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Can anyone explain what these are? We have approached a bank about lending, we have not used that bank before and they are asking for these. I checked with our accountant and they do not prepare them for us because until now, there has been no need. The accountant is estimating that it would cost $2500 per year to prepare them. If finance was a sure thing, it wouldn't be a big deal, but would hate to pay that out and then get turned down. Is this something that must be prepared by an accountant or something we could maybe do ourselves?

for further clarification.

This is a financial statement that is prepared by a chartered accountant, but not actually audited. It's not as high a standard as an audit (therefore less expensive), but it is a higher standard than a financial statement that you prepare yourself with your accounting software. You can't do it yourself.

It will also be a letter explaining the integrity of the financial statements, ie explaining that they are unaudited but are prepared using GAAP (generally accepted accounting principles). You cannot do this yourself as you may not know how the revenues or expenses need to be recognized in accordance with GAAP etc. However even for a multi million dollar company I've never seen the cost be over $2,500 - get a second opinion!

The only reason that the estimate would be that high is if you were dropping off a "shoebox full of receipts" and the accountant was required to recreate your entire year or past years of business transactions. If you already use an accounting software program and create your own financial statements then the accountant should only have to create financial statements from your year ending trial balance. Verifying adherence to GAAP doesn't apply for an NTR as the audience for a NTR is usually the owner of the business and the CRA.  
 
The cost is reflective of the time required to be put in by the accountant. Are they going to be going back multiple years? Is it a small accounting firm where the work is being done by a chartered accountant directly (expensive) or a large firm where a junior accountant does the work (less expensive) and has it reviewed and signed off by a CA?  
 
$2500 for a Notice to Reader sounds expensive but if the accountant is recreating a few years of transactions it would make sense. If you keep good records then it shouldn't cost this much.

The notice to reader statement is an assurance engagement that is accepted by a public accounting firm. It is far less than an audit, basically compiling the data provided. The bank will want this just to assure that someone knowledgeable in accounting has "touched" the statements and would notice any huge errors. The fact that only a notice to reader is required it must mean you do not rely heavily on bank financing, which is good. Try the smaller accounting firms and you should be able to get a good price for this, but it will be based on the amount of work required to put together the statements. For example the cost might be less if you use an accounting software like quickbooks to record transactions and keep your bank account reconciled. If they have to create statements from your banking records and shoe boxes of receipts then the cost could be much higher. Just shop around and go with the best price, unfortunately you can't avoid this.

Another reason the bank may want a notice to reader is because if you are just reporting all income and expense through your personal tax return, it is unlikely that you are preparing a balance sheet which is important for bank financing. The notice to reader will i:nclude both an income statement and balance sheet.

thevoiceofreason said "The notice to reader statement is an assurance engagement that is accepted by a public accounting firm. It is far less than an audit, basically compiling the data provided. The bank will want this just to assure that someone knowledgeable in accounting has "touched" the statements and would notice any huge errors. The fact that only a notice to reader is required it must mean you do not rely heavily on bank financing, which is good. Try the smaller accounting firms and you should be able to get a good price for this, but it will be based on the amount of work required to put together the statements. For example the cost might be less if you use an accounting software like quickbooks to record transactions and keep your bank account reconciled. If they have to create statements from your banking records and shoe boxes of receipts then the cost could be much higher. Just shop around and go with the best price, unfortunately you can't avoid this. "

THe NTR is the only type of Financial Statement that is NOT an assurance engagement. Reviews Engagement and audits are but Notice to Readers are not. As has been stated if you are self-employed and your accountant has only in the past prepared a 2125 form reporting self-employed income and expenses on your personal tax return then the bank will need to see a set of financial statements that i:ncludes a Balance Sheet. The fact they are only asking for an NTR is good news. If they need comparatives (ie more than one year has to be prepared) then it could easily get to $2,500 or more in pro fees. But if it is just 1 year then I would agree you can probably get it done for less provided you are giving the accountant good, organized, reconciled data to work with.  
 
Edited by midge, 2016-05-12 12:05:16

Thanks everyone. The bank is just requesting 2015 NTR. We do not use accounting software, but do use the farm accounting book provided by the accountant, so all the columns are totalled already and we have an up to date net worth statement drawn up. It is a large accounting firm, not a small independent!

That's easy then! The accountant will verify the math and create a trial balance in a program like quick books from which they'll create your financial statements! $2,500 seems like a lot but it's been almost six years since I worked in public accounting for one of the large firms. Like everything else, prices go up!