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Learn more about Annual Audit

According to Thai law, any licensed legal entity is required to prepare and maintain its accounts and to request an annual audit. All Thai companies have a legal obligation to prepare and maintain accounts (including limited companies, registered partnerships, and even foreign legal entities operating in Thailand). Failure to do so is a criminal offense, and any wrongdoing in this regard could result in a penalty of up to THB 200,000. Before and after an annual audit report has been completed, there are several steps involved, and it is essential that you, as a client, choose a service provider that is entirely consistent in its pricing of the entire process, not just the minor task of getting an annual audit report completed and signed.

Table of contents

What is an annual audit?

An annual audit is a systematic examination and verification of account books, transaction reports, other related documentation, and physical inventory inspection by professional accountants of a corporation. In a legal audit process, the company’s management team discusses strategic plans and goals, reviews vital documents and records, and analyzes and identifies the company’s current.

The annual audit also lays the groundwork for ensuring ongoing legal enforcement and helps managers recognize the legal issues caused by changes in policies, priorities or objectives and allows for the preparation of the statutory tasks to be undertaken as a result of the problems.

What are the benefits of conducting an annual audit?

In your workflow cycle, there may be a leakage without you or someone else working in your business ever knowing it. Each company has a certain number of processes and day-to-day operations in place, no matter what it does, but have you ever wondered how effective yours is?

Even if your business is small or the workload isn’t so overwhelming, this doesn’t mean you shouldn’t benefit from saving more time, or money, or both at once, just by changing how you run your business. Remember that a small tweak will make a difference to a world. An experienced and professional auditor or audit team can help you find out when and where you are scattering your resources to “get more bang for your quid.” It is up to you, though, to amend it instead.

At least one person in one of the top positions in the business should have a complete and profound understanding of their financial and legal health. But if the audit has uncovered any significant problems, the quicker you are aware of the issues, and the more knowledge you have, the better you can fix them. Mainly when you apply for a bank loan, a well-conducted and thorough annual audit comes in handy. The banks are now more than ever searching for very accurate financial statements from business owners, so make sure you plan and provide all the relevant details comprehensively and clearly.

When you have other people working for you, it doesn’t hurt to run a little test some time, no matter how few or how much you trust each of them. An experienced auditor reviews procedures for detecting any suspicious actions or potential fraud that your employees may commit. That’s why an annual audit is vital to the success of your organization for the future: it results in precious performance that can be the foundation of your strategic planning and business strategy.

To make an annual audit as good as possible, you must put your A-game on during the year and strive tirelessly for the results you want. “No pain, no benefit” is particularly real when you’re a startup. The complexities of running a growing and creative business with fewer resources are pushing you to bring in more imagination and experience than others.

How to proceed with a financial audit?

Each annual audit firm has its methodology. However, there are similar broad outlines in each of these methodologies. The goal is to give a simplified overview to understand what audit methodology is all about. The methodology will be based on a general approach that must then be adapted to each mission’s specificities. This process has four main stages:

Step 1. Acquaintance

This first step allows the auditor to take cognizance of the company’s general context and assess the main risks. He will then use this knowledge to plan and orient his mission. During this first step, the auditor sets up the permanent file (or supplements it if it already exists) and writes the mission plan. To achieve his goals, he will conduct interviews with key people in the company and use the company’s documentation and accounts.

Step 2. Evaluation of internal control

During this second step, the auditor will research the various risks and assess the possible impact on the nature and extent of his work. To have him study the internal control procedures leading to the production of financial accounts.

This step allows him to implement a risk-based approach, which will prevent him from exhaustively controlling the financial accounts but instead focusing on risky points.

To ensure that this objective is complete, the auditor will establish a significance level. This threshold, a figure, will give it a quantified limit beyond which an error, an inaccuracy, or an omission can affect the regularity, the sincerity, and the exact image of the annual accounts. This threshold will be used throughout its mission to program the surveys’ scope and assess the seriousness of any anomalies observed. This is, of course, a subjective notion established according to quantitative (net profit, equity, etc.) and qualitative criteria (intuition based on the analysis carried out).

Step 3. Review of financial accounts

This third step is a continuation of the previous two. Once we have learned about the company’s environment, its internal control and have targeted the risks, it is necessary to analyze the accounts more precisely to identify any significant anomalies.

