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Audited, Accountant-reviewed & Notice to Reader Financial Statements
Calgary Small Business Accountants
Audited, accountant reviewed, and notice to reader financial statements are three different levels of assurance provided by a CPA to assess and report on the financial information of an organization. Here’s a breakdown of each type:
1. Audited Financial Statements
- Audited financial statements undergo the highest level of scrutiny and provide the highest level of assurance. An audit involves an in-depth examination of an organization’s financial records, transactions, internal controls, and supporting documentation. The purpose of an audit is to express an opinion on whether the financial statements are presented fairly and in accordance with the applicable financial reporting framework, such as Generally Accepted Accounting Principles (GAAP).
- The audit process typically includes reviewing financial records, conducting interviews, performing analytical procedures, and testing transactions to gather evidence and assess the accuracy and completeness of the financial information. The resulting audited financial statements include the auditor’s report, which provides an independent opinion on the fairness of the financial statements.
2. Accountant Reviewed Financial Statements
- Reviewed financial statements involve a lower level of assurance compared to audits but still provide credibility to the financial information. A review involves an inquiry and analytical procedures conducted by a professional accountant to obtain limited assurance that there are no material modifications that need to be made to the financial statements.
- During a review, the accountant performs inquiries with management, performs analytical procedures, and evaluates the overall presentation of the financial statements. However, a review does not include the same level of testing and examination as an audit. The resulting reviewed financial statements include a review report that states the accountant’s conclusion on the reasonableness of the financial statements.
3. Notice to Reader Financial Statements
- Notice to reader financial statements represent the lowest level of assurance. Also known as compiled financial statements, these statements are prepared by an accountant based on information provided by the organization without performing any audit or review procedures.
- In a notice to reader engagement, the accountant compiles the financial information into a standard format and presents it in the form of financial statements. However, they do not provide any assurance or opinion on the accuracy or completeness of the information. The resulting notice to reader financial statements typically include a statement by the accountant disclaiming any assurance.
All three types of financial statements are prepared using International Financial Reporting Standards (IFRS) or Accounting Standards for Financial Enterprises (ASPE).
All of the above statements are prepared by a licensed CPA who is authorized to perform these services.
Most companies do not need any of the above statements; however, in cases of financing, banks or the BDC may require one of the above types of statements to be provided to meet lending requirements.