Banks have opposed a proposal that would allow 66% of businesses with turnover up to €900,000 to have their financial statements reviewed rather than fully audited, joining the Tax Department and Central Bank in pushing back against the measure.
The Bank Association wrote to parliament asking for changes to the contested article in a DISY bill under discussion, saying the measure should only apply to very small businesses and stressing the need for companies to prepare and submit audited or reviewed financial statements on time.
For the past two years, businesses with turnover up to €200,000 have been subject only to reviews of their financial statements by a statutory auditor or audit firm, rather than full audits with audited financial accounts.
The DISY bill seeks to raise the turnover threshold from €200,000 to €900,000, prompting strong reactions.
Banks warned that the expansion of the scope for reviews instead of audits is excessively large, stressing that the submission of audited financial statements by borrowers is important for banks’ business operations. They proposed setting lower thresholds for reviews.
Bank supervisors point out that a problem is being created, as several borrowers do not submit audited or reviewed financial statements on time as required under the terms of their banking facilities, the association added.
The banks cited Central Bank guidelines stating that if a bank has a floating charge on a company as security, it must receive audited financial statements from the company annually.
Otherwise, the floating charge does not count towards collateral, with a corresponding negative impact on the bank’s capital adequacy measurements and the available capital that can be channelled into lending, the association said.
Banks also need audited or reviewed financial statements to update customer accounts within the framework of Central Bank guidelines for combating money laundering, they stressed.
It is therefore very important that measures are promoted which strengthen companies’ compliance with the timely preparation and submission of audited or reviewed financial statements to the Registrar of Companies and their lenders, the banks emphasised.