To control the accounts, the auditor will seek to validate the annual audit assertions. These are the criteria that financial information must meet to be regular and fair. These assertions apply to each item of the balance sheet and the income statement and the information contained in the appendix. Overall there are six assertions: completeness, reality, property, correct evaluation, separation of exercises, accurate imputation.

To validate these assertions, the auditor will implement audit procedures. He will then record all his work in a work folder. This file will allow the auditor to:

➤ To make the mission more efficient by monitoring the progress of the work
➤ To control the work of its employees
➤ To justify the conclusions drawn and provide proof of the due diligence performed

Step 4. Opinion and report

The auditor draws up a report in which he explains and justifies his opinion. This opinion is the conclusion of all the work carried out during the mission. It is communicated to all partners/shareholders during the annual general meeting via the report. This report has a precise form and substance: title, paragraphs, date, the signature of the story. The opinion was given by the auditor maybe, as the case may be:

➤ Unqualified certification
➤ Certification with reservation (s): disagreement or limitation
➤ Refusal to certify: disagreement

What is the PND 50?

This form is a form of corporate income tax. Here in the Kingdom, it is filed annually. It is quite a long process. It merely goes ahead and delineates the corporate income activity or lack of income activity within a given organization, and this has to be dealt with annually.

It is filed with the Department of Revenue (RD) and Business Development (DBD). The RD and DBD include a year-end audit of the company’s finances and the preparation of the company’s financial statements. So long as the corporation is an established limited company, public company, legal entity, and registered partnership, whether engaged in business or not (trading or not trading), the Annual Audit should be submitted and compulsory.

What is the balance sheet?

A Company Balance Sheet is a financial statement that lists the assets, liabilities, and equity of a business during the fiscal year. A balance sheet documents the disposition of money in a store. It indicates the accounting value of all the assets, liabilities, and equity of the organization, which can lead to assumptions about the entity’s liquidity.

It is called a balance sheet because it balances the two sides. A company has to pay for all the things it has (assets) either by borrowing money (liabilities) or by getting it from shareholders (equity of the shareholders). Such three parts of the balance sheet give investors an idea of what the company owns and owes and the amount the shareholders spend.

A balance sheet must be drawn up at least once every 12 months in which the twelve-month span is the accounting or financial year of the company. A newly formed corporation will close accounts within 12 months of incorporation. It must be approved by a professional external auditor and must be filed annually with the Department of Revenue and Business Development.

The balance sheet must be checked by one or more auditors and sent to a general meeting for approval within four months of its date. A copy of it must be sent to each person enrolled in the shareholders’ list at least three days before the general meeting. Copies must also be kept available at the company’s offices for the same time for shareholders’ inspection.

The corporation’s annual financial statement must be filed with the Revenue Department and Business Operations Department, along with its annual income tax report, within 150 days of the close of its accounting period. Otherwise, the corporation may be liable for a specific penalty or fine that may also extend to the responsible officer.

What is the company's financial statement?

A Financial Statement is a company formal record of a business, person, or other entity’s financial activities. It presents significant operating results and an enterprise’s financial position.

Companies with accounting periods ending 31 December 2020 must file audited financial statements no later than 31 May of each year with the Department of Business Development (DBD), Ministry of Commerce.

How to validate your annual financial statement?

A limited company shall hold an Annual General Meeting (AGM) within four months of the end of the fiscal year to consider and approve the audited financial statements, as required by law (such as the rotation of directors) and as provided for in the company’s Articles of Association (AOA).

To hold the AGM, the company must give written notice of the AGM’s calling, through its Board of Directors, at least seven days before the shareholder meeting date (unless otherwise stipulated in the AOA of the company). The notice must be published in a local newspaper and sent by registered mail or hand-delivered to any shareholder whose name appears in the shareholder’s list.

What are the penalties for late financial statement submission?

Also, the overall maximum penalty levied for not holding an AGM to approve the audited financial statements within four months of the end of the fiscal year is as follows: THB 20,000 on the company; and THB 50,000 on the directors.

After the AGM is held, a limited company has only one month from the meeting date to send its authorized financial statements through the DBD’s e-filing system to the Department of Business Development (DBD), the Ministry of Commerce.

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