Explaining Compilations: What They Are and Why They Matter
What Is a Compilation?
A compilation engagement is when a Chartered Professional Accountant (CPA) takes the financial information you provide, from bookkeeping software, spreadsheets, or receipts, and presents it in the form of formal financial statements. This is often referred to as a Notice to Reader (NTR) report.
Unlike audits or reviews:
Audit = High assurance, deep testing, verification of balances.
Review = Limited assurance, some analysis and procedures.
Compilation = No assurance, simply presenting your data in a standardized format.
Why Compilations Matter
For many small businesses in Canada, compilations are the most practical option. They matter because they:
Support CRA compliance: Compiled statements are often used to file corporate tax returns.
Meet lender requirements: Banks may request financial statements, but not necessarily an audit.
Provide clarity: Owners gain a clear snapshot of their financial position without the cost of higher-level engagements.
What’s Included
A typical compilation report contains:
A Notice to Reader disclaimer (stating no assurance is provided).
Financial statements such as the Balance Sheet and Income Statement.
Sometimes notes to the financial statements, depending on the situation.
Key Pitfalls to Avoid
Assuming assurance: A compilation does not verify accuracy. The CPA relies entirely on the information you provide.
Using bookkeepers for NTRs: Only licensed CPAs can legally prepare and sign compilation reports.
Ignoring basis of accounting: Under Canada’s CSRS 4200 standard, compilations must include a note describing the basis of accounting used.
Costs and Value
Cost: On average, compilation engagements in Canada start around $2,500, depending on complexity.
Value: They are far less expensive than audits or reviews, making them ideal for small businesses that need compliance and clarity without high costs.
Takeaway
Compilations are the backbone of small business reporting in Canada. They don’t provide assurance, but they deliver clarity, compliance, and credibility at a fraction of the cost of audits. For Kamloops entrepreneurs, they’re often the most practical way to stay organized, satisfy CRA, and meet lender expectations.