Year-end financial statements for a Canadian business are prepared under a framework such as ASPE or IFRS. An accountant then compiles, reviews or audits them. The level you need is set by the people relying on the statements: your shareholders, your lender, your bonding company, an investor or a buyer. Corporate law sets when an audit can be waived.
What the year-end package is
A complete set normally includes a balance sheet (statement of financial position), an income statement (statement of operations), a statement of retained earnings or changes in equity, a cash flow statement, and notes. A report from the accountant sits at the front, and its title tells the reader how far to trust the figures. Compiled statements can be prepared on other bases, such as cash or tax, and may present less, so read the note that describes the basis of accounting.
The three levels of accountant involvement
| Compilation | Review | Audit | |
|---|---|---|---|
| Standard | CSRS 4200 | CSRE 2400 | Canadian Auditing Standards (CAS) |
| Assurance given | None | Limited | Reasonable |
| What the accountant does | Assembles statements from your information | Mainly inquiry and analytical procedures | Tests records, controls and balances; gathers evidence |
| Report wording | Compilation engagement report | “Nothing has come to our attention…” | Opinion that statements are presented fairly |
| Typical user | Owners, CRA, small lenders | Banks with covenants, bonding, franchisors | Larger lenders, investors, regulators, some funders |
| Relative cost | Lowest | Higher | Highest |
The compilation standard replaced the old Notice to Reader for periods ending on or after December 14, 2021. What changed, and why it matters to you.
Who decides the level
No single rule says “a business of this size needs an audit.” The level is driven by:
- Corporate law. A corporation is required to have an auditor unless its shareholders validly waive one. Under the Alberta Act that takes a special resolution, and under the federal Act unanimous consent. A waiver lasts only until the next annual meeting. How the waiver works.
- Your lender. Loan agreements commonly specify the statements required and when. Read the reporting covenant. It usually says “review engagement” or “audited” in so many words.
- Bonding, franchisors, landlords, grant programs and investors. Each sets its own requirement, usually in a contract.
- A future sale. Buyers and their lenders give more weight to reviewed or audited history.
The engagement chooser walks through these and tells you the lowest level that satisfies all of them.
What the CRA sees
A corporation’s T2 return carries its financial statement information in the General Index of Financial Information (GIFI) format. Schedule 141 asks about the accountant who prepared or reported on the statements and the highest level of their involvement: audit, review or compilation. The CRA does not require any particular level. Your lender or shareholders do.
The guides
Compilation, review or audit
What each one is, what it costs you in time and money, and what it gives the reader.
Read the guideWhat replaced the Notice to Reader
The compilation engagement report, the basis-of-accounting note, and what changed for owners.
Read the guideSkipping the audit
When shareholders can waive an auditor, and why the waiver must be renewed every year.
Read the guideASPE or IFRS
Which framework a Canadian company uses, and when the choice is not yours.
Read the guideStatements for a mortgage
What CMHC lists, and what to have ready before a lender asks.
Read the guideEngagement chooser
Six questions, one recommendation, and what to confirm first.
Open the toolQuestions people ask
Does my small business need financial statements in Canada?
A corporation’s directors must place financial statements before shareholders at each annual meeting (for example, Alberta Business Corporations Act, s. 155), and a T2 return must include the corporation’s financial statement information in GIFI format. Lenders, landlords, bonding companies and investors often ask for statements of a particular level as well.
What are the three types of accountant engagement for financial statements?
A compilation (CSRS 4200), where the accountant assembles the statements and gives no assurance; a review (CSRE 2400), which gives limited assurance based mainly on inquiry and analysis; and an audit (Canadian Auditing Standards), which gives reasonable assurance in the form of an opinion.
Which accounting standards do Canadian private companies use?
Most use Accounting Standards for Private Enterprises (ASPE, Part II of the CPA Canada Handbook). A private enterprise may choose IFRS (Part I) instead. Publicly accountable enterprises use IFRS. Not-for-profit organisations use Part III or may elect IFRS.
Sources
- IAS Plus (Deloitte), summarising the CPA Canada Handbook, CSRS 4200, Compilation Engagements. Read 25 October 2026.
- CPA Canada, Audit and assurance alert: Engagements to review historical financial statements (CSRE 2400). Read 25 October 2026.
- Alberta King’s Printer, Business Corporations Act, RSA 2000, c B-9 — current as of 2 September 2026; s. 1 (special resolution), s. 163. Read 25 October 2026.
- Justice Laws Website, Canada Business Corporations Act, s. 163. Read 25 October 2026.
- Canada Revenue Agency, RC4088, General Index of Financial Information (GIFI). Read 25 October 2026.
- CPA Canada, New T2 Schedule 141 included in May tax software updates. Read 25 October 2026.