Important information for Corporations requiring a compilation engagement (previously referred to as “Notice to Reader” or “NTR”)

The Auditing and Assurance Standards Board (AASB) has issued updated standards which will change how we (FHB) perform your Compilation engagement and will impact the form and content of your engagement letter, financial statements and accompanying report.

We are required to comply with AASB and apply the new standards on Compilation engagements for corporations with fiscal years ending December 14, 2021 or later.

How the new standards will impact you

Increased Communication and increased work/documentation required for your year-end

The new standards enhance the level of communication between you (management) and FHB at the onset and during performance of the engagement.

Some pertinent discussion points/inquiries you can expect:

  • We are required to obtain and document a certain level of knowledge from you, respecting your corporation’s accounting, records management, and operational processes.
  • Discussion/determination of the basis of accounting to prepare the financial statements
  • Discussion/determination of judgments needed for the preparation of the compiled financial information (i.e., how the allowance for doubtful accounts is established)
  • Whether the information will be used by a third party, and if so:
    • whether the third party can request and acquire further information on your corporation, or
    • whether the third party has agreed with you on the basis of accounting chosen

Financial Statements

For increased transparency, the financial statements will now include a note disclosure describing the basis of accounting used to prepare the statements as established by management (with the assistance of FHB as required).

Financial statements will also include a new compilation report that defines your (management) responsibilities, our (FHB) responsibilities, the limitations of a compilation engagement, and references the basis of accounting used to prepare your financial statements.

You will be required to acknowledge your responsibility for the final version of the financial statements by way of signature.

Year end Fees

The above mandatory changes in accounting standards reflect a notable increase in the amount of work required to prepare a Compilation engagement. As a result, you will notice an increase of approximately 10% to your annual year end fee.

If you are not required by a third party to have financial statements prepared, you may wish to consider reducing your year end to a GIFI (General Index of Financial Information) engagement.

The GIFI engagement differs from the Compilation in the following ways:

  • The GIFI engagement does not include any account review or verification by us.
  • It does not include a set of externally prepared financial statements as with the Compilation and includes only the Income Statement and Balance Sheet information prepared within your corporate income tax return.

If you are considering reducing your year-end to a GIFI, we urge you to consider not only the fee increase, but the stated differences between Compilations and GIFIs, based on the level of work/reporting you require.

If you would like to discuss your options in this area further, please contact our office.


Yours truly,