Financial Statements: Do you Need Assurance?
There are two classes (assurance and non-assurance) and three types of financial statements (audit, review, notice to reader) in Canada. Assurance means a professional accountant is expressing an opinion on whether the financial information is materially correct.
Financial statements that have some level of assurance are audited or reviewed by a CPA and includes a report by the CPA expressing a conclusion designed to enhance the degree of confidence in the financial statements, in accordance with an accounting standard. Certain investors or lenders require an audited or a reviewed financial statement in return for their involvement. CPA’s are required to follow and use GAAP when involved with audited or reviewed financial statements.
A non-assurance type financial statement is called a compilation or notice to reader statement. This type of financial statement may be collated, adjusted and prepared by any accountant, and does not require the use of GAAP. This type of financial statement has limited use because it is based on the information provided by the company or management and is often used only for tax purposes.
