Failing to appoint a Certified Auditor can lead to several serious consequences, as we will explore in this article.
Impact on Evaluation
Without audited financial statements, a company cannot conduct a credible and reliable business evaluation.
Local Content Compliance
According to the requirements of the Local Content and Government Procurement Authority, clients cannot be accepted under local content programs unless audited financial statements are available.
IKTVA Program Eligibility
Saudi Aramco does not accept any client into its IKTVA program unless the client has submitted audited financial statements.
New Partners or Investors
When seeking new partners or investors, audited financial statements are a prerequisite for making investment decisions.
Bank or Government Financing and Support
Audited financial statements are an official requirement for obtaining bank loans, government funding, or any other type of financial support.
Impact on Company Classification
Providing audited financial statements is a mandatory requirement for classification processes. The Certified Auditor must legally sign and stamp the classification form.
Legal and Commercial Risks
Not having a Certified Auditor exposes the company to risks such as financial losses due to poor accounting practices, weak internal controls, and asset mismanagement.
It can also result in incorrect financial adjustments, which reduces the company’s ability to prove its rights and increases legal and financial exposure.
Decision-Making and Asset Control
Weak financial oversight may lead to asset loss and embezzlement. It also hampers the accuracy of financial reporting, which negatively affects timely and sound managerial decision-making.
International Agency Approvals
Obtaining international agency representation typically requires audited financial statements, as most global brands and companies consider them a formal requirement for licensing and partnerships.
Additionally, many public and private sector entities require audited reports. If a company intends to list itself in the financial market in the future, it must prepare audited statements as a strategic step.
Failing to do so could hinder the company’s growth and ability to be listed in the financial markets.
If a company decides not to appoint a Certified Auditor, it must annually document this decision and submit a formal resolution to the Saudi Ministry of Commerce, especially when there are no financial statements at the beginning of the fiscal year or if the company has suspended its operations.
This decision must comply with the new Companies Law issued by the Ministry of Commerce.
It is worth noting that once a company decides to prepare financial statements, this will significantly affect the opening balances, as it becomes challenging to verify their accuracy without the involvement of a Certified Auditor and previously audited statements.
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