A statutory audit is a legally required independent review on the accuracy of a company's financial statements and records.
By examining information such as financial transactions, bank balances, and accounting records, the statutory auditor determines whether a company provides a "true and fair" representation of its financial position, and meets all relevant guidelines and legal requirements.
Which companies require statutory audit?
All corporate entities registered in Cyprus, irrespective of their status and size are obliged to prepare a set of financial statements and these audited.
Current statutory audit requirements in Cyprus
As a member of the European Union (EU), Cyprus is subject to the accounting, auditing and financial reporting requirements established in EU Regulations and Directives as transposed into national laws and regulations.
The Companies Law (Cap.113) sets the requirements for the preparation of corporate financial statements in Cyprus and transposes the EC Accounting Directive (2013/34/EU). The Companies Law requires all entities to apply EU-endorsed IFRS in their consolidated and separate financial statements. Exemptions from consolidation apply for small and medium-sized entities except where any affiliated enterprise is a public-interest entity or where the obligation to prepare consolidated financial statement arises under other legislation.
Previously, the Companies Law required mandatory statutory audits for all companies in Cyprus excluding small firms. The Law was amended in September 2016 and audit for all registered companies regardless of size is now compulsory. ref.Cap.113 §152A(1)(a)
Who provides statutory audit services?
A statutory audit can be carried out by an independent external party, who is approved and registered with the Institute of Certified Public Accountants of Cyprus (ICPAC), qualified to carry out statutory audit of annual or consolidated accounts and holder of general practicing and an audit practice certificates.
The Auditors and Statutory Audits of Annual Consolidated Accounts Law 53(I)/2017 regulates the auditing profession and the public oversight of the audit profession, outlines mandatory quality assurance reviews of statutory audit firms, specifies the requirements for granting license to perform audits and outlines initial and continuing professional development requirements.
According to the Law, the Institute of Certified Public Accountants of Cyprus (ICPAC) is explicitly named as a Recognised Body of Auditors (RBA) and all statutory auditors and audit firms must be registered with ICPAC.
There are currently over 700 statutory audit firms in Cyprus.
Are there any benefits of audit?
There are number of advantages of having an audit.
The main function of an audit is to check for accuracy. As a result, an audit can help you find errors in your accounting books or processes. An audit might be able to spot a small mistake before it grows into a big one. And, audits can catch errors before you file your business tax return, helping prevent tax audits.
What is included in the audited financial statements?
The audited financial statements include the following:
Company details -
Report of the board of directors -
Independent auditor's report - summarises the results of the audit and provides an opinion on the financial statements as to its fairness and accuracy
Statement of comprehensive income (profit and loss) - reports on a company's income, expenses, and profits over a stated period of time
Statement of financial position (balance sheet) - reports on a company's assets, liabilities, and owners equity at a given point in time
Statement of changes in equity (statement of retained earnings) - reports on the changes in equity of the company over a stated period of time
Statement of cash flow - reports on a company's cash flow activities, particularly its operating, investing and financing activities over a stated period of time
Notes to the financial statements -
How much does an audit cost?
Our audit service fee is based on the amount of time we spend conducting the audit. Typically, the larger the organization and the more complex its finances and operations, the more time the audit will take and the higher the audit cost.
The rates that various audits firms charge can vary significantly, mainly depending on whether the auditor is a large audit practice or a smaller audit firm.
Audit quality is not only a sign of technical competence but also of professional conduct. Whether you are a growing business or your are looking to sell your company, an audit is a sign of good governance and shows your insistence in having good internal controls and willingness to use external advisers - all of which are appealing to potential investors, banks and regulatory bodies.
Our audit service approach
We provide a tailored approach to every statutory audit, which is why you get to view our audit work not just as an expense but as an up-to-date reality check of your company.
Every time we undertake an audit assignment, our aim is to acquire a broad knowledge of your business environment and your company's requirements and strategic direction. We believe that our audits should provide added value by serving as a springboard towards identifying tax, administrative and competitive opportunities.
To small private companies, owner-managed and family-controlled businesses we are a trusted business advisors that will help identify and manage risks – control, compliance and operational – as well as generate value-added ideas and solutions.
We provide a partner led audit where the audit partner will be a key member of the audit team, participating at all stages of the audit.
How we do an audit
Our audit of your financial statements begins with obtaining a thorough understanding of your business and industry, including your internal controls. Our understanding of how you run the business is important not only because it allows us to offer a personal service, but also to enable us to understand the goals, issues and challenges your company faces. This knowledge and understanding ensure our audit plan is developed around your requirements rather than imposing ourselves on you.
We conclude the audit with the expression of an opinion as to whether or not your financial statements are presented fairly in all material respects and with a management letter where our findings and suggestions for improvement are formalized.
Prior to and during the audit, we work closely with our clients to develop a service plan and calendar, which includes engagement planning meetings and frequent client communications intended to produce an efficient and cost-effective audit.
Our audit methodology is based on the International Standards on Auditing (ISA), a global professional standards for the performance of financial audit of financial information.
What are the main stages of a statutory audit
This is the initial planning stage, where we accept you as a client, put arrangements in place to start work, and think about the timing and nature of the work to be performed.
2. Risk assessment
Here, your business will be analysed to assess and identify what we think the main risks are in the business. A significant amount of the audit work will then be targeted at these riskier areas.
3. Audit strategy
Once the significant areas of risk have been identified, specific tests will be designed in order to address these risks.
4. Gathering evidence
This is the actual testing stage where evidence is gathered. The nature of the evidence needed will depend on the type of testing required. If discrepancies are found these will be discussed with you in order to give you a chance to adjust the financial statements before they are finalised.
We will assess the evidence gathered and conclude on whether the financial statements are free from material misstatement and if so, give an “unqualified” opinion - saying that everything in the financial statements is true and fair.
Quantia Advisors Ltd is a Certified Public Accountants firm registered to carry on accounting and audit work in Cyprus by the Institute of Certified Public Accountants of Cyprus (ICPAC). Details about our statutory audit registration can be viewed at www.icpac.org.cy under reference number E264/A/2013.