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New compilation engagements standard coming in 2020

Svetlana Berger, principal in Auditing and Assurance Standards at CPA Canada, talks about a new standard approved in October 2019, to be issued in February 2020. Learn about the potential impact for practitioners.

What's happened?

The Auditing and Assurance Standards Board (AASB) approved a new standard on compilation engagements in October 2019, to be issued in February 2020. The new standard takes effect for compiled financial information for periods ending on or after December 14, 2021, with early application permitted. Its impact could be significant, so practitioners will need to start work in 2020 to ensure successful implementation.


Informed by research and feedback from hundreds of stakeholders, including practitioners, lenders, and representatives of provincial accounting bodies, the AASB recognized that Section 9200, Compilation Engagements, was outdated.

The new standard, Canadian Standard on Related Services (CSRS) 4200, Compilation Engagements, replaces Section 9200 and Assurance and Related Services Guideline (AuG) 5, Compilation Engagements – Financial Statement Disclosures. CSRS 4200 provides a suite of requirements and guidance for accepting, conducting and reporting on compilation engagements.

Here are some of its key features, designed to respond to stakeholder input and public interest issues:

  • A scope that sets out which services are compilation engagements. Today, practitioners find it difficult to distinguish a bookkeeping service from a compilation engagement. The new standard clarifies that a bookkeeping service may result in system-generated financial information. Such information is excluded from the scope of the standard if no communication is included or attached to it.
  • Specific engagement acceptance considerations that apply when the compiled financial information is intended to be used by a third party. Currently, practitioners are unclear about whether it is appropriate to accept or continue a compilation engagement when there is a third-party user.
  • Specific required work effort and documentation. The lack of explicit guidance in this area could be a reason for the existing variability in practice.
  • A requirement that compiled financial information includes a note describing the basis of accounting that was applied. Today, users generally lack an understanding of how the compiled financial information was prepared.
  • A new compilation engagement report that is more informative and insightful than the current Notice to Reader. Users are unclear as to the extent of work performed by the practitioner and have asked for greater transparency about those responsibilities.

Ken Charbonneau, chair of the AASB, explains: “The project was challenging, but in a positive way, given the board’s significant efforts in reconciling the various views that were expressed by stakeholders. However, we are proud of the final CSRS 4200, which incorporates a balanced response to stakeholder views. We believe that it will improve transparency to users about compiled financial information and clearly communicate the nature of the engagement. It will also better assist practitioners in performing compilation engagements.”

What's next?

The revisions will be a substantial change in practice for many practitioners, so it is important that you take appropriate action to prepare in advance of the effective date. The impact of these changes will also be felt by users – including loan officers who use compiled financial information when granting loans or extending credit to small and mid-sized companies.

During 2020, several publications and other materials aimed at promoting awareness, understanding, and effective implementation of the new standard are planned, including client and third-party briefing documents and a practitioner implementation tool.

Do not wait until the effective date to act. The impact of these changes may be substantial for some practitioners. Here is what you can start doing immediately:

  • read the standard and the Basis for Conclusions
  • read the CPA Canada publications and other materials aimed at promoting awareness, understanding and effective implementation as they become available
  • consider how the new standard impacts your current engagements
  • talk to your clients about the potential impact on them

For more information and to stay up to date, visit the project page.

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The views and opinions expressed in this article are those of the author and do not necessarily reflect that of CPA Canada.