Under Israeli Companies Law, every Ltd. company is required to appoint an auditor to conduct an annual financial audit.

Many business owners tend to view the annual audit as a bureaucratic nuisance.

However, a professionally conducted company audit is a powerful management tool that identifies internal control weaknesses and builds trust with banks and investors.

Before You Sign: The Secret Checklist for Shareholders

After your CPA completes the audit work, the annual financial statements are presented to you for signature. Here are 4 critical points you must verify before signing:

1. Has interest been calculated on owner loans (owner current account)?

This is a critical two-way clause that must be carefully audited:

  • When you withdrew funds (you owe the company): If a debit balance exists, deeming national interest under Section 3(t) / 3(t1) is mandatory to prevent reclassification as a dividend subject to personal tax and penalties.
  • When you injected funds (the company owes you): If you loaned money to the company, the company can accrue recognized interest expenses, saving corporate tax while building a tax-free repayment liability back to you.

2. Does all fixed business property appear on the depreciation form (Form 11)?

When purchasing equipment or vehicles, expenses are spread over multiple years via depreciation. Check Schedule 11 (Form Yod-Alef) to ensure no major capital assets or invoices were omitted, securing your full tax deduction.

3. "House cleaning": Have bad and doubtful debts been recognized?

Review customer accounts receivable before closing the report. Uncollectible bad debts must be written off to avoid paying income tax on uncollected virtual money.

4. Have tax loss carryforwards from prior years been fully utilized?

Companies have the legal right to offset prior business losses against current profits. Ensure accumulated losses are fully utilized to minimize current year tax liability.

At Bernstein CPA, we conduct deep-dive audits of company books, analyze owner accounts, optimize depreciation and carryforward losses, delivering total financial clarity before you sign.