Compilation Engagement Report: What Replaced Notice to Reader

What is a compilation engagement, and is it the Notice to Reader under a new name?

A compilation engagement is an accountant assembling a corporation's financial statements from information that management supplies, without being required to verify that information. The compilation engagement report replaced the Notice to Reader, and it is more than a new label: the Auditing and Assurance Standards Board (AASB) describes it as more informative than the old notice. The Notice to Reader gave no assurance either, so the new report does not add any.

What the accountant needs from you is reconciled books. The case is not simple when a bank, buyer or franchisor will receive the statements, or when the books do not reconcile: bank and card accounts, loans, or a shareholder loan with no schedule. A recipient that asks for "reviewed" or "audited" statements wants more than a compilation. The list of what to gather is under "What do I provide" below.

Information printed straight from bookkeeping software, with no communication included or attached, falls outside the standard (AASB). If a bank or buyer asks for compiled statements, a printout alone is not enough: the accountant compiles them and issues the report, and needs books that reconcile.

The table compares the wording Ontario prescribes for each (O. Reg. 324/21).

Which year-ends use the compilation engagement report instead of the Notice to Reader?

In Ontario, statements covering a period that ends on or after December 14, 2021 carry the compilation engagement report. Only an older period can still carry a Notice to Reader. The period's end date decides, not the date the work is done.

The regulation names the notice that takes a compilation outside licensed public accounting (see the province section below). The AASB gives the same effective date for the standard and allows early application. For a late-filed or catch-up statement for an older year-end, Ontario's regulation allows either notice. Which one the accountant uses, and which professional standard applies to that older work, is a question for the accountant; ask when the engagement terms are set.

What does a compilation engagement report say, and what does it not give me?

A compilation engagement report says the accountant compiled the statements from information management provided, and that no audit, review or assurance was given. It is not a statement that the numbers are right. The table paraphrases Ontario's prescribed wording (O. Reg. 324/21, section 4).

A recipient who needs assurance has to ask for a review or an audit; see Compilation or review engagement.

Who is responsible for the accuracy and completeness of the figures: me or the accountant?

Management is responsible for the accuracy and completeness of the information the statements are built from, and the compilation engagement report says so. The accountant assists in preparing the statements and was not required to verify the information supplied. The regulation does not define "management"; ask the accountant who is named.

A missing invoice, an unrecorded loan or a wrong bank balance in what you supply flows into the statements, and the accountant was not required to verify it.

What do I provide, and what should the engagement letter settle?

You provide the records the statements are built from, and you confirm the terms of the work before it starts. The AASB says the standard sets required work and documentation for the accountant, so expect questions about the books.

Ask for the engagement terms in writing: which statements, which period, which basis of accounting and who will receive them. The standard has acceptance considerations when a third party will use the statements, so name the lender or buyer up front. To tidy the books first, see the year-end close checklist. For the fee, see compilation engagement cost.

Does the CRA require a compilation, review or audit report with my T2?

The CRA's pages do not list a compilation, review or audit report as a filing requirement. They ask for the financial statement information in GIFI form, with the same level of detail as traditional statements, and for Schedule 141 even if there are no notes. The CRA's Schedule 141 page says to include any notes and the "auditor or accountant's report", if prepared (CRA). That page does not name the compilation engagement report, so ask the accountant how it goes with the filing. Notes travel with the return: a T2 filed electronically includes them as plain text (RC4088).

Other rules sit outside the CRA. The directors of a federal corporation place comparative annual financial statements before shareholders (section 155), and those statements must generally follow Canadian GAAP (Regulations, section 71), so ask the accountant whether the compiled set meets that. For the T2 statements and whether shareholders can waive an audit, see year-end financial statements for a corporation. A provincially incorporated corporation checks its own statute.

How does the accountant show a compilation engagement on the T2 (Schedule 141)?

