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Compliance Training Crucial for Financial Professionals in Cambodia
In an effort to maintain transparency and accountability, the Cambodian government has implemented various compliance regulations for financial professionals in the country. These regulations aim to ensure that businesses operating in Cambodia meet specific criteria, submit required documents, and undergo audits.
Audit Requirements
According to Prakas 643 of the Ministry of Economy and Finance, certain business entities must submit their financial statements to be audited by an independent auditor. To qualify, businesses must meet at least two of three criteria:
- Annual turnover exceeding 4 billion riel (US$969,200)
- Total assets worth more than 3 billion riel (US$726,673)
- Having over 100 employees
Audit Process
In addition to the audit requirement, businesses that are obligated to be audited must do so for a minimum of three consecutive years. The issuance of the audit report should be completed within six months from the closing date of the accounting period.
Ministerial Order 563 (MO 563)
Ministerial Order 563 (MO 563), issued on July 10, 2020, outlines the requirements for business entities that must be independently audited. These include:
- Public companies
- Businesses with public accountabilities
- Investment projects
Non-Profit Organizations
Non-profit organizations will also need to be audited if they meet specific criteria, including:
- Annual expenses exceeding 2 billion riel (US$484,449)
- Having more than 20 employees
Certificate of Compliance (CoC)
Another crucial compliance requirement is the submission of a Certificate of Compliance (CoC) by March 31 each year for Qualified Investment Projects (QIPs). The CoC must include various documents, such as:
- Articles of incorporation
- Latest audited financial statements
- Patent tax certificate
Fiscal Periods in Cambodia
Fiscal periods in Cambodia do not need to coincide with the calendar year. If a company is established during the financial year, its first period of accounts will run from the date of incorporation to December 31.
International Financial Reporting Standards (IFRS)
The National Accounting Council of Cambodia has adopted International Financial Reporting Standards (IFRS) for SMEs, which are referred to as Cambodian International Financial Reporting Standards (CIFRS).
Qualified Investment Projects (QIPs)
Businesses registered as QIPs must have their financial statements audited by an external independent auditor registered with the Kampuchea Institute of Certified Public Accountants and Auditors.
Annual Reports
Annual reports prepared in both Khmer and English languages are required for all companies, which should include:
- Financial statements
- Statement by directors on the financial statements
- Statutory declaration by the director or officer primarily responsible for financial management
- Auditor’s report
Failure to Comply
Failure to comply with these regulations may result in penalties ranging from 10 to 25 percent of the unpaid tax amount, as well as interest of 1.5 percent for late or unpaid taxes.
Importance of Compliance Training
To ensure compliance, it is essential that financial professionals in Cambodia undergo comprehensive training on these regulations. This training will help them understand the requirements and avoid potential penalties.
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