Compilation, review or audit: which financial statements does your corporation need?

Most small private corporations in Canada only need a compilation engagement: the accountant compiles financial statements from your records and issues a compilation engagement report under CSRS 4200, without checking whether the numbers are correct. You need a review engagement (limited assurance) or an audit (reasonable assurance) only when someone with a stake in the business requires it, usually a lender, landlord, franchisor, investor, funding program or a statute. Because each step up involves more procedures, the fee rises sharply, so it pays to confirm exactly what the requesting party will accept before you engage a firm.

This guide is part of the overview of corporate accountant fees. Figures are illustrative.

The three engagement levels compared

What changed when CSRS 4200 replaced the Notice to Reader

The old Section 9200 "Notice to Reader" was replaced by CSRS 4200, Compilation Engagements, effective for compiled financial information for periods ending on or after 14 December 2021. CPA Canada has confirmed that Section 9200 can no longer be used. The main practical differences for a business owner are:

• The compiled statements must include a note describing the basis of accounting used, for example a cash basis, a tax basis or a basis that follows parts of accounting standards for private enterprises (ASPE).
• The accountant must understand the intended use of the statements and agree the terms in an engagement letter.
• The accountant must consider whether the statements are misleading and may withdraw if they are.
• The report wording changed; it is now a compilation engagement report.

For you, the extra documentation can mean slightly more time on the first compilation under the new standard, but it also makes the statements clearer for a bank reading them.

Why a compilation is cheaper and what it does not tell anyone

A compilation fee reflects the hours to adjust your trial balance, prepare statements and notes, and assemble the T2 schedules from them. The accountant does not verify your bank balance with the bank, count your inventory or check that customers owe what you say. That is why a compilation fee is driven almost entirely by the condition of your records.

What makes a review or audit more expensive

A review engagement requires the practitioner to perform inquiry and analytical procedures sufficient to obtain limited assurance. In practice that means asking structured questions about revenue, expenses, related parties and subsequent events, and following up on unusual relationships in the numbers. An audit goes much further: the auditor tests transactions and balances, obtains external confirmations, observes inventory counts and evaluates internal controls relevant to the audit.

Factors that push the hours up at both levels:

• Inventory, work in progress or construction contracts
• Revenue recognized over time or with complex customer terms
• Related-party transactions with shareholders or associated companies
• Weak internal controls or a single person handling all cash
• First-year engagements, where opening balances also need work
• Tight deadlines set by a lender

Worked example: the cost of stepping up

The following is an illustrative example. A retail corporation's compilation takes 14 hours at a blended $140 an hour:

14 x $140 = $1,960

The bank asks for a review engagement for a new credit facility. The firm estimates the review will take about 2.5 times the hours because of inventory and analytical procedures:

14 x 2.5 = 35 hours; 35 x $140 = $4,900

If an investor later demands an audit, an illustrative estimate of 6 times the compilation hours gives 84 hours, or 84 x $140 = $11,760, before any first-year opening balance work. The multipliers are assumptions for the arithmetic; ask your firm for its own estimate. You can enter the hours into the accounting fee estimator.

Can a private corporation skip the audit?

Corporate statutes generally require an auditor unless shareholders waive the requirement. Under the Canada Business Corporations Act, shareholders of a corporation that is not a distributing corporation can resolve not to appoint an auditor if every shareholder (including non-voting shareholders) consents, and the resolution lasts only until the next annual meeting (CBCA s.163); provincial corporate statutes have their own versions of this rule. Many small corporations make this decision every year in the annual resolutions in their minute book. A waiver under corporate law does not override a contract: if your loan agreement requires reviewed statements, you must still provide them.

Questions to ask before choosing the level

1. Who will rely on the statements, and what exactly did they ask for in writing?
2. Will they accept a compilation with additional information, such as aged receivables or inventory listings?
3. Could a review be required only every second year, or only above a loan balance?
4. Is your provincial CPA body's licensing a factor? The rules on who may perform compilation, review and audit engagements are set provincially, so confirm the firm is authorized for the engagement you need.
5. When is the deadline, and does an earlier deadline mean a rush fee?

When to consult a professional

Talk to a CPA before signing a loan or franchise agreement that specifies a type of financial statement, and before deciding to waive an audit if you have minority shareholders. A lawyer can explain the corporate law waiver and how it is recorded.

The financial statements feed directly into the corporate return, so read T2 preparation cost alongside this guide, and check the 2026 filing calendar for the dates a lender's deadline must fit around.

Frequently asked questions

Does the CRA require audited financial statements?

The CRA does not require a small corporation to have audited or reviewed statements to file a T2. The T2 includes financial information in GIFI format, which is usually prepared from the year-end statements.

Can my bookkeeper do the compilation?

That depends on provincial rules and on the bookkeeper's qualifications. Compilation is regulated differently across provinces; check with your provincial CPA body before relying on someone who is not licensed for the engagement.

Can I switch from a review back to a compilation?

Yes, if no one who relies on the statements requires a review any more. Confirm in writing with the lender first.

Sources

• CPA Canada — guidance on CSRS 4200 and the replacement of Section 9200
• FRAS Canada — the Auditing and Assurance Standards Board and its standards
• Corporations Canada — federal corporate law and annual requirements
• Canada Revenue Agency — T2 and GIFI filing