Reports on Financial Statements

AuthorVern Krishna
Chapter : Reports on Financial
Reports on nancial statements are an integral part of their verica-
tion and accountability and the subject of many lawsuits. Even if not
legally required, many businesses will prepare such statements for the
purpose of assuring their proprietors and creditors of the propriety
of the nancials. us, we refer to such reports as “assurance reports.
Financial statements may be audited or unaudited. In either case,
the auditor may express an opinion — unrestricted or restricted — on
the statements. e degree to which readers of the statements can
assure themselves of the integrity of the nancial statements depends,
in part, upon the nature of the report. Audits enhance the condence
of users of the nancial statements. e auditors’ report is a key com-
munication item that, although brief, contains valuable information.
An auditor is an independent person or entity called upon to review
the enterprise, its processes, and its internal controls, for the pur-
pose of expressing an opinion on the nancial statements. Corporate
and securities statutes require publicly held corporations to appoint
auditors and le audited nancial statements with the appropriate
regulatory authorities.
Chapter 14: Reports on Financial Statements 
For example, section  of the Canada Business Corporations
Act requires the shareholders of every distributing corporation to
appoint an auditor at their rst annual meeting of shareholders and
at each successive annual meeting thereafter. Section  allows non-
distributing corporations not to appoint an auditor. Section  of
the CBCA allows a court to appoint and x the remuneration of an
auditor if the corporation does not have one and a shareholder applies
to have one appointed.
e auditor has considerable statutory rights and powers. For
example, they are entitled under CBCA section  to receive notice
of every meeting of shareholders and to attend, at the expense of the
corporation, at such meetings and be heard on matters relating to
their duties. Any shareholder can give notice to the corporation and
have the auditor attend at a shareholder meeting at the expense of the
Similarly, section () of the Ontario Securities Act requires every
reporting issuer to le annually audited comparative nancial state-
ments within  days of the end of its nancial year. Section ()
mandates that: “Every nancial statement referred to in section ()
shall be accompanied by a report of the auditor of the reporting issuer
or mutual fund prepared in accordance with the regulations.
ere is an important dierence between the role of the auditor and
the role of a lawyer. Auditors are independent persons and can be
required to report illegal acts to other regulators, such as securities
commissions. A lawyer owes their primary duty of loyalty to the
client and is expected to zealously represent the client. A lawyer’s
communications on legal advice to their client are strictly privileged
and protected from non-disclosure.
RSC, , c C- [CBCA].

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