On the 10th of July 2020, the Ministry of Economy and Finance (“MoEF”) issued Ministerial Order No. 563 (“MO 563“) which sets out the form, procedures and requirements for entities that are required to submit financial reports for an independent audit with an auditor who is a member of the Kampuchea Institute of Certified Public Accountants and Auditors (“KICPAA“) and licensed by the National Accounting Council (“NAC“).
Who is required to submit financial reports for an independent audit?
All public enterprises, enterprises with public accountability, and investment projects must submit their financial reports for each accounting period for an independent audit.
A public enterprise is defined as an entity that is under the effective Law of the General Articles of Association of Public Enterprises.
Enterprises with public accountability are defined as:
Enterprises that have any debt instruments or equity instruments that are traded in a public market or an enterprise that is preparing to issue such instruments to be traded in a public market (either domestic or foreign stock exchange or domestic or regional OTC (over the counter) market; or
Enterprises that hold assets in a fiduciary matter for a broad range of outsiders as a primary business such as banks, deposit-taking micro-finance institutions, credit unions, insurance companies, securities dealers, securities brokers, and mutual funds.
Investment projects are defined to include qualified investment projects (“QIPs“) that have received certification and registration from the Council for Development of Cambodia (“CDC“).
In addition to the enterprises outlined above any enterprise in Cambodia that meets two (2) of the three (3) criteria in the second column of the table below will also be required to submit their financial reports for independent audit for each accounting period:
We provide the updated criteria introduced by MO 563 and the previous criteria in the table below.
| Auditing Requirements | ||
|
MO 563 (10 July 2020) New Criteria |
Prakas no. 643 (26 July 2007) Old Criteria |
|
| Annual Turnover | Above KHR 4 billion (approximately USD 1,000,000) | Above KHR 3 billion (approximately USD 750,000) |
| Total Assets | Above KHR 3 billion (approximately USD 750,000) at the date of the close of the accounting period | Above KHR 2 billion (approximately USD 500,000) |
| # of Employees | More than 100 referring to the average number for the year | More than 100 |
Enterprises that do not meet two (2) out of the three (3) criteria above can also voluntarily submit their financial reports for independent audit.
Not-for-profit entities must submit their financial reports for each accounting period for independent audit if the not-for-profit entity meets the criteria below:
- Total Annual Expenses more than KHR 2 billion (approximately USD 500,000); and
- Workers/employees of twenty (20) or more individuals, referring to the average number of workers/employees for the year.
Not-for-profit entities that do not meet the two criteria above can voluntarily submit their financial reports for independent audit.
Responsibilities for entities that are obliged to submit their financial reports for independent audit
Those categories of entity, as outlined above, that are obliged to submit their financial reports for independent audit are required to do so for a minimum of 3 (three) consecutive accounting years even if the entity ceases to meet the criteria.
If an entity, that was obliged to submit their financial reports for independent audit, ceases to have commercial activity or operations for a period of 12 (twelve) consecutive months from the close of its last accounting period, that entity can make a request to the National Accounting Council to not submit financial reports to independent audit.
The issuance of an independent audit report shall be completed no later than 6 (six) months from the closing date of the accounting period. In the case that this cannot be carried out, entities that are obliged to obtain an independent audit report can request an extension from the National Accounting Council with an appropriate explanation.
Entities who are obliged to obtain an audited financial report shall deliver the report to the General Secretariat of the NAC no less than six (6) months and fifteen (15) days from the closing date of their accounting period.
Auditors shall not provide audit services to an enterprise or not-for-profit entity for more than five (5) years consecutively.
Rights and Responsibilities of Officers
The General Secretariat of the National Accounting Council has the responsibility to store all audit reports and has the right to use those reports to conduct monitoring, inspection and evaluation of the compliance of the reports with effective laws, regulations and standards and to maintain the confidentiality of financial and non-financial information of entities subject to the audit requirements.
The General Secretariat may release financial reports to authorized public establishments in the case of a request that is in accordance with laws and regulations. Any leadership or officers of the General Secretariat that leak or release financial and non-financial information of entities subject to audit requirements shall be held responsible and face punishment under the laws in effect.
Penalties
Without considering other criminal charges as set forth in the Law on Accounting and Audit and effective regulations in the fields of accounting and auditing in the Kingdom of Cambodia, entities subject to audit requirements that do not comply with the obligations as set out in MO 563 shall be subject to fines from the National Accounting Council as set forth in Sub-Decree 79 SDMO dated 1 June 2020 or fines for violations of the Law on Accounting and Audit.
Tax services required to be undertaken by a licensed tax agent in Cambodia are provided by Mekong Tax Services Co., Ltd, a member of DFDL and licensed as a Cambodian tax agent under license number – TA201701018.
The information provided here is for information purposes only and is not intended to constitute legal advice. Legal advice should be obtained from qualified legal counsel for all specific situations.
Contacts
Partner, Cambodia Deputy Managing Director & Head of Cambodia Tax Practice
Partner & Head of Regional Accounting Advisory Practice
Partner & Deputy Head of Cambodia Tax Practice
