A tax return needs financial information.
Your corporation’s tax return starts with financial records. CRA generally asks for financial statement information using GIFI: balance sheet information, income statement information and additional details. A T2 is a tax return; GIFI is the way financial information is reported with it.
That does not automatically create a compilation engagement report, a review conclusion or an audit opinion. Tax preparation and financial reporting engagements have different purposes.
Compare the work.
| Work | Purpose & output | Assurance |
|---|---|---|
| Corporate tax financial information | Supports the T2 tax return and relevant GIFI schedules. Not automatically a compilation report. | No audit or review assurance from tax preparation. |
| Compilation | Compiled financial information, a described basis of accounting and a compilation engagement report. | No assurance. |
| Review | Financial statements and a review report, based primarily on inquiry and analytical procedures. | Limited assurance. |
| Audit | Financial statements and an auditor’s opinion, based on more extensive evidence-gathering. | Reasonable assurance; not absolute certainty. |
A compilation brings information together.
A compilation is prepared using management’s information and a specified basis of accounting. It does not provide assurance that the financial information is free from material misstatement. It may suit users who do not need the assurance of a review or audit.
A review or audit adds assurance.
A review provides limited assurance, while an audit provides reasonable assurance. An audit involves more extensive procedures, but is not a guarantee that every error or instance of fraud will be found.
These are distinct engagements. A routine check of bookkeeping or a discussion about a tax return is not a formal review engagement.
Corporations Canada: Financial statements and levels of review
Ask the reader first.
- For a lender: ask for the precise engagement and reporting requirements in writing.
- For a nonprofit: check the applicable legislation, bylaws and funding agreements.
- For owner-management and tax needs: discuss whether tax preparation and bookkeeping meet the immediate purpose.
- If requirements change: revisit the scope before the statements are prepared.
There is no universal rule that a small organization only needs a compilation. The intended use and applicable requirements matter.
Where CKPC fits.
Our website focuses on bookkeeping, corporate and personal tax, compilations and practical advisory support. Review and audit appear here to explain the differences, not as advertised CKPC offerings. If an assurance engagement is required, we can discuss how your records should be prepared for the appropriate provider.
This guide is general information; the engagement needs to be assessed for your circumstances.
Let’s find the right starting point.
Tell us what you need and we’ll discuss scope, timing and fees before work begins.
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