Audit, Review and Compilation Engagements
These engagements are associated with the financial statements of your business and it is helpful for you to understand the difference between them.
1. Audit Engagement
In an audit engagement, the accounting firm scrutinizes the client’s financial statements so that it can provide an objective opinion on the fairness of these documents.
Federal and provincial legislation in Canada requires corporations to prepare annual financial statements for audit by qualified independent auditors. Once your statements have been audited, they will become the accepted means by which you will report to your shareholders, bankers, creditors and the government.
2. Review Engagements
The purpose of a review engagement is to prepare and review the clients financial statements in order to determine if they plausible or not.
Another way to put it is that the firm makes sure that the documents are not misleading.
If everything is in order then the firms standard review report prefaces the clients financial statements.
3. Compilation Engagement
In a compilation engagement, the firm compiles unaudited financial information into financial statements, schedules or reports based on the information provided by the client.
This engagement is best suited to situations where the client understands that the statements generated by the firm do not offer any assurance on the reliability of the compiled information. To warn readers of this lack of assurance, the firm attaches a “Notice To Reader” that says that no review was performed on the information and that the information may not be appropriate for use by the reader.
The reports generated in a compilation engagement are for the exclusive use of the company’s management or for income tax purposes.
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