By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

A Bahamian accountant yesterday warned against the enhanced Business Licence verification process becoming “too draconian” and urged that some flexibility be provided on a “case by case” basis.

Kendrick Christie, president of the Association of Certified Fraud Examiners Bahamas Chapter, told Tribune Business there should be sufficient “leeway” where $5m-plus companies who have engaged an auditor to produce full financial statements can obtain an extension beyond end-June 2024 if if can be justified.

Noting that the Government is “sticking to its guns”, and refusing to agree to the year’s delay requested by the Bahamas Institute of Chartered Accountants (BICA) and Bahamas Chamber of Commerce and Employers Confederation (BCCEC), he argued that while “not backing away” from the set reporting deadlines it needs to examine every company’s case on an individual basis.

Companies with annual turnover exceeding $5m presently have to file their audited financials by end-April, and can possibly obtain a further extension to end-June once they apply to the Department of Inland Revenue (DIR) and it is warranted.

However, Mr Christie told this newspaper: “There should be some understanding of the issues some of them may face. It seems the Government has made a decision requiring audited financial statements, perhaps because there is a push towards corporate income tax or for whatever purpose.

“I have messaged the financial secretary [Simon Wilson] to apply this grace period. Don’t get me wrong, but I don’t want it to be too draconian where there’s no leeway for these companies.” He pointed out that financial institutions licensed by the Securities Commission and Central Bank are able to apply to their regulators for an extension to file their annual audited financials if circumstances warrant.

Suggesting the same should apply to the new Business Licence verification requirements, he added: “There will be these cases where there has to be some understanding applied by the Department of Inland Revenue and Ministry of Finance.” Failure to properly count inventory, Mr Christie said, was a common issue among companies unused to undergoing a full audit.

However, he argued that undergoing an audit would be beneficial to those $5m-plus turnover companies who have never before been subjected to such scrutiny. The Crowe Bahamas partner explained that an annual audit is part of good governance and business practice, since management and ownership both rely on accurate financial numbers to understand how the business is performing.

Audits also have the potential to detect fraud, waste and internal control weaknesses, Mr Christie said, while adding that companies with multi-million dollar annual turnover should possess “robust” accounting and management systems that make the step-up to a full audit much less taxing.

“It will benefit their companies,” he added. “We usually give them very good recommendations on internal controls, fraud risk and to improve their systems. For companies with $5m, $10m, $20m, there’s some benefit to having an audit. They should have accounting in place and accounting systems.”

Arguing that it would be “worrisome” if such Bahamian businesses lacked these controls and systems, Mr Christie said: ‘“They should have robust accounting systems and systems of reporting. These are large entities. Their shareholders will certainly want to know those systems are working properly.

“Yes, the audit has a cost, but I don’t think it will be something any large company will be very much concerned about. I think auditors want to be efficient, and if a company has their system operating as efficiently as possible I don’t think you will see complaints about a high level of audit fees.”

When the enhanced Business Licence reporting regime was unveiled by the Prime Minister in the 2023-2024 Budget debate, businesses generating annual revenue between $2.5m and $4.999m were to require a financial review by an independent accountant. That stipulation now appears to have been eased.

Meanwhile, businesses with annual revenue between $250,000 and $499,000 were to originally require accounting certification by an independent accountant, while those with turnover between $500,000 and $2.499m needed a compilation report.

The private sector is arguing that full audited financial statements for companies with turnover in excess of $5m is unnecessary, and overkill, because the Business Licence fee is based only on top-line turnover.

But the Government has not agreed to the year’s deferral sought by the Chamber and BICA. It will give companies until end-April 2024 to submit their audited financial statements. And, once they apply and it is justified, a further two-month extension will be given until end-June 2024. However, once that deadline has passed, potential sanctions - equal to 1-2 percent of revenue - may be enforced.