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Upcoming Changes to the Compilation Engagement Process

 

In our piece titled Changes to Corporate Financial Statements at the end of 2021, we brought to your attention some changes to the way we will be required to prepare corporate financial statements. In this piece we are going to discuss how this will impact some of the work we will do when preparing your compiled year-end financial statements (previously known as a “Notice to Reader” or “NTR”) going forward.

 

The changes come as a result of updates to the rules and standards that govern CPA firms across Canada, and thus all CPA firms must abide by these changes. The good news for our clients is that most of these changes will impact us more than they will impact you, but there will be some noticeable differences. Here is a summary of the key changes you will see:

  • The engagement letter, which we send to you for your approval at the beginning of the process, will look a little different than before. In addition to the content changing due to the new requirements, Clearline is implementing a new engagement proposal and approval process that is web based (which you may have already seen).
  • We will likely ask more questions about who, other than you, receives copies of these financial statements and for what purpose do they use the financial statements. Examples of this would include, but are not limited to:
    • A creditor, such as a bank, examining the financial statements for lending purposes
    • A potential investor, such as a key employee that you are now allowing to own a portion of the business, examining the financial statements for investment purposes
    • A regulator, such as a government entity, examining the financial statements for the purposes of evaluating a grant or some other funding program
  • We may ask more questions about your business operations, your bookkeeping practices and processes for keeping financial data. Some of the questions may include:
    • How do you deliver your goods and/or services to your customers?
    • What are the key purchases you make during the year?
    • How is the bookkeeping for your company performed, who performs it, and how do they determine when to record something in your accounting records?
  • What other types of records do you keep about the company’s finances outside of your accounting software?
  • The acknowledgement letter, which we ask you to sign at the end of the process to approve the financial statements, will also look a little different than before. In addition to the content changing due to the updated standards, Clearline is implementing new electronic signature software that should make this process easier than it has been in the past and eliminate the need to print, sign, scan and send paperwork back to us.

 

If you have any questions about these changes or would like to know more, please reach out to your contact at Clearline.