Notice to Reader (Compilation Engagement)

Definition

The Notice to Reader is the old name for the report that accompanied compiled financial statements in Canada. Under CSRS 4200, effective for periods ending on or after December 14, 2021, the report has been renamed the Compilation Engagement Report. It still provides no assurance, but the content and procedures behind it are more robust than the legacy Notice to Reader.

Key rules

CSRS 4200 requires the practitioner to:

1. Accept the engagement only when the basis of accounting is acceptable for the intended use of the financial information.
2. Obtain knowledge of the entity's business and operations.
3. Discuss and document the basis of accounting, which must be described in a note to the compiled information.
4. Compile the financial information based on records and explanations from management.
5. Make inquiries when information appears to be incorrect, incomplete, or otherwise unsatisfactory.
6. Issue a Compilation Engagement Report in the prescribed form.

Example

Typical CSRS 4200 Compilation Engagement Report excerpt (structure, not verbatim):

COMPILATION ENGAGEMENT REPORT

To Management of XYZ Consulting Ltd.

On the basis of information provided by management, we have
compiled the balance sheet of XYZ Consulting Ltd. as at
December 31, 2026, and the statements of income, retained
earnings, and cash flows for the year then ended, and Note X,
which describes the basis of accounting applied in the
preparation of the compiled financial information.

Management is responsible for the accompanying financial
information, including the accuracy and completeness of the
underlying information used to compile it and the selection
of the basis of accounting.

We performed this engagement in accordance with Canadian
Standard on Related Services (CSRS) 4200, Compilation
Engagements, which requires us to comply with relevant ethical
requirements. Our responsibility is to assist management in
the preparation of the financial information.

We did not perform an audit engagement or a review engagement,
nor were we required to verify the accuracy or completeness of
the information provided by management. Accordingly, we do not
express an audit opinion or a review conclusion, or provide
any form of assurance on the financial information.

Readers are cautioned that the financial information may not
be appropriate for their purposes.

The basis of accounting note typically reads: "These financial statements have been prepared in accordance with Accounting Standards for Private Enterprises (ASPE)," or states an alternative basis and its intended use.

Common mistakes

• Continuing to call the report a "Notice to Reader" on a letterhead cover page while attaching a CSRS 4200 report. Pick one name.
• Omitting the basis of accounting note. It is mandatory under CSRS 4200.
• Taking on the engagement without documenting knowledge of the business. CSRS 4200 requires working paper evidence.
• Issuing a report while not independent, without disclosing the lack of independence. Compilation does not require independence, but the basis of presentation should still be clear.
• Failing to refuse the engagement when the intended user clearly needs assurance (for example, the user is a third-party lender expecting reliance).

Related concepts

A compilation sits at the lowest level of practitioner involvement. For higher assurance see compilation, review, and audit. The compiled statements still reference a framework such as ASPE, and the basis of accounting is disclosed in the notes.