Overview of the Law on Accounting and Auditing
The Law on Accounting and Auditing issued in July 2016 aims to ensure effective, transparent, and reliable financial reporting and auditing practices in Cambodia. It provides a comprehensive legal framework for:
- Regulating accounting and auditing activities;
- Developing the competency of regulatory and professional institutions;
- Promoting adherence to internationally aligned standards and ethical practices;
- Establishing enforcement and oversight mechanisms.
This law applies to enterprises, not-for-profit entities, accountants, auditors, and public institutions, with exceptions for the National Bank of Cambodia and the National Audit Authority.
Governance of Accounting Firms in Cambodia
Accounting and auditing firms are regulated through licensing, professional standards, and ethical obligations:
1. Licensing (Articles 29–30):
- Only registered members of the national professional body may practice.
- There are two types of licenses:
- License for professional accounting services.
- License for auditing services.
- Licenses are issued by the National Accounting Council (NAC), now Accounting and Auditing Regulator (ACAR) under the Ministry of Economy and Finance (MEF).
2. Professional Body (Articles 9–10):
- There is a single official professional body for accountants and auditors, ensuring independence and quality control.
- Composition and operation are determined by Sub-Decree.
3. Ethical Requirements (Articles 13–15):
- Accountants and auditors must adhere to a code of ethics set by the MEF based on ACAR’s proposal.
- Auditors must observe independence rules, including:
- Not auditing entities they served as accountants in the past 3 years.
- Limiting consecutive audit service to a maximum of 5 years.
- Avoiding conflicts of interest through family or ownership ties.
4. Sanctions and Penalties (Articles 31–37):
- Violations may result in:
- Reproach or suspension;
- Permanent disqualification;
- Criminal penalties (e.g., imprisonment for practicing without a license or falsifying audit reports);
- Fines and legal sanctions for legal entities.
Accounting Obligations for Enterprises in Cambodia
1. Financial Statements (Articles 16–19):
- Enterprises must prepare financial statements annually within 3 months of the financial year-end.
- Statements must comply with accounting standards set by the ACAR and approved by MEF.
- Enterprises may request an extension in writing with justification.
2. Submission for Audit (Article 18):
- Enterprises may be required to have their financial statements audited under conditions set by Prakas of the MEF.
3. Basis for Tax (Article 19):
- Financial statements serve as a basis for tax obligations under Cambodian tax laws.
4. Recordkeeping (Articles 20 & 23):
- Enterprises must:
- Maintain accounting records for at least 10 years.
- Use valid accounting vouchers for all transactions.
5. Fiscal Year (Article 21):
- The accounting period is the calendar year (January 1 to December 31), unless approved otherwise.
6. Language and Currency (Article 22):
- Records and statements must be in Khmer and Khmer Riel.
- Dual-language and foreign currency may be allowed under conditions approved by the MEF.
2025 List of Licensed Accounting Firms
As of 7 May 2025, ACAR announced that a total of 102 firms had been granted licenses to provide accounting and/or auditing services. This comprised 7 firms with a Level 1 Professional License in Accounting, 44 firms with a Level 2 Professional License in Accounting, and 58 firms with a Professional License in Auditing.
VSD Audit and Assurance is granted an Auditing Practice License by ACAR, allowing it to provide full auditing and accounting services as described under all license types above.
Check out here is detail of the latest list.
Why Enterprises Should Work Only with Licensed Accounting Firms?
1. Legal Compliance
- Article 29 of the law prohibits any individual or entity from providing accounting or auditing services without a license issued by the National Accounting Council (NAC).
- Engaging unlicensed firms may lead to non-compliance with the law, which can result in penalties not only for the service provider but potentially also for the enterprise using the service.
2. Validity of Financial Statements and Audit Reports
- Article 18 and 19 emphasize that financial statements are used as a basis for tax filing and regulatory compliance.
- Statements or reports prepared by unlicensed firms may be rejected by tax authorities or regulators, exposing the enterprise to audits, fines, or reassessment.
3. Avoidance of Legal and Criminal Risks
- Article 33 and 34 impose criminal penalties (including imprisonment and fines) on unlicensed practitioners and legal entities who engage them.
- Enterprises using unlicensed providers may face legal consequences, especially if they are found complicit in using falsified or non-compliant reports.
4. Assurance of Professional Competence and Ethics
- Licensed firms must adhere to:
- Approved accounting standards (Article 11),
- Ethical codes (Articles 13–14),
- Professional oversight by the official professional body (Article 9).
- Unlicensed firms are not bound by these standards, increasing the risk of unethical practices, fraud, or poor-quality work.
5. Regulatory and Tax Assurance
- Tax authorities and regulators are more likely to accept and trust the work of licensed firms due to their recognized qualifications and oversight.
- Working with unlicensed firms may trigger increased scrutiny, investigations, or penalties during tax reviews or audits.
6. Long-Term Reputation and Business Integrity
- Using licensed firms helps protect the enterprise’s corporate reputation, investor confidence, and trust from financial institutions.
- Association with unlicensed practitioners may raise doubts about financial integrity, harming business relationships and access to financing.
