An information deal between China and the US regarding audits of US-listed Chinese companies that are embroiled in accounting scandals is making headlines. Here's how to learn from the situation by making sure you've kept the correct accounting records that'll be checked in a SARS audit, especially as the Tax Administration Act says SARS can now show up unannounced at your door to audit your accounting records. But don't forget that there's a different time frame to keep your accounting records for under the Companies Act...
Up to now, American authorities have had little or no access to the auditing documents when unethical accounting in China has affected the US Securities and Exchange Commission, says TheWallStreet Journal.
This led to accounting firms being sued directly to provide access to audit accounting records needed for investigations.
Now, a new information-sharing deal will make it easier to inspect accounting firms to make sure they're following those rules as inspections determine whether audits have followed US standards or not.
This is intended to help investors in the long run, as auditors will be able to nip accounting scandals that affect their investments in the bud, says TheWallStreet Journal.
But it's not just China that needs to worry about whether its accounting records are up to scratch or not.
Revealed: Why you need to make sure your business is keeping accurate accounting records
Because under the Tax Administration Act
, SARS officials can show up unannounced to check your accounting records, says FSPBusiness
By keeping accurate accounting records and documentation to support all transactions, for both revenue declared and expenses claimed, you'll be able to stay out of trouble with SARS.
To do so, you'll need to make sure you keep your debtors' ledger, debtor's list, creditors' ledger, creditors' list, sales ledger, inventory listings, fixed asset register, tax schedules, general ledger and cash book, says the Practical Accountancy Loose Leaf.
But don't just keep them for the current financial year.
Here's how long you'll need to keep your accounting records for, to meet both SARS and the Companies Act's requirements…
You'll need to keep your accounting records for at least five years and avoid a fine of up to R16,000 from SARS if it finds you owe it more than R50,000,000, adds FSPBusiness.
To be safe, keep them for another two years after that as the 2008 Companies Act says you've got to keep all your company records for at least seven years.