An end of the year assessment is important for any company. It is the best way to give you an accurate and updated picture of your company’s finances. There are three types of end of year engagements: audit, compilation, and review engagement. Each differs in terms of scope of work performed and level of assurance provided. Here are the differences between them.
People always panic when they hear the word audit. This is thanks to the fear surrounding CRA audits that can sometimes lead to people needing to pay large amounts of money or facing criminal charges. An audit engagement is not that though, so rest assured. In this instance, an audit is done so that an independent accountant can take an honest look at company finances and give a fair opinion on them.
A Chartered Accountant will look through financial data to make sure that it fits with government standards and is free from errors and misstatements. An audit is the most intense and thorough end of year assessment. It also provides the most assurance. An accountant will look through documents, assets, and make inquiries. The purpose of an audit is simply to make sure that everything is as it should be.
An audit is meant to look for misstatements in a thorough manner, but a review engagement is only meant to assess whether a company’s financial statements are believable or plausible. Unlike an audit, a review engagement does not offer as much assurance about whether a company is fully complying. Instead, they offer what is called negative assurance. This just means that the Chartered Accountant is providing assurance that nothing is jumping out as wrong. This differs from an audit, which provides a positive assurance by stating that everything is right. Review engagements tend to be more popular since they are easier, cheaper, and most companies do not require a thorough look.
A compilation, also known as a notice to reader, involves an accountant compiling information into financial statements. There is no assurance provided in this instance since the client provides all of the information. A compilation would only be used if a company does not need assurance about their financial data. In this instance an accountant will not be giving an assessment or opinion about the financial data nor do they modify it, they simply compile it into the necessary reports.
Which Do You Need?
Certain industries, businesses, and companies require different end of year assessments. In some instances, these are specified in the legal by-laws. If it is up to you to decide, consult a Chartered Accountant. They will be able to advise you on which would be best for your situation. Contact us today to discuss the end of year assessment options available.