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Audit service in call for improved record keeping of companies

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Records kept by the Department of the Registrar of Companies and Official Receiver (DRCOR) are at high risk of tampering, the government’s Internal Audit Service has said.

In a memo to the House watchdog committee, the service identified several weak spots in terms of data relating to registration of companies, or to changes subsequently made to these records.

The service alluded in particular to a case of contraband tobacco dating back to October 2015. In a warehouse in Aradippou, Larnaca, authorities discovered 20 tonnes of illegal tobacco and 630,000 cigarettes.

The contraband was estimated to be worth some €3 million in unpaid duties and taxes.

According to the audit service, subsequent investigations unearthed “phantom companies” and it was not possible to track down actual persons or corporations listed on documents seized.

The service is recommending a number of changes to record-keeping procedures at the registrar of companies.

Where a lawyer files an application to register a company, the department ought to verify that the person is real and that he or she is a registered lawyer with the bar association.
Also, a company’s articles of association must list the identity card number and the residential address of the individual signing as a witness, as is required of company directors.
Where changes are made to company records, the concerned company’s board should appoint authorised representatives who are exclusively responsible for filing such applications, so that it is then possible to match these representatives to actual persons.
The registrar of companies is further urged to issue guidelines to applicants to perform the following actions: confirm that the address provided is not a PO Box; a third party to verify that the premises cited as the registered address of a company are real and operate as business premises; confirmation by the owner of the premises that he or she has the title deed on the property cited as the company address.

In addition, company managers and secretaries should be required to state their own residential address rather than the company address.

For foreign nationals who are company cadres, they must confirm they possess a work permit.

Where changes are made to company records, this should be confirmed by furnishing relevant decisions by the company’s board.

Moreover, the audit service recommends that, in the case of modifications to records, the DRCOR include additional data fields on such applications requiring the full name, identity card number and capacity of the person signing the application.

Compliance rests with the individual filling out the application form and not with the DRCOR

The audit service said it has planned another round of audits in 2017 to determine how far its recommendations will have been taken on board.

 

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