Sri Lanka Accounting and Auditing Standards Monitoring Board

General Statutory Information

Contents

Introduction

Specified Business Enterprises

Duties of Specified Business Enterprises

Duties of Directors, Managers, Secretaries and other Officers

Duties of Auditors

Sri Lanka Accounting Standards and Sri Lanka Auditing Standards

Investigative Powers of the Board

Penalties and other Implications

Legal Information

Introduction

The Sri Lanka Accounting and Auditing Standards Act No.15 of 1995 and the regulations made under the Act have defined certain enterprises to be Specified Business Enterprises.

The Act applies mainly to the preparation, presentation and audit of financial statements of these enterprises in respect of periods commencing on or after 1st January 1999.

The Act imposes certain duties and obligations on specified business enterprises and their directors, officers and auditors, the default of which would result in various penalties, extending upto an imprisonment of either description for a term of 5 years.


Specified Business Enterprises

The following have been defined as specified business enterprises by the Act and the regulations made under the Act:

* Companies licensed under the Banking Act, No. 30 of 1988.

* Companies authorised under the Control of Insurance Act, No. 25 of 1962, to carry on insurance business.

* Companies carrying on leasing business.

* Factoring companies.

* Companies registered under the Finance Companies Act, No. 78 of 1988.

* Companies licensed under the Securities and Exchange Commission Act, No. 36 of 1987, to operate unit trust.

* Fund Management Companies.

* Companies licensed under the Securities and Exchange Commission Act, No.36 of 1987, to carry on business as stockbrokers or stock dealers.

* Companies licensed under the Securities and Exchange Commission Act, No. 36 of 1987, to operate a Stock Exchange.

* Companies listed in a Stock Exchange licensed under the Securities and Exchange Commission Act, No.36 of 1987.

* Other Companies 

(a) which have a turnover in excess of Rupees  500 Million; 

(b) which at the end of the previous financial year, had shareholders equity in 
excess of Rupees 100 Million;

(c) which at the end of the previous financial year, had gross assets in excess of Rupees 300 Million;

(d) which at the end of the previous year had liabilities to banks and other financial institutions in excess of Rupees 100 Million;

(e) which have a staff in excess of 1000 employees.

* Public Corporations engaged in the sale of goods or the provision of services.

* A group of companies, any one of which fall within any of the above categories. For this purpose, "a group of companies" means a holding company and its subsidiaries, the accounts of which have to be consolidated under section 147 of the Companies Act, No.17 of 1982

 

 

 

Duties of Specified Business Enterprises

Every specified business enterprise is required to -

(1) prepare its financial statements in compliance with Sri Lanka Accounting Standards, and take all necessary measures to ensure that the financial statements are audited in accordance with Sri Lanka Auditing Standards with the object of presenting a true and fair view of the financial performance and financial position of such enterprise;

(2) have the financial statements audited by members of the Institute of Chartered Accountants of Sri Lanka holding a certificate to practice issued by the Institute;

(3) submit the annual audited financial statements * of the enterprise to the Sri Lanka Accounting and Auditing Standards Monitoring Board, to enable the Board to determine whether the financial statements have been prepared in compliance with Sri Lanka Accounting Standards; and

(4) furnish to the Board or to any person authorised by the Board any information pertaining to its financial statements as may be required by the Board or any person authorised by the Board within such time, as may be specified in a notice issued by the Board or any person authorised by it.

*Every specified business enterprise is requested to submit two copies of the annual report as required, to the address given below, and obtain a receipt of the same.


Duties of Directors, Managers, Secretaries and other Officer

It is the duty of all directors, managers, secretaries and other similar officers of a company or a Public Corporation to exercise all such diligence to prevent the commission of an offence under the Act as he/she ought to exercise having regard to the nature of his/her functions and the circumstances of the case.

Please refer to the paragraph on "Penalties and other Implications" for further details. 

Duties of Auditor

The financial statements of every specified business enterprise shall be audited by a member of the Institute of Chartered Accountants of Sri Lanka holding a certificate to practice issued by the Institute.

