Financial Statement Comparison

Audit Engagement

Highest Level of Assurance

  • An audited financial statement provides the highest level of assurance to users of financial statements.
  • Auditors must obtain independent evidence, on a test basis, to substantiate assertions made by the Company’s personnel and management based on a risk approach.
  • Auditors are required, in addition to performing an analytical review of the financial statement components and inquiry of management, to obtain verification by tracing a sample of transactions to various forms of source documentation.
  • Auditors must understand the systems in place at the company, even if the system controls are not being relied upon.
  • The Independent Auditor’s Report contains the auditor’s opinion whether the financial statements present fairly in all material respects, based on the testing performed.
  • Most time consuming and expensive option.

 

Review Engagement

Moderate Level of Assurance

  • Consists of an analytical review of financial statements and an inquiry of company’s management and personnel to assess the plausibility of the financial statements.
  • More assurance than a Notice to Reader, but less than an audit.
  • The accountant provides negative assurance that nothing has come to their attention and that the financial statements appear to be plausible in the circumstances.
  • Moderately time consuming and expensive option.

 

Notice to Reader

No Level of Assurance

  • No level of assurance to the users (i.e. CRA, shareholders, lenders, etc.) of the financial statements. Not recommended for use by lenders.
  • Not required to be in accordance with Canadian Generally Accepted Accounting Principals (GAAP).
  • Not recommended for the general distribution to third parties who may rely on the statements.  If distributed, the users of these statements should be informed of the inherent limitations of these statements.
  • Least time consuming and expensive option.