- Notice to Reader (Section 9200) was replaced by CSRS 4200, Compilation Engagements, for periods ending on or after 14 December 2021.
- A compilation gives no assurance. A review engagement (CSRE 2400) gives limited assurance. An audit gives reasonable assurance.
- In Ontario, review and audit engagements must be performed by a public accounting licence holder.
- The level you need is set by whoever relies on your statements: a lender, investor, surety, landlord or your own shareholders. Read the agreement before you choose.
Owners still ask for a “notice to reader”, and bankers still write it into loan terms. The phrase has outlived the standard. Since December 2021, the work most people mean by it has been called a compilation engagement, and the rules behind it changed in ways that matter.
Above a compilation sit two levels of assurance: the review engagement and the audit. Each costs more effort and tells the reader more. This guide explains all three in plain language, who usually asks for which, and how to work out what your business actually needs.
What happened to notice to reader
For decades, Section 9200 of the CPA Canada Handbook governed “compilation engagements”, and the one-page report attached to them was known as a Notice to Reader. The report told readers that the accountant had compiled the statements from information provided by management, and had not audited or reviewed them.
Section 9200 was replaced by Canadian Standard on Related Services (CSRS) 4200, Compilation Engagements, effective for financial statements for periods ending on or after 14 December 2021. The report is now called a Compilation Engagement Report.
- Compilation engagement
- A compilation engagement is one in which a professional accountant assists management in preparing financial information, such as year-end financial statements, from records management provides. The accountant does not verify the information and expresses no assurance on it.
The key changes under CSRS 4200:
- The accountant must obtain an understanding of the business and the basis of accounting being used.
- The basis of accounting must be described in the statements, usually in a note. Statements no longer arrive without any explanation of how they were prepared.
- Management must acknowledge its responsibility for the information in writing, typically in the engagement letter.
- The accountant must consider whether the compiled information is false or misleading, and must not be associated with it if it is.
If someone asks you for a notice to reader today, they almost always mean a compilation engagement under CSRS 4200.
Three levels of comfort: compilation, review, audit
The difference between the three is how much the accountant tests, and therefore how much comfort a reader can take from the statements.
- Review engagement
- A review engagement, performed under CSRE 2400, is an assurance engagement in which a public accountant performs mainly inquiry and analytical procedures and concludes whether anything has come to their attention that the statements are materially misstated. It provides limited assurance.
- Audit
- An audit, performed under Canadian Auditing Standards, is an assurance engagement in which the auditor gathers sufficient appropriate evidence, including testing balances and transactions, to give an opinion on whether the statements are presented fairly. It provides reasonable assurance, the highest level available.
| Compilation | Review engagement | Audit | |
|---|---|---|---|
| Standard | CSRS 4200 | CSRE 2400 | Canadian Auditing Standards (CAS) |
| Assurance | None | Limited | Reasonable |
| What the accountant does | Compiles statements from management's records; understands the business and basis of accounting | Inquiry and analytical procedures; follows up on anything unusual | Tests transactions and balances, considers internal controls, obtains external evidence such as confirmations |
| What the report says | Statements were compiled; no audit or review was performed | Nothing has come to the accountant's attention suggesting material misstatement | Opinion on whether the statements present fairly in accordance with the framework |
| Ontario licence required | Not assurance; CPA Ontario sets the rules for members who compile | Yes, public accounting licence | Yes, public accounting licence |
| Relative effort | Lowest | Moderate | Highest |
| Commonly requested by | Owners, CRA filings, smaller credit facilities | Banks on larger facilities, some sureties and investors | Investors, larger lenders, some grant programs, shareholders who have not waived it |
Effort drives fees. A review takes more of the accountant's time than a compilation, and an audit considerably more. The quality of your bookkeeping drives effort at every level: clean, reconciled books with documentation shorten all three.
Who usually asks for which
Nobody needs a higher level of assurance for its own sake. The requirement almost always comes from a third party. Typical patterns, which vary by institution and agreement:
- CRA. CRA does not require compiled, reviewed or audited statements. A corporation files its T2 with financial information in GIFI (General Index of Financial Information) format. Most owner-managed companies still have compiled statements prepared alongside the return.
- Lenders. Smaller operating lines and term loans often accept compiled statements. Larger facilities, or loans with financial covenants, commonly require a review. Some lenders require an audit above a certain exposure.
- Investors. Outside equity investors often ask for reviewed or audited statements, and shareholder agreements may set the level.
- Sureties and bonding companies. Contractors who need performance and labour and material bonds are frequently asked for reviewed statements, and audited statements as bonding capacity grows.
