Why Your Business Needs To Be Ready With Your Year-End Audit

Admit it or not, no business is excited for a year-end audit and saying that it is a stressful time for you and your finance staff is an understatement. But before we enumerate the burden and bottlenecks, let’s go back to the basics and review why a year-end audit is important and the things you need to keep in mind.

Why Audit?

The purpose of Audit is to assess the accuracy, timeliness, and reliability of your business’ financial documents that is used internally for decision making. These documents will be reported to government bodies such as the Bureau of Internal Revenue (BIR) and Secretary of Exchange and Commission (SEC).

What do you need to prepare?

Below are the reports and documents that you need to prepare for that audit:

1. Balance Sheet
2. Service Invoices/Official Receipts
3. Monthly and Quarterly copies of BIR reports
4. Purchase and Disbursement Vouchers
5. Bank Statements

Who gets audited?

According to Section 232 of the Tax Code:

“(A) Corporations, Companies, Partnerships or Persons Required to Keep Books of Accounts. All corporations, companies, partnerships or persons required by law to pay internal revenue taxes shall keep and use relevant and appropriate set of bookkeeping records duly authored by the Secretary of Finance wherein all transactions and results of operations are shown and from which all taxes due the Government may readily and accurately be ascertained and determined any time of the year: Provided, That corporations, companies, partnerships or persons whose gross annual sales, earnings, receipts or output exceed Three million pesos (P3,000,000), shall have their books of accounts audited Public Accountants and examined and yearly their by independent income tax Certified returns accompanied- with a duly accomplished Account Information Form (AIF’) which shall contain, among others, information lifted from certified balance sheets, profit and loss statements, schedules listing income-producing properties and the corresponding income therefrom and other relevant statements”.

House Bill 5636, as approved by the House of Representatives on 31 May 2017

As indicated above, a company (single proprietorship) whose quarterly sales or earnings exceed P750,000.00 is mandated to file an Audited Financial Statement by an independent Certified Public Accountant (CPA). However, not all Four (4) quarters need to exceed P750,000.00 to be audited. If One (1) of the quarters exceeded, then an audit will be required, or else, a penalty will be imposed by the BIR for nonsubmission of Audited Financial Statement.

As for the Corporations, regardless of how much is the sales or revenue, an Audited Financial Statement is mandatory.

Deadline of Submission of Audited Financial Statement

 

For Bureau of Internal Revenue

Deadline for submission of the Audited Annual Financial Statement and the Income Tax Return to the BIR is every 15th of APRIL subsequent to the end of the calendar year (December 31, 20XX). For those with a fiscal year-end, the deadline for submission shall be on the 15th day of the 4th month following the close of the fiscal year-end.

General documentary requirements also submitted along with the ITR include the following:

1. Audited Financial Statement
2. Statement of Management Responsibility on the ITR signed by the President and Treasurer, or both their equivalents.
3. BIR Form Nos. 2307 with sworn declaration per Revenue Regulation No. 2-2015, if applicable

For Securities and Exchange Commission

The Audited Financial Statement shall be submitted to the SEC and shall depend on the last numerical digit of the corporation’s SEC registration or license number. This shall apply to corporations with a calendar year ended December 31, 20XX. Corporations with fiscal year-end shall file their Audited Financial Statement within 120 calendar days from the end of their fiscal year.

The SEC shall require the following attachments upon filing:

1. Audited Financial Statement (if applicable) stamped received by the BIR; and
2. Statement of Management Responsibility on the Financial Statement signed by the President and Treasurer, or both of their equivalents.