Notice to Reader
A Notice to Reader — now formally a compilation engagement report — is the lowest level of financial statement service, in which an accountant assembles statements from information the client supplies without auditing or reviewing it.
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Key facts
| Category | Corporate tax |
|---|---|
| Also known as | compilation engagement report, NTR, compiled financial statements |
| Current name | Compilation engagement report, under CSRS 4200 |
| Assurance provided | None; the accountant expresses no opinion |
| Basis disclosed | The report must state the basis of accounting applied |
| Typical use | Owner-managed corporations, for internal use and tax filing |
| Authority | CPA Canada standards; Ordre des CPA du Québec |
What it means in practice
A compilation provides no assurance. The accountant arranges the client's figures into financial statement format and attaches a report stating exactly that, so no reader mistakes the statements for audited ones. Canadian practice replaced the old "Notice to Reader" wording with CSRS 4200 compilation engagement reports, but the older name is still what most business owners and many lenders say. Compilations are what the large majority of Canadian private corporations produce each year. They accompany the T2 corporate return, support the CO-17 in Québec, and are usually enough for a bank operating loan or a straightforward shareholder transaction. Where a compilation is not enough is any situation whose reader needs independent verification: significant external financing, a share sale, a dispute, or a shareholder agreement that specifies audited or reviewed statements. Those require a review engagement or an audit, which cost considerably more and take longer.
No assurance is not the same as no value
A compilation presents information supplied by management in financial statement form. The accountant does not verify it, does not test the underlying records, and expresses no opinion — which is exactly why it is the least expensive of the three engagement levels. For a great many owner-managed corporations that is the right level. The statements support the T2 and CO-17, give the owner a coherent annual picture, and cost a fraction of assurance work. The standard now requires the report to describe the basis of accounting used, so a reader can see what the figures rest on. That change was made precisely because users had been treating compilations as though they carried assurance.
FAQ
My bank says a notice to reader is not enough. What do they want?
Can I prepare the statements myself and have an accountant sign?
Need this applied to your situation?
A definition only gets you so far. Talk to a Montréal CPA about what this means for your return — in English or French.