- Landlords. Commercial landlords may ask a tenant for financial statements before signing or renewing a lease. Compiled statements are often accepted; check the lease or the request.
- Your own shareholders. Under Ontario's Business Corporations Act, a private corporation must appoint an auditor unless all shareholders consent in writing to an exemption. Most owner-managed companies obtain that consent, but it should be on file.
- Government programs and grants. Some require audited statements or a specific audit report above a funding threshold. Read the program terms.
Before you agree to a level of assurance, find the clause that requires it. Owners sometimes pay for a review nobody asked for, or discover too late that an audit was required.
The licence question in Ontario
In Ontario, public accounting is regulated under the Public Accounting Act, 2004, and licences are issued by CPA Ontario. Assurance work, which includes review engagements and audits, must be performed by a licensed public accountant through a firm that meets the licensing requirements.
We say this plainly because it affects your planning. Bloemet does not perform review engagements or audits. Our CPA partner prepares year-end financial statements, corporate tax returns and the accounting work that sits around them.
If your lender, surety or investors need a review or audit, we will tell you so directly, help you get the books and supporting schedules ready, and coordinate with a licensed firm on your behalf. A well-prepared file usually means fewer questions from the reviewer or auditor, and less of your time.
How to work out what you actually need
- Collect the agreementsPull your loan agreements, shareholder agreement, lease, bonding documents and any grant terms. The requirement is usually written in one of them.
- Find the exact wordingLook for phrases like “review engagement”, “audited” or “accountant-prepared”. Old documents may still say “notice to reader”, which today means a compilation.
- Ask the reader directlyIf the wording is vague, ask your banker or surety what they will accept. Ask whether it changes at a certain loan size or bonding level.
- Check the shareholder consentConfirm that the written audit exemption is on file for the current year if you are not appointing an auditor.
- Plan the year-end around itReviews and audits need more lead time and more schedules. Decide early so the books, inventory counts and confirmations are ready.
If you are moving from a compilation to a review, the biggest change is usually in the monthly bookkeeping, not the year-end. Our month-end close checklist is a good place to start: reconciled balance sheet accounts and documented accruals are exactly what a reviewer looks for.
Getting your books ready for a review or audit
Whether or not you need assurance now, books kept to this standard make every year-end simpler. Before a review or audit, have these ready:
- Bank and credit-card reconciliations for every month, with statements attached
- Accounts receivable and payable aging reports that agree to the general ledger
- A fixed asset register with additions and disposals supported by invoices
- Inventory count sheets and the costing method used, if you hold inventory
- Loan statements and a schedule of principal and interest
- A shareholder loan continuity schedule
- HST returns and payroll remittance records that agree to the ledger
- Notes on unusual transactions, related-party dealings and significant contracts
Our accounting services page explains how we handle year-end statements and corporate tax, and how we work with licensed firms when assurance is required. If you want to talk through what your lender or investors are asking for, you can join our early-2027 client list.
Questions
Is a notice to reader still valid in Canada?
Not as a standard. Section 9200 was replaced by CSRS 4200, Compilation Engagements, for periods ending on or after 14 December 2021. When someone asks for a notice to reader today, they almost always mean a compilation engagement report.
What is the difference between a compilation and a review engagement?
A compilation provides no assurance: the accountant prepares statements from management's records without verifying them. A review engagement under CSRE 2400 provides limited assurance, based mainly on inquiry and analytical procedures. Reviews take more work and, in Ontario, require a public accounting licence.
Does CRA require reviewed or audited financial statements?
No. A corporation files its T2 return with financial information in GIFI format. CRA does not require assurance on that information, although most owner-managed companies have compiled statements prepared alongside the return.
Does Bloemet perform review engagements or audits?
No. We prepare year-end financial statements and corporate tax returns. If you need a review or audit, we will tell you plainly, help you prepare the books and schedules, and coordinate with a licensed public accounting firm.
When does a bank require a review engagement?
It depends on the lender and the facility. Smaller loans often accept compiled statements, while larger facilities or loans with financial covenants commonly require a review. Check the loan agreement and ask your banker whether the requirement changes with the size of the facility.
Does my private Ontario corporation need an audit?
Under Ontario's Business Corporations Act, a private corporation must appoint an auditor unless all shareholders consent in writing to an exemption. Most owner-managed companies obtain that consent. Lenders, investors or other agreements may still require an audit separately.
This guide is general information for Ontario businesses, not advice for your situation. Rules change; talk to us before acting on it.