NTR (Notice To Reader) Versus Compilation Report

  Prior to December 2021st, a Compilation report was referred to as a Notice to Reader Engagement (NTR). The Compilation Financial Reports are more thorough than the Notice to Reader with regards to the management’s discussion and reviewing of the financial information. The report is set out in a way to avoid expectation gabs between the client and the accountant by setting out the nature of the engagement and the respective requirements and responsibilities for each party.

  A Compilation Report is a financial statement compilation engagement prepared by Chartered Professional Accountant (CPA) with CPA license who must comply with the Chartered Professional Accounting professional standards set in Canada, even though there will be no assurance and no opinion provided. The accountant creates the Compilation Report and then compiles that with the financial statements. This is different to an audit or review report as there is only a single paragraph with no paragraph titles in the report.

  CPA uses their professional judgement and considers the reasonability of the information provided by the client. This is a higher level of financial statements preparation than statements prepared by a bookkeeper’s software because, bookkeepers do not need to keep up with the tax and accounting standards to ensure that the accounts used to classify transactions are appropriate. In addition, bookkeepers usually do not record transactions that are outside the daily business such as sales, business expenses or payments.

  A notice to reader (NTR) accompanies an un-audited set of finance statements compiled in accordance with basic accounting principles. Compilation Financial Reports also provide more information for the reader. Even though the report provides no assurance, it is still relied on by lenders and third party and so providing more in-depth reviews and documentation is required when preparing the compiled financial information.

  In a compilation engagement, financial information of the business is presented in a logical and coherent format in accordance with basic principles of accounting, which should allow the readers to better understand the financial results and position of the business. Even though the previous Notice to Reader and Compilation Report are very similar, this newly updated standard is necessary to provide the clarity and reliability of the report for all the readers and users of the financial statements are well as the different reports generated by the firm or third parries such as Chartered Professional Accountants.

  For a Compilation Report, an accountant takes the prepared financial statements and reviews and finalizes the statements for the company and ensures that the appropriate accounting standards are followed and that the financial statements are reported in the correct format. The accountant is not required to verify any numbers or provide assurance on the accuracy of the content within the statements.

  Compilations can provide users of the financial statements with many different types of information, but it has not been audited and therefore cannot provide the adequate assurance. These compiled statements can be released quickly to third parties since there is no auditing of the financial information, which some companies might see as an advantage.