When the engagement is a compilation, line 302, "Conducted a compilation engagement", is the matching choice in Part 2 of Schedule 141. Part 2 lets the filer choose one or more lines for their own involvement and that of the person referred to in Part 1 (the person who did more than half of the work on the financial information), so a bookkeeper's work may add line 304. The lines are 300 auditor's report, 301 review engagement report, 302 compilation engagement, 303 accounting services, 304 bookkeeping services and 305 other.

Part 4 (line 101) asks whether notes to the financial statements were prepared. A compilation engagement report refers to a note on the basis of accounting; the accountant answers that line from the notes actually prepared. The reservation question (line 099) is asked only if line 300 or 301 was chosen, so it does not apply to a compilation. For the other involvement questions, see Compilation or review engagement.

Schedule 141 has no line named for a Notice to Reader. Ask the accountant which Part 2 line applies to an older year-end.

Will a bank, buyer or franchisor accept a compilation?

The bank, buyer or franchisor that receives the statements decides whether a compilation is enough. The report gives no assurance and warns that it may not suit a reader's purposes, so a recipient that wants assurance will ask for a review or an audit.

Before ordering the work, ask the recipient in writing which level it accepts and whether it has wording requirements. Tell the accountant who will receive the statements. For what a lender's request for "reviewed" statements means, including a franchisor's disclosure, see Compilation or review engagement. For a mortgage on dividend income, see Proving income to a lender.

Does my province change the wording or who may issue the report?

Yes, it can: Ontario sets its own wording and licensing rule, and other provinces may differ. The AASB issues the Canadian standard (CSRS 4200), but this page confirms Ontario's rules only.

In Ontario, compilation services provided independently of the client that a third party can reasonably be expected to rely on can count as public accounting, which needs a licence, unless the compilation carries the prescribed notice (Public Accounting Act, 2004, sections 2 and 3). O. Reg. 324/21 sets that notice and requires it in English, French or both, matching the language of the compilation. For who may do each engagement, see Compilation or review engagement.

Rules in other provinces and territories may differ and were not confirmed here. Ask your accountant whether the engagement follows the standard and the rules of your corporation's province, and confirm with the provincial CPA body.

Example

Illustrative figures in Canadian dollars.

An Ontario corporation, year ended December 31, 2025

The corporation had revenue of C$420,000. If its accountant is engaged to compile the statements, the report is the compilation engagement report, because the period ends on or after December 14, 2021. The owner supplies reconciled bank and card statements, loan and shareholder loan balances, payroll and GST/HST filings, and last year's statements. The same statements feed the T2 GIFI schedules, and line 302 fits on Schedule 141.

A bank asks for "reviewed" statements

A bank offers a C$250,000 operating line and asks for reviewed statements. A compilation report gives no review-level assurance. The owner asks the bank in writing which level it accepts before ordering the work, and tells the accountant that a bank will receive the statements.

Two year-ends either side of the changeover

Two Ontario corporations are catching up older filings.

• Corporation A, year ended November 30, 2021: the period ends before December 14, 2021, so Ontario allows either notice.
• Corporation B, year ended December 31, 2021: the period ends on or after December 14, 2021, so only the compilation engagement report applies.

Different for you?

• A bank, buyer or franchisor wants more than a compilation: read Compilation or review engagement and ask the recipient in writing which level it accepts. If the year-end file is not ready for that level, see corporate tax and year-end help.
• The accountant's engagement letter asks for records your books do not support (unreconciled accounts, a shareholder loan with no schedule): reconcile first with the year-end close checklist and the shareholder loan account. For help preparing the year-end file, see corporate tax and year-end help or bookkeeping help.
• You want to know the fee: see compilation engagement cost.
• You found an error in last year's statements: see correcting last year's financial statements.
• Your corporation has unfiled years: see catching up on unfiled corporate returns.
• You are outside Ontario: confirm the wording and who may issue the report with your accountant and the provincial CPA body.