The Act requires the auditors to certify in their audit report that the audit has been conducted in accordance with Sri Lanka Auditing Standards and that the financial statements have been prepared and presented in accordance with Sri Lanka Accounting Standards.

Sri Lanka Accounting Standards and Sri Lanka Auditing Standard

For the purpose of the requirements of this Act, Sri Lanka Accounting Standards and Sri Lanka Auditing Standards are the Standards adopted by the Institute of Chartered Accountants of Sri Lanka and published in Gazette Extraordinary No.1056/19 of 2nd December 1998 subject to subsequent amendments. These Standards will be effective for financial statements covering periods beginning on or after 1st January 1999.

The Institute may revise, alter or amend the standards adopted by it under the Act, and such revised, altered or amended standards will be published in the Gazette. Such revisions, alterations, and amendments shall become effective from and after the date of publication or such later date as may be specified therein. 

Click to view Related Gazette Notifications

Investigative Powers of the Board


The Board or any person duly authorised by the Board may - 

(1) by notice in writing require a specified business enterprise or its auditors to furnish to the Board or to a person authorised by the Board, within such time, as shall be specified in the notice, any information pertaining to its financial statements and it shall be the duty of such specified business enterprise or its auditors, as the case may be, to comply with such requirement within the time specified in the notice;

(2) summon and question any director, officer or auditor of any specified business enterprise on any matter pertaining to the preparation or presentation of its financial statements; and

(3) carry out such investigations or hold such inquiries as it may by notice in writing consider necessary or expedient for the performance of its duties under this Act, and for such purpose may summon and call upon any director, officer or auditor of any specified business enterprise to appear before it at any such investigation or inquiry or to produce any such books or documents in the possession or control of such director, officer or auditor as are required for the purpose of such investigation or inquiry.

Note: A notice described in (1) above has to be issued not later than one year after the specified business enterprise has submitted the relevant financial statements to the Board. There is no time limit to exercise the other powers. 

Penalties and other Implication

* Every person who fails to comply with the requirements of the Act shall be guilty of an offence under this Act, and shall on conviction after a summary trial before a magistrate be liable to a fine not exceeding five hundred thousand rupees.

* Where a person is convicted of an offence under this Act and the court holds that the Act constituting such offence was done with the intention of misleading the shareholders of a specified business enterprise or any financial institution dealing with such specified business enterprise or the Inland Revenue Department or where a licensed commercial bank is convicted of an offence under this Act and the court holds that the Act constituting the offence was done with the intention of misleading the depositors of such bank, the court may sentence the offender to imprisonment of either description for a term not exceeding five years.

* Where an offence under this Act, is committed by a body corporate, any person who is at the time of the commission of the offence, a director, manager, secretary or other similar officer of that body corporate shall be deemed to be guilty of that offence unless he proves that the offence was committed without his knowledge or connivance and that he exercised all such diligence to prevent the commission of that offence as he ought to have exercised having regard to the nature of his functions and all the circumstances of the case. 

* Where any accountant of any specified business enterprise violates any provision of this Act, it shall be duty of the Board to bring such violation to the notice of any professional body of which such accountant is a member for the purpose of enabling such body to take appropriate action against such accountant.

* Where any specified business enterprise has failed to act in compliance with provisions of this Act, it shall be the duty of the Board to bring such fact to the notice -

(a) of any authority which is empowered by law to regulate or supervise the 
activities of such specified business enterprise; and

(b) of the Inland Revenue Department if the Board considers that such non- compliance has resulted in a substantial reduction of the tax liabilities of such specified business enterprises.

Legal Information

This notice is intended purely to draw your attention to the new requirements under the Sri Lanka Accounting and Auditing Standards Act No.15 of 1995 and implications of non-compliance. For a more complete understanding of the legal implications you are advised to refer to the provisions of the Sri Lanka Accounting and Auditing Standards Act No.15 of 1995 and Related Gazette Notifications.


Ajith S. Ratnayake
Director General
Sri Lanka Accounting and Auditing Standards Monitoring Board
3rd Floor 
293 Galle Road
Colombo 3
Telephone:94-1-301210
E-mail       : slaasmb@sltnet.lk
Fax            :94-1-301211

 

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