Does it matter if the seller's financial statements were never actually reviewed by an accountant?

It matters for how much weight you can put on the numbers as handed to you, though it doesn't mean the business is misrepresented. Financial statements that were only compiled (assembled from figures the owner provided, without independent verification) carry far less assurance than ones subject to an accountant's actual review or audit engagement, where at least some analytical testing and inquiry has been done. Many small Ontario businesses only ever have compiled statements, simply because the cost of a higher level of accounting assurance hasn't been worth it for a business their size — that's common practice, not necessarily a red flag by itself.

What it does mean practically is that your own due diligence has to do more of the work an accountant's review would otherwise have done — reconciling reported figures against bank records, tax filings, and other independent sources yourself, rather than relying on someone else having already checked. It also strengthens the case for robust representations, warranties, and an indemnity around financial statement accuracy in your purchase agreement, since you're accepting more risk than you would with independently reviewed numbers.

Have your own accountant treat unreviewed financials with appropriate skepticism and verify independently rather than taking them at face value. A Treadstone business lawyer can help build protections around this into the deal.