E-commerce accounting scenario: prepare continuously for audit

Background

Assume a Cyprus private company sells physical goods through its own shop and several marketplaces. The figures and process below are invented solely to explain decisions; they are not a client engagement, time saving or verified outcome. The accounting period and entity type determine whether a statutory audit or a permitted review applies.

The challenge

Marketplace payouts arrive net of fees, refunds, adjustments and currency conversion. Treating each deposit as gross sales conceals revenue, misstates costs and makes VAT reporting difficult. Cross-border transactions also differ: qualifying EU consumer distance sales may be reported through Union OSS, while relevant intra-EU business supplies can create VIES obligations. Neither the sales channel nor a single revenue threshold settles every VAT question.

Steps to assess

• Map each payout to gross sales, refunds, platform fees, FX and settlement timing; reconcile bank and platform records every month.
• Separate domestic sales, qualifying EU consumer distance sales, intra-EU business transactions and any non-EU or marketplace-deemed-supplier transactions before selecting VAT reporting routes.
• Check the company's financial year, net turnover, total gross assets and the two-year statutory conditions with a licensed auditor before deciding whether audit or review is available.
• Retain a clear reconciliation trail, supporting invoices, VAT evidence and year-end schedules for the auditor or reviewer.

What the assumptions show

If monthly reconciliation is maintained, the year-end file should require less reconstruction, but the time saved cannot be predicted from this scenario. If the company is eligible for a review, a licensed statutory auditor still performs that engagement. If it does not meet the review criteria, it needs the applicable full audit. OSS and VIES decisions must be made transaction by transaction; neither route guarantees the absence of penalties.