Auditing and accounting services
Users of financial statements recognize three levels of reporting by accountants on financial statements. While you may choose whichever reporting level you consider appropriate, you recognize that the level of reporting will affect both the cost of the accounting services and how the users of the financial statements view your business. You should consider carefully what you need.
Following is a brief description of the three levels of reporting. We would appreciate the opportunity to discuss with you how we can meet your financial reporting needs in the most cost effective way.
a. Compilation (or Notice to Reader) - a compilation provides no assurance as to the accuracy or completeness of the financial statements. The financial statements may not be in full compliance with generally accepted accounting principles, although they should not be false or misleading. A compilation may not provide sufficient assurance to lenders because of the accountant's limited involvement. However, the accountant's limited procedures also mean lower accounting fees for the business.
The accountant's report reads as follows:
"On the basis of information provided by management, I have compiled the balance sheet of XYZ Inc. as at September 30, 20xx and the statement of income and retained earnings for the year then ended.
"I have not performed an audit or review engagement in respect to these financial statements and, accordingly, I express no assurance thereon.
"Readers are cautioned that these financial statements may not be appropriate for their purposes."
b. Review engagement - a review engagement provides "negative assurance" that nothing has come to the accountant's attention that would indicate that the financial statements are not in accordance with generally accepted accounting principles. The accountant is obliged to perform sufficient work and "audit-like" procedures to justify that conclusion, although these procedures should not be considered an audit. Because of the more extensive involvement of the accountant, bankers and other users of financial statements have come to accept the review engagement as the standard form of reporting for most small businesses.
The accountant's Review Engagement Report concludes as follows:
"Based on my review, nothing has come to my attention that causes me to believe that these financial statements are not, in all material respects, in accordance with Canadian generally accepted accounting principles."
c. Audit engagement - users of financial statements receive positive assurance from the auditor's Audit Report that the financial statements are, in all material respects, in accordance with Canadian generally accepted accounting principles. To justify this conclusion, the auditor must perform sufficient work, referred to in his report as Canadian generally accepted auditing standards. As a result of the much more extensive work, the cost of an audit engagement tends to be relatively high. Since the Ontario Business Corporations Act allows smaller corporations to waive the audit requirement, most small business choose to do so. Not-for-profit organizations incorporated under the Corporations Act do not have the ability to waive the audit requirement.
The Audit Report concludes as follows:
"In my opinion, these financial statements present fairly, in all material respects, the financial position of the XYZ Inc. as at December 31, 20xx and the results of its operations for the year then ended in accordance with Canadian generally accepted accounting principles."
Tax compliance
Like it or not, we all must file tax returns annually. For many of us, our income tax liability represents a significant portion of our income. It is natural that we should want assurance that our tax liability is computed accurately and that all allowable deductions and credits are taken into account.
Preparation of your tax returns should not be simply an exercise in historical documentation, putting on paper what happened in your last tax year. With every tax return prepared by the firm, John, Doug and other members of the Douglas R. Freeman, Chartered Accountant firm apply their years of experience and training to make sure that your returns are not only accurate but that filing options where they exist are properly considered.
Tax planning and consulting
Generally, if you have income, you will pay tax. But why is it that two taxpayers in relatively similar circumstances can end up paying substantially different amounts of tax? After the fact, there is often little that can be done to ease the tax burden - the die is cast. However, planning can make the difference.
Each of us has a basic right to arrange his or her affairs within the law to minimize our tax liability. Tax planning involves considering the income tax implications of transactions well in advance to determine if there are steps that can be taken beforehand that could substantially reduce your tax cost.
Please be clear: tax planning does not involve in any way falsely reporting or misrepresenting your income. Nor shall we become involved in any way with any plan or scheme that, in our view, involves falsely reporting or misrepresenting your income.
Nor do we believe that good tax planning should involve a plan that distorts your personal or business finances so that other overriding financial and business objectives are compromised.
Nor do we create miracles. What we do is help you develop a sensible plan to reduce your income taxes without involving you in strategies that may not stand up to scrutiny by the tax authorities or may subject you to financial risks.
New business consulting
An entrepreneur setting out in a new business venture faces numerous obstacles and new situations that may not be familiar to him or her. The future success of the venture depends on how the entrepreneur deals with these issues and what decisions he makes, including decisions made by default by not making any decision. A few of these issues are:
