Limited Assurance Review Instead of Full Scope Audit

The Cyprus Parliament approved amendments to the Companies Law and to the Assessment and Collection of taxes law (“the laws”) on 9 June 2022, in order to introduce the Limited Assurance Review procedure as an alternative to the full scope audit. The purpose of the amendments is to simplify the procedure of auditing the financial statements of small and medium-sized enterprises (SMEs) and reduce the administrative burden involved.

Businesses which meet specified thresholds in terms of turnover and total assets will be entitled to have their financial statements subject to a Limited Assurance Review, to be performed by statutory and licensed auditors. The amendments were considered necessary for reducing the administrative burden and unnecessary costs on SMEs and audit firms alike.

The businesses to whom the laws apply and the relevant thresholds are as follows:

• Companies with a net turnover (including income from rents, interest, dividends and royalties) which does not exceed €200,000 and total assets which do not exceed €500,000 for at least two consecutive years. The amendment enters into force on 1 January 2023 and applies to the financial statements for the year/period ending on 31 December 2022 or any other later date.
•  Individuals with turnover and any other income from sources defined in certain articles of the Income Tax law exceeding €70,000 but not exceeding €200,000 and total assets not exceeding €500,000 for at least two consecutive years. Individuals with a turnover lower than €70,000 have no obligation to prepare financial statements. Individuals with a turnover and total assets exceeding the limits mentioned above, continue to be required to have their financial statements subject to a full scope audit.

The relaxations do not apply to parent companies that are required to prepare consolidated financial statements and to subsidiaries of such companies. They also do not apply to companies which are regulated and supervised by the Central Bank of Cyprus, the Cyprus Securities and Exchange Commission and the Commissioner of Insurance and companies which hold a qualifying participation in such companies.