Audit Services in Cyprus are compulsory according to the company’s act for every company incorporated in Cyprus. In order for an auditor to prepare the audit of financial statements below records and documents must be arranged:
i. Books and records
The accounting records must include the total amount received and spent, all sales and purchases, assets and liabilities during the financial year.
The records of a company are not available for review by anyone except the directors and auditors. On the other hand, The Inland Revenue, as well as the VAT authorities can, however, request the production of any records while examining accounts for tax or VAT purposes.
It is also required to keep following documents:
- Register of members
- Register of directors and secretary
- Register of directors’ interests (in shares of the company)
- Register of debentures and charges
- Minutes of directors’ and shareholders’ meetings.
Regarding the VAT requirements, according to Cyprus laws the VAT returns must be prepared on a quarterly basis which are decided by the VAT office. The VIES Returns, the cross-border business-to-business transactions within the EU must be filed on a monthly basis.
ii. Annual Return
All companies must also file an annual return providing information of the company’s capital structure, mortgage and facts of registered shareholders, directors and secretary.
A copy of the annual financial statements must be attached to the annual return, with an auditors’ report required for all companies and a Management Report where this is required. The documents filed with the Registrar of Companies must be in Greek (or Turkish) and are open to public inspection. By concession, the financial statements filed with the Annual Return may be in English.
iii. Financial Statements
Financial Statements must be prepared by all Cyprus incorporated companies once a year and presented at the shareholders’ Annual General Meeting. The financial accounts must be kept at the company’s registered office or at a place chosen by the directors.
They may be in any language, but it is necessary to keep either a Greek or English translation with the Registrar of Companies as an attachment to the company’s Annual Return.
The accounting period should be for twelve months ending on any date decided upon by the directors.
Financial Statements should be prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the EU and International Financial Reporting Standards as issued by the IASB and should comply with the Companies Law, Cap. 113.
The Accounting year-end is deemed to be 31 December, unless notice of another date is given.
Small companies are subject to certain conditions, exempt from the obligation to prepare Management Report.
iv. Consolidated Financial Statements
If a Cyprus company is holding subsidiaries, it is required to prepare consolidated financial statements. The following exemptions apply:
- Small and medium sized groups may be exempt from the obligations to draw up consolidated financial accounts (Note: The exemptions from consolidation in the cases of (i) severe and long-term restrictions, (ii) disproportionate cost or undue delay and (iii) held exclusively with the view to subsequent sell, as these were provided by the previous Law have been abolished).
- Groups of companies, the holding or mother companies of which publish consolidated financial accounts on the basis of Generally Accepted Accounting Principles, shall be exempt from the obligation to draw up consolidated financial accounts.
v. Annual Income Tax Return
Every company resident in Cyprus for tax purposes is required to complete and submit an annual Income Tax Return (TD4) to the Department of Inland Revenue (Cyprus Income Tax Office, CITO). The annual Tax Return for all Cyprus companies (including small companies) should be based on the Company’s standalone financial statements.
Cyprus Tax Laws require the TD4 to be based on the Company’s audited financial statements and be accompanied by an Auditor’s Confirmation of compliance.
vi. Audit of Financial Statements
Last but not least is the Audit of Financial Statements. The Financial Statements of all Cyprus companies have to be audited by an independent auditor or auditors.
The audit methodology used by the Cyprus accounting firm should comply with the International Financial Reporting Standards on Auditing (IFRS) and line up with all new standards.
Technology is unquestionably crucial for auditors as the latest computer assisted techniques and audit software are necessary for the daily accounting preparations.
Beyond the technology it is just as important to understand the clients’ businesses, procedures, risks and fraud valuation etc. so that the correct audit planning can be processed.