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New Audit Requirements – Audit


Changes on Cyprus Audit Requirements for the year ended
31/12/2022

I can not remember when the last time was there were such big
developments in the Audit profession in Cyprus, besides of course
the regular changes of the IFRs.

On the 08.06.2022 the Cyprus parliament voted specific criteria
on which companies would be audited. Prior to this decision all
Cyprus companies were required to perform an audit. This was an
income tax requirement which was religiously followed in the
republic.

What are the new audit requirements for Cyprus companies:

– Turnover / Income (all income streams with no exceptions) >
than Euro 200,000, and or

– Total Assets (excluding liabilities) > Euro 500,000

Auditors will have to review the management accounts of the
Cyprus companies and ascertain if the above 2 criteria are met. If
they are not met, then companies will not be required to have a
statutory audit.

Up until and inclusive of year ends 31/12/2021 all Cyprus
companies were requited to comply with the International Auditing
Standards (IASs) and had to perform statutory audits. This task was
performed by local regulated by ICPAC (Institute of Certified Public
Accountants in Cyprus) Audit and Assurance firms like CYAUSE Audit
Services Ltd.

This impliedd that irrespective of their size, transactions,
risk profile all companies had to comply with lengthy documentation
and detailed audit work which in most cases it can be argued it was
not necessary so that the auditors would support their audit
opinions.

On the other hand, the regulators had to monitor and review all
their members for the quality and compliance with the IASs
irrespective of whether these licensed audit firms have been
performing a statutory work for a kiosk, a holding company, or a
bank.

What this change means to the profession

Regulated audit firms will be required by law to perform
statutory audits only for companies that meet the above thresholds
which translated to less companies but bigger in size which, to be
honest, makes sense.

This are great news, I believe, as audit firms will not
necessarily change their fees for the preparation of the financial
statements and tax return completion, which is a very detailed and
complicated process, but would certainly reduce the amount of
paperwork required to perform statutory audits on smaller
clients.

Having said this, we expect banks to require audited financial
statements for smaller clients for loan purposes, something which
also aligns Cyprus with the rest of the world’s compliance and
banks common practices.

CYAUSE Audit Services Ltd

We are a Regulated Audit & Assurance firm in Cyprus
with offices in Nicosia and Limassol servicing more than 300
clients locally and internationally. Routine statutory external and
internal audit engagements are performed by our experienced staff
daily as these functions represent almost 50% of our day to day
activities.

CYAUSE Regulators: ICAEW, ACCA & Cyprus local Audit Regulator ICPAC (Institute of Certified Public
Accountants in Cyprus).

ICPAC Registration/ License Number: E321/G/2013

So what is a statutory audit?

I have come across audit, statutory audit and
internal audit. I am confused!

Lets start with the easiest one – the Internal
Audit

An internal audit is either a statutory
requirement usually required by regulated entities, Investment
Firms, public companies or it is a purposely ordered engagement by
an Organisation itself to assess its internal control systems.

Internal audit engagements are performed to provide assurance to
the management or the users of the organisations facilities and the
government that the organisation is well run internally with well
though and thorough procedures that would deter fraud, malpractice,
operational errors and would enhance efficiencies.

So what is a Statutory Audit

A statutory audit is the assessment of the financial statements
of a company by a Regulated Audit and Assurance firm like CYAUSE
Audit Services.

The auditors, plan and execute their work based on a
sophisticated sample basis to provide an opinion to the financial
statements of the company usually prepare by the Company. They test
all items of the financial statements including the disclosures
making sure that they are not misleading to the users of the
financial statements and that they add value to them.

Audit work is not visible to the user of the financial
statements nor the paying client which is the company itself. Audit
work comprises of a series of paperwork, narrative, tests and
conclusions all supported by the firms and IASs methodology and are
property of the audit firm.

Auditors must have all their work readily available to the
regulator in case of an on-site monitoring * or in case of an
investigation by the local authorities. In fact, the auditors work
is summarised on 2 or 3 pages, called the audit opinion where they
state whether the financial statements show a true a fair view.

Facts, documentation and detailed audit work performed by the
auditors to reach that opinion is only visible to a 3rd party if
requested and if the audit firm agrees to show their work.

Consequently, we believe, the latest developments for Cyprus
audit requirements are towards the right direction and likely to
benefit everyone:

a) Audit Firms

Will be preparing lengthy supporting documentation and detailed
audit work to support their audit opinions only for large companies
as defined by the law.

b) Companies that do Not Need an Audit

Nothing really changes for them as the company tax returns and
the financial statements must be prepared and reviewed by a
regulated auditor.

In the event they are not reviewed by a regulated audit and
assurance firm (this must be stated as such in the tax return prior
to its submission; there is a box on the actual tax return that
must be ticked) these tax returns are likely to be investigated by
the local income tax office; we all know what happens what the
taxman visits the premises.

c) Regulators – local and
international

The local regulators ICPAC ((Institute of Certified Public
Accountants in Cyprus) will have less companies to review and
monitor, thus hiring less staff and making their lives easier. Same
will apply for the international accounting bodies the ICAEW and
the ACCA.

Overall: It makes sense.

There is no need to spend so much time documenting work
performed for an inactive company as you would do for the audit of
a large trading company in order to be compliant with IASs just
because the Cyprus regulator believes in a one size fits all
audit.

Clearly the new regulation ensures that issue is now been
resolved.

The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.



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