Compilation vs. Review Engagement: Which Does Your Lender Actually Need?

"We just need your financial statements" is one of the most common — and least helpful — things a bank or landlord will say to a business owner. In Canada, "financial statements" can mean three very different things, with very different costs and turnaround times. Here's how to figure out which one you actually need.

The three levels of financial statements

CPA Canada recognizes three levels of financial statement engagement, each providing a different degree of assurance to the reader:

• Compilation engagement (Notice to Reader): The CPA organizes financial information you provide into standard statements. No assurance is given that the numbers are accurate — the CPA hasn't verified them, only compiled them.
• Review engagement: The CPA performs analytical procedures and makes inquiries to obtain limited assurance that nothing appears materially wrong. More work than a compilation, less than an audit.
• Audit: The CPA independently tests transactions and balances to provide reasonable assurance the statements are free of material misstatement. The highest level of scrutiny and cost.

What a Notice to Reader actually says

A Notice to Reader is the compliance report attached to compiled financial statements. It states plainly that the statements have not been audited or reviewed, and that the CPA is not expressing any opinion, conclusion, or assurance on them. Despite that disclaimer, an NTR prepared by a licensed CPA is still widely accepted by banks, landlords, and franchisors for routine financing and lease decisions — it demonstrates that a professional organized the numbers to a recognized standard, even without verifying them.

How to tell which one your lender wants

Most small business financing — a line of credit renewal, an equipment loan, a commercial lease — asks for a compilation engagement, even when the request just says "financial statements" or "year-end statements." Review engagements and audits are typically reserved for larger financing amounts, specific loan covenants, or regulatory requirements (like some franchise agreements or not-for-profit reporting rules).

If you're not sure which one is being requested, ask the lender directly whether they require a Notice to Reader, a review engagement, or an audit — the terms are specific, and lenders usually know which one they mean even if their initial request didn't specify.

If you'd rather not have that conversation, send us the request and we'll interpret it for you — in our experience, it's a compilation engagement more often than business owners expect.

Cost and turnaround differences

As a general pattern across the industry, cost and time scale up significantly with each level: a compilation engagement is the fastest and least expensive, a review engagement typically costs several times more and takes longer due to the additional procedures involved, and an audit is the most expensive and time-intensive of the three. Exact fees depend on the size and complexity of your business — we quote a fixed fee upfront once we understand your specific engagement.