Associated Press
PHNOM PENH, Cambodia - Cambodia's government for the first time has begun enforcing a law requiring firms to undergo financial audits, one of a series of steps meant to prepare for launching a stock market in 2009, officials said Thursday.
Some 400 enterprises will be obliged in the initial stage to submit their financial statements to independent auditors by December this year, said Ngy Tayi, an undersecretary of state for Cambodia's Finance Ministry.
Preparing firms for regular audits will help improve financial transparency, which is a "foundation for the successful opening of a stock market," he said. "We must have everything in place before we open a stock market in 2009."
He also said the number of firms requiring outside audits could go higher but he was unable to be precise.
Firms that are subject to auditing are those meeting at least two of three criteria - having annual turnover of three billion riel ($731,700), total assets of two billion riel ($487,800) and 100 employees - according to a Finance Ministry regulation issued Tuesday.
Cambodia passed an audit law in 2002.
But it didn't set clear criteria to stipulate which companies would be audited, said Bretton Sciaroni, a partner of Sciaroni and Associates law firm in the capital Phnom Penh.
"Now the initial criteria are established," Sciaroni said, adding that the new regulation also "lends itself to transparency in the private sector."
"It is widely assumed that most companies do not have audits. Companies that are forced to have audits likely will find it is a useful management tool so that they can be assured of what is going on inside their own company," he said.
He said audits can also be used to help secure financing for companies, and facilitate mergers, acquisitions and joint ventures.
"If Cambodia's stock exchange follows established international models, the audit requirement is a necessary precondition for listing," he said.
Some 400 enterprises will be obliged in the initial stage to submit their financial statements to independent auditors by December this year, said Ngy Tayi, an undersecretary of state for Cambodia's Finance Ministry.
Preparing firms for regular audits will help improve financial transparency, which is a "foundation for the successful opening of a stock market," he said. "We must have everything in place before we open a stock market in 2009."
He also said the number of firms requiring outside audits could go higher but he was unable to be precise.
Firms that are subject to auditing are those meeting at least two of three criteria - having annual turnover of three billion riel ($731,700), total assets of two billion riel ($487,800) and 100 employees - according to a Finance Ministry regulation issued Tuesday.
Cambodia passed an audit law in 2002.
But it didn't set clear criteria to stipulate which companies would be audited, said Bretton Sciaroni, a partner of Sciaroni and Associates law firm in the capital Phnom Penh.
"Now the initial criteria are established," Sciaroni said, adding that the new regulation also "lends itself to transparency in the private sector."
"It is widely assumed that most companies do not have audits. Companies that are forced to have audits likely will find it is a useful management tool so that they can be assured of what is going on inside their own company," he said.
He said audits can also be used to help secure financing for companies, and facilitate mergers, acquisitions and joint ventures.
"If Cambodia's stock exchange follows established international models, the audit requirement is a necessary precondition for listing," he said.
3 comments:
Bret’s point of view on audit in Cambodia is professional and accurate. He is also the man who can explain more in detail this highly important topic to Samdech Prime Minister. If the PM is convinced, he will call on the technicians rather than politicians to work out on how to implement effectively and efficiently the companies’ audit in Cambodia in order to ensure the success of the future equities market of the country.
So Bret, the ball in your field!
Who trust Cambodia Stock Market?
Accounting standards is not the problem. There are several international CPA firms in Cambodia such as KPMG, and PW c. Further, at least one foreign owned corp with a branch company in Phnom Penh, was qualified to be listed on the HK Exchange-and this certainly would not have happened if the audits submitted did not meet GAAP acceptable to the regulators.
The key point in setting up the stock exchange, is that of regulation by the yet to be established Securities Exchange Commission of Cambodia, and the Capital Markets Law when passed. The Capital Markets law will authorize the SEC to set up it's own accounting standards for listing which will be GAAP-international std., and it is only the SEC that will have authority over listed companies. The SEC will have it's own hearings for listing, and de-listing, and it's own procedures for liquidation of a listed company.
The other problem is that Cambodia does not have the people yet who have an intimate understanding of capital markets or stock exchanges. The stock exchange should be private, but the oversight will be governmental.
Private companies that want to be listed most probably will have to have at least 3 years of audits by registered CPA firms, but we will have to see the requirements for listing when the draft law comes out.
It is important for Cambodia to have a stock market because companies that can get listed have another way of capitalization since business loans from banks in Cambodia are almost non-existent.
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