Lenders/creditors requiring audited statements within a loan agreement.
  • g. Procedures Performed:
    • I.Risk assessment and extensive audit procedures.
    • II. Lenders/creditors requiring audited statements within a loan agreement.

2. Review Services

This report presents compiled financial statements without providing any assurance on their accuracy.

Activities:

  • a. Nature of Involvement: Application of Canadian generally accepted standards for reviews.
  • b. Objective: To form a conclusion on whether any issues have come to the practitioner’s attention.
  • c. Level of Assurance: Limited
  • d. Basis of Presentation: Financial reporting framework.
  • e. Benefits:
    • I. Enhances confidence in financial statement preparation.
    • II. Identifies material misstatements or non-compliance.
  • f. Example Scenarios:
    • I. No audit requirement, but users need assurance.
    • II. Preparing a business for transition to an audit.
  • Procedures Performed:
    • I. Primarily inquiry and analytical procedures.

3. Compilation Services

Activities:

  • a. Nature of Involvement: Application of other Canadian standards for compilations.
  • b. Objective: To compile financial information into statements based on client-provided information.
  • c. Level of Assurance: None.
  • d. Basis of Presentation: Financial reporting framework selected by management.
  • e. Benefits: Assists management with financial information preparation.
  • f. Example Scenarios:
    • I. When management lacks expertise in financial reporting.
    • II. Often combined with other services, such as taxes.
  • g. Procedures Performed:
    • I. Section 9200: No specific inquiries or procedures required.
    • II. CSRS 4200: Understanding entity’s business, operations, accounting system, records, and basis of accounting used.

Non-Assurance Reports (Compilation Reports)

1. Notice to Reader

2. Review Reports

3. Agreed-Upon Procedures (AUP) Reports

4. Prospective Financial Information (PFI) Reports

5. Consulting Reports

Service Level Nature of Involvement Objective Level of Assurance Basis of Presentation Benefits Example Scenarios Types of Procedures
Audit Application of Canadian generally accepted auditing standards To form an opinion on financial statement preparation Reasonable Financial reporting framework (IFRS Standards, ASPE, or ASNFPO) Credibility, Internal control detection, Misstatement identification Investment decisions, Regulatory requirements In-depth risk assessment, Extensive audit procedures
Review Application of Canadian generally accepted standards for reviews To conclude on material compliance with the reporting framework Limited Financial reporting framework (IFRS Standards, ASPE, or ASNFPO) Confidence enhancement, Misstatement identification No audit requirement, Business transition Inquiry, Analytical procedures
Compilation Application of other Canadian standards for compilations Compile financial information, Basis of accounting applied None Financial reporting framework selected by management (e.g., cash basis) Management assistances Lack of expertise, Combined with other services Section 9200 (No specific inquiries), CSRS 4200 (Understanding entity’s business, operations, accounting system, records, and basis of accounting used)

Ethical Principles:

CPAs adhere to fundamental principles of professional ethics, including integrity, due care, objectivity, professional competence, confidentiality, and professional behaviour.

Buchprufer Solutions: Your Trustworthy Partner

Navigating the complex landscape of financial reporting in Canada requires a deep understanding of the diverse services provided by Certified Public Accountants (CPAs). At Buchprufer Solutions, we pride ourselves on being experts in preparing reports that meet the highest standards of credibility and assurance.

If your CPA firm is looking for a reliable partner to enhance confidence in financial statement preparation, identify material misstatements, or simply provide valuable assistance in financial information compilation, look no further. Explore our services with our exclusive one-month free trial option.

For any related assistance, call our experts at +1-437-983-8387 or email info.m@buchprufer.com to schedule a consultation.

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