CA Sri Lanka comes up with auditing framework for SMEs, informal sector

Minister Rishad Bathiudeen (second from right) receiving a copy of Sri Lanka Auditing Standard (SLAuS) for the Audits of Non – Specified Business Enterprises (Non-SBEs) from CA Sri Lanka immediate Past President Lasantha Wickremasinghe. President of CA Sri Lanka Jagath Perera (far right) and Chairman of CA Sri Lanka’s Audit Framework Subcommittee Sanath Fernando look on

Turning a new page in the history for key Sri Lankan economic drivers—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—the 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,” said Industry and Commerce Minister Rishad Bathiudeen, 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. 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 private firms towards a practical and real-life framework, through a cost-benefit approach but with much less technical sophistication. 

CA Sri Lanka believes that around 450 Lankan audit firms can start using the new ‘SLAuS for non-SBEs’ on their clients from now on. As for Lankan SMEs, they power more than half the Lankan economy with 35 to 40 percent of total employment. Around 60 percent of all Lankan enterprises are seen as SMEs.