Sept 03, Colombo: Turning a new page in the history of key Sri Lankan economic drivers including the SMEs, informal enterprises and unlisted businesses, a pioneering financial auditing framework was unveiled in Colombo recently.
As a result of the new framework, more than one million registered SMEs and countless other unlisted businesses in Sri Lanka finally get their long awaited break to become credit worthy and receive access to finance by clearing the biggest obstacle they have been facing; inability to be officially audited and show a verified financial statement, despite maintaining their own bookkeeping.
The latest audit framework, modelled on the famed Nordic SME auditing, now equips the informal economic sectors to be credit-worthy on their own with any Sri Lankan bank or other financial institution, finally ending the credit-cum financing blockade that relentlessly plagued these sectors for many decades.
"Even the World Bank supports Sri Lanka's initiatives to develop comparable national accounting and auditing frameworks. I believe that this launch as a major step towards linking our informal sector to global markets" announced the Minister of Industry and Commerce Rishad Bathiudeen on 30 August.
Minister Bathiudeen was addressing the ceremonial launch event of Sri Lanka Auditing Standard (SLAuS) for the Audits of Non - Specified Business Enterprises (Non-SBEs) by the Chartered Accountants Sri Lanka at CA Sri Lanka office, Colombo.
Called as "Sri Lanka Auditing Standard (SLAuS) for the Audits of Non - Specified Business Enterprises (Non-SBEs)", this is also the first ever such SME bookkeeping audit framework to be introduced anywhere in South Asia. Among SBEs are public listed firms and firms handling public money such as Finance companies.
CA Sri Lanka, observing the "adoption of Sri Lanka Accounting Standards (SLFRS) for SMEs was low due to their complexity", has pioneered the non-SBE SLAuS.
Since the International Standards on Auditing (the ISAs) globally used in today's auditing have become more extensive, complex and therefore impractical for SMEs to use them, the simplified version for Sri Lankan small businesses by CA Sri Lanka called as "non-SBE SLAuS" was launched.
This stand-alone 60 page new SLAuS is a departure from the one-size-fits-all financial reporting and eases the complex reporting burden on smaller SMEs and unlisted firms giving a practical and real-life framework, through a cost-benefit approach but with much less technical sophistication.
This new SLAuS is modelled on similar auditing frameworks adopted by some Nordic countries. CA Sri Lanka believes that around 450 Lankan audit firms can start using the new "SLAuS for non-SBEs" from now on. The new SLAuS for non-SBEs is for unlisted firms/SMEs, and also for SMEs using "SLFRS for Smaller Entities".
As for Lankan SMEs, they power more than half the Lankan economy (estimate) with 35% -40% of total employment. Around 60% of all Lankan enterprises are seen as SMEs. "Access to finance" is a major policy intervention area in the new National SME Policy Framework introduced by NEDA under Industry and Commerce Ministry. This policy calls banks, financial institutions and leasing companies to scale-up special lending windows for SMEs, as well as to promote equity injection to viable SMEs through angel funds and venture capital arrangements-both of which are finally made possible by the new "SLAuS for non-SBEs."