Business owners guide to accounting firms and audit firms in Sri Lanka

 Once you register a company, one of the most important things you need to do is to make sure you have good financial management throughout the business. To make sure the business is growing and has good margins, you constantly need to know your revenue, expenses and profits. Failing to keep track of these , could lead to your business making losses or ending up in situations where there is constant financial pressure and no growth. 

While, most business owners see accounting and auditing as something they have to do only to meet legal requirements, accounting and auditing practices have many benefits beyond this. Good accounting and auditing practices and firms can help you to not only track your growth but also give you the right information to make sound decisions about the future of your company. 

In this article, you’ll learn how you can use accounting and auditing to get more benefits to your business, what your duties, and responsibilities are and what type of services you can get from accounting and auditing firms in Sri Lanka.

Table of Content

1. What are accounting and auditing?
2. Why are accounting and auditing important?
3. What are the duties and responsibilities of businesses during accounting or audits?
4. What are the accounting services provided by accounting firms in Sri Lanka?
5. What are the audit services provided by audit firms in Sri Lanka?
6. How can Simplebooks help?

What are accounting and auditing?

It is important to note that, although many people use the terms accounting and auditing interchangeably, they describe two very different things.

Accounting helps with recording transactions of the business. For example, the number of goods or services sold, your profit, your expenses such as salaries, delivery costs, or utility costs are recorded in your ledger. 

In contrast, an audit can only start after the accounting is done. The primary purpose of an audit is to make sure the financial statements made during accounting are accurate. 

While accounting is a daily process, audits are usually performed once a year or during each financial quarter. 

Another difference between auditing and accounting is that in most cases an in-house team of qualified accountants perform accounting, auditing is done by independent third-party auditors.

Why are accounting and auditing important?

Now that you know the difference between accounting and auditing, it is important to understand the benefits of accounting and auditing beyond mere legal requirements.

Ensure legal obligations are met  – There are two main legal requirements related to accounting and auditing practices in Sri Lanka.

• Every company is required to conduct accounting according to the standards maintained by the Sri Lanka Accounting and Auditing Standards Monitoring Board (SLAASMB) as per the Sri Lanka Accounting and Auditing Standards Act, No.15.

• Completed accounts must be audited by using an independent third party auditor as per the Inland Revenue department requirements.

The purpose of this audit is to make sure the companies have followed the right standards, processes and submitted accurate information. The audit looks at the source documentation of the company to verify all information is accurate and does not contain any omissions.

Establishes internal controls on the organization – When you implement proper accounting practices, every transaction is recorded, no matter how big or small they are. By doing so, you can avoid any unnecessary expenses, prevent any fraudulent activity from happening, and ensure overall transparency and a stable financial position for the company.

Implements financial responsibility – If a company does not follow any accounting practices, employees or other parties can mishandle its finances. For example, your employees could get financial benefits by buying overpriced goods or services from a supplier and get a commission from the supplier in exchange. You can prevent this type of issue by using standardized accounting practices. 

Ensures the business is efficient – When your company’s day-to-day transactions are recorded and costs and profits calculated, you can identify whether they are growing, how they are growing, and understand your weaknesses. This helps you take corrective action to improve your operations and, in turn, earn more revenue and profits.

Help make short, medium, and long-term decisions – When accounting is done according to the relevant standards, you can base your decisions on information that you know accurately represents the company’s financial health. This makes it possible to plan expansions, new products or services, establish new branches, or recruit new employees while reducing any risks to growth and stability.

What are the duties and responsibilities of businesses during accounting and audits?

As a business owner, you must fulfill several responsibilities and duties established by the SLAASMB when performing accounting and audits.

• Prepare your financial statements in compliance with Sri Lanka Accounting Standards.
• Make sure your financial statements are audited by a Chartered Accountant to present an accurate and fair view of your company’s financial performance and financial position.

What are the accounting services provided by accounting firms in Sri Lanka?

While you can do your business’s accounting using an in-house team of accountants, many companies also use external companies to conduct their accounting functions. Some of the most common services by accounting firms in Sri Lanka include;

• Entry and review of Accounting Journal
• Review of Employee Expenses
• Filling, collecting, and payment issued for Sales & Purchases Invoice
• Cash review
• General ledger and periodical trial balance preparation
• Preparation of Monthly financial statements
• Reviewing periodic statements made by your staff
• Monthly bank reconciliation statements
• Clearing of accounting backlog
• Accounting process outsourcing

Some accounting firms also offer additional services beyond the core accounting services and make it even easier for you to manage your company’s finances.

For example, here at Simplebooks, we provide companies with a range of services, including bookkeeping services, payroll management, taxation, and financial consulting.

What are the audit services provided by audit firms in Sri Lanka?

Similar to accounting firms’ services in Sri Lanka, auditing firms also offer a range of services.

• Independent statutory audits
• Forensic audits
• Company financial statement audits
• IT controls
• Compliance audits
• Infrastructural controls and security audits
• Due diligence audits
• Company management audits
• Efficiency audits
• Organizational structure audits, i.e. (hierarchy audit)
• Corporate governance audits
• Internal audits

When you are approaching an audit firm to obtain their services, make sure they have qualified, experienced, and up to date auditors.

You can get in touch with us for a free consultation to discuss your needs and understand how we can help you perform your audit obligations.

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How can Simplebooks help?

If you are a business owner looking for an accounting firm or audit firm in Sri Lanka, look no more. We have a fully qualified team of chartered accountants and certified auditors to help you solve all your accounting and auditing problems. 

Get in touch with us today for a free consultation.