A pioneering financial auditing framework was unveiled for informal enterprises and unlisted businesses in Colombo on August 30.
As a result of the new framework, more than one million registered SMEs and countless other unlisted businesses in Sri Lanka finally get their long awaited break to become credit worthy and receive access to finance by clearing the biggest obstacle they have been facing; inability to be officially audited and show a verified financial statement, despite maintaining their own bookkeeping. The latest audit framework, modelled on the famed Nordic SME auditing, now equips the informal economic sectors to be credit-worthy on their own with any Sri Lankan bank or other financial institution, finally ending the credit-cum-financing blockade that relentlessly plagued these sectors for many decades.
“Even the World Bank supports Sri Lanka’s initiatives to develop comparable national accounting and auditing frameworks,” the Minister of Industry and Commerce Rishad Bathiudeen said addressing the launch of Sri Lanka Auditing Standard (SLAuS) for the Audits of Non – Specified Business Enterprises (Non-SBEs) by the Chartered Accountants Sri Lanka at CA Sri Lanka office, Colombo.
Called as “Sri Lanka Auditing Standard (SLAuS) for the Audits of Non – Specified Business Enterprises (Non-SBEs)”, this is also the first ever such SME bookkeeping audit framework to be introduced anywhere in South Asia (Among examples of SBEs are public listed firms and firms handling public money such as Finance companies). CA Sri Lanka, observing the “adoption of Sri Lanka Accounting Standards (SLFRS) for SMEs was low due to their complexity”, has pioneered the non-SBE SLAuS. Since the International Standards on Auditing (the ISAs) globally used in today’s auditing have become more extensive, complex and therefore impractical for SMEs to use them, the simplified version for Sri Lankan small businesses by CA Sri Lanka called as “non-SBE SLAuS” was launched.
This stand-alone 60 page new SLAuS is a departure from the one-size-fits-all financial reporting and eases the complex reporting burden on private firms towards a practical and real-life framework, through a cost-benefit approach but with much less technical sophistication. This new SLAuS is modelled on similar auditing frameworks adopted by some Nordic countries. CA Sri Lanka believes that around 450 Lankan audit firms can start using the new “SLAuS for non-SBEs” on their clients from now on. The new SLAuS for non-SBEs is for unlisted firms/SMEs, and also for SMEs using “SLFRS for Smaller Entities”. SLFRS says any business with more than Rs 500 Mn annual revenue cannot use the SLFRS for Smaller Entities but have to go for SLFRS for SMEs or the full SLFRS. Therefore SBEs (Eg public listed firms and firms handling public money such as Financial institutions) should use the full SLFRS and not the “SLAuS for non-SBEs”. Chairman of CA Sri Lanka’s Audit Framework Subcommittee Sanath Fernando said that SMEs finally get their chance to become a formal entity-to be officially audited and receive a verified financial statement and as a result, for the first time to be ‘bankable’ with Lankan financial institutions.
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