Unaudited Financial Statements
Under sections 201(2) and 201(5) of the Companies Act (the "Act"), directors are responsible to present and lay before the company, at its annual general meeting, financial statements that:
- comply with Accounting Standards; and
- give a true and fair view of the financial position and performance of the company.
The financial statements to be presented and laid at Company’s AGM may be audited or unaudited financial statements.
Unaudited Financial Statements (UFS)
A company that qualifies for the criteria of the small company concept may be exempted from audit. Under this scenario, a company is required to prepare unaudited financial statements that include Director’s Report.
As a minimum, a director’s report should state:
- The names of each director who is appointed during the financial year;
- The principal activities of the company and, if necessary, the principal activities of its subsidiaries;
- The company’s financial position;
- A summary of the company’s trading activities;
- A summary of prospects;
- Recommendations for dividends for the financial year;
- Any significant events that occurred after the date on the balance sheet;
- Significant changes to the company’s fixed assets.
Unaudited financial statements, also called accounts compilation, are similar to an audit report except for the expression of an audit opinion on the financial statements.
What is a small company concept?
A private company that qualifies as a small company during the financial year may be exempted from audit and it should meet at least 2 of the 3 criteria for the immediate past two consecutive financial years:
- Total annual revenue ≤ $10m
- Total assets ≤ $10m
- No. of employees ≤ 50
For a company that is part of a group:
- the company must qualify as a small company; and
- the entire group must be a “small group” to qualify for the audit exemption.
For a group to be a small group, it must meet at least 2 of the 3 quantitative criteria on a consolidated basis for the immediate past two consecutive financial years.
Where a company has qualified as a small company, it continues to be a small company for subsequent financial years until it is disqualified. A small company is disqualified if: (a) it ceases to be a private company at any time during a financial year; or (b) it does not meet at least 2 of the 3 the quantitative criteria for the immediate past two consecutive financial years.
Where a group has qualified as a small group, it continues to be a small group for subsequent financial years until it does not meet at least 2 of the 3 the quantitative criteria for the immediate past two consecutive financial years.
Audited financial statements
A company that does not qualify for the criteria of the small company concept is required to present and lay before the company, in its AGM, audited financial statements. This is an annual financial statement accompanied by Independent Auditor’s Report and Director’s Report.
