A Review Engagement Report is needed to meet bank or statutory requirements. A financial statement review engagement provides a moderate level of assurance (and provides no opinion), expressed in the form of a Review Engagement Report providing negative assurance on unaudited financial statements by using the words “nothing has come to our attention…” The Chartered Accountant determines if the financial statements are plausibile. Procedures for a financial statement review engagement include, inquiry, analytical procedures and discussion. Additional procedures may be required to arrive at standard of “plausible”; focuses on internal evidence.
Once plausibility is established, the chartered accountant issues a Review Engagement Report with the financial statements. Where an audit is not required or the shareholders have waived the appointment of an auditor, financial statements may be prepared on a review basis.
The moderate level of assurance provided with the Financial Statement Review Engagement is commonly referred to as negative assurance. It means that nothing has come to the attention of the accountant causing them to believe that the financial statements are not, in all material respects, in accordance with Canadian Generally Accepted Accounting Principles (GAAP). It is considered a low level of assurance relative to that provided by an Audit Engagement.
A financial statement review engagement is usually completed for the following reasons:
- Bank or statutory requirements
- Compliance or Partnership Agreements
- Professional Association Requirements
- Due diligence
Financial statement review is most popular among small to mid-size businesses who have a loans with the bank and need to meet certain covenant requirements. Financial statement review is also popular in Ontario for travel agents who need to meet TICO requirements. Another group who often obtain a financial statement review are private colleges who must meet ministry or government requirements. Some levels of government may also require charities or not-for-profits to obtain financial statement review if revenues or donations exceed $250,000. A review engagement report can help your organization provide more reliability in your business financial statements. Another instance in which your organization may need to provide a review engagement report or have your financial statements reviewed is to provide documentation for due diligence requests. If you are considering selling your business the acquiring party may require a review engagement report or a review of financial information to ensure they can rely on your financial statements.
If you like to find out if your organization requires a financial statement review or a review engagement report attached to the business financial statements please email us at (info@srjca.com) or call the office to speak with one of our experience chartered accountants (647-725-2537). SRJ Chartered Accountants will take care of your financial statement reviews so you can focus on what’s important – the success of your business!