YMC Consulting

Annual audits in Cyprus are mandatory for most businesses, ensuring compliance with local laws and International Financial Reporting Standards (IFRS). Below is an overview of key requirements and insights:

Who Requires an Audit?

1. Companies

• All companies registered in Cyprus, irrespective of size or activity, must prepare audited financial statements annually.
• This includes dormant companies, though they may qualify for exemptions from full audits.

2. Exemptions

• Sole proprietorships and partnerships are generally not required to prepare audited financial statements unless:
  • They opt for voluntary audits.
  • Audits are needed for specific purposes (e.g., loan applications).
• Small entities with minimal activity may qualify for simplified reporting.

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Annual Audit Requirements

1. Preparation of Financial Statements

• Companies must prepare financial statements in accordance with IFRS, including:
  • Balance sheet.
  • Income statement (profit and loss).
  • Statement of cash flows.
  • Notes to the accounts.

2. Engagement of a Licensed Auditor

• Audits must be conducted by a licensed auditor or auditing firm registered with the Cyprus Public Audit Oversight Board (CyPAOB).

3. Audit Report

• The auditor reviews financial statements to ensure:
  • Accuracy.
  • Compliance with IFRS and local tax laws.
• An audit report is issued, either expressing an unqualified opinion (no issues) or highlighting discrepancies.

4. Submission Deadlines

• Financial statements must be submitted to:
  • The Registrar of Companies.
  • The Tax Department.
• Deadline: 12 months after the end of the financial year (e.g., for the year ending December 31, the deadline is December 31 of the following year).

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Key Objectives of the Audit

Tax Compliance: Ensures accurate computation of taxable income and compliance with tax laws.

Regulatory Compliance: Verifies adherence to the Companies Law, Cap. 113, and other regulations.

Transparency and Accountability: Provides assurance to shareholders, investors, and stakeholders about the company’s financial health.

Penalties for Non-Compliance

Late Submission to the Registrar of Companies

• Penalties may include:
  • Monetary fines.
  • Legal repercussions, such as company deregistration.

Failure to File with the Tax Department

• Consequences may include:
  • Fines and interest on unpaid taxes.
  • Increased scrutiny during future audits.

Additional Considerations

Tax Return Submission

• Audited financial statements are the basis for the corporate tax return (Form IR4), which must also be filed with the Tax Department.

Group Audits

• Groups of companies with consolidated financial statements must undergo group audits in addition to individual audits.

Voluntary Audits for Small Entities

• Smaller businesses may opt for voluntary audits to:
  • Enhance credibility.
  • Improve financing opportunities.

Need assistance with your annual audit or compliance?
Contact us today to ensure your business stays on track
with its financial reporting obligations!

info@ymcconsultings.com