Is the financial statements of the organization you own subject to a statutory audit? The legislation defines a clear list of organizations subject to mandatory confirmation of the accuracy of the financial statements by obtaining an audit opinion.
Terminology and legislation
Requirements for enterprises that have to pass an audit are described in the Law on Auditing Activities and in a number of special regulatory acts. In this case, several criteria are considered:
- legal form;
- special types of economic activity;
- financial performance indicators.
The first two criteria are independent of the financial performance of these enterprises.
An audit is an extra-departmental audit of accounting and financial statements. Verification is subject to primary documents, payment and settlement, tax returns. And its result is a conclusion that will confirm the reliability of the statements. It is issued to the management of the audited company. It reflects violations and distortions, assesses fiscal and commercial risks, gives recommendations for correcting errors and violations.
The purpose of the statutory audit is to officially confirm the accounting and financial statements.
Why audit came about
Auditing activity appeared against the background of a separation of interests, when the direct owner ceases to take a personal part in the management of his enterprise. Lack of proper control leads to multiple bankruptcies.
Against this background, starting a new business or avoiding bankruptcy proceedings, the owners began to invite people whom they trusted. And they conducted independent audits of both financial and accounting statements, revealed the facts of theft and inaccuracy of documents submitted by the enterprise management. Later, this type of activity formed a separate branch of economic relations.
Companies subject to statutory audit
Organizations subject to statutory audit, in terms of financial performance, must meet at least one of two criteria:
- according to the results of the last reporting year, their revenue exceeds 400 million rubles;
- assets, according to the balance sheet, exceeded the mark of 60 million rubles.
According to these indicators, even limited liability companies, more precisely all business entities, are subject to audit. It is necessary to pass the audit in the following order - if the revenue increased by the end of 2016, then the auditor should be invited in 2018 to check the financial statements for 2017.
Organizations subject to mandatory audit, depending on the organizational legal form, are absolutely all joint-stock companies, open and closed, public. Even municipal and state companies are subject to these requirements of the law.
Closed companies are subject to annual mandatory audit since 2014. Moreover, it does not matter at all what form of taxation they have chosen, what are the financial and economic performance indicators of the company.
By type of activity, the following organizations are distinguished, subject to mandatory audit:
- Insurance companies;
- stock and commodity exchanges;
- financial institutions;
- pension funds formed without state participation;
- securities market participants;
- charity organisations.
It will be necessary to pass the audit of those enterprises that put up and were admitted to trading in their own shares. You will also have to invite an auditor if the legal entity submits consolidated statements.
However, state funds and extrabudgetary entities do not fall into this category.
Organizations practicing lotteries and gambling, self-regulatory associations in all areas of professional activity are subject to mandatory audit.
All political parties in the country are also subject to mandatory verification by the auditor.
Legislative innovations
Since 2016, an annual audit obliged all developers who attract interest holders to the process, that is, they actually erect buildings at the expense of other people's funds. They should publish its results. Although developers previously conducted an audit, they provided a report solely at the request of interested parties.
Report to statistics
Organizations whose reporting is subject to mandatory audit, upon receipt of an opinion, are required to submit it to the statistical authorities, together with the annual financial statement. All this should be done no later than 10 days from the moment the auditor issued the opinion. And in any case, no later than December 31 of the year when the inspection was conducted.
Legal entities can report to Rosstat:
- by direct appeal to the regional office with documents on paper, or by mail;
- via telecommunication channels - the electronic form of documents can be presented in pdf, tif, jpg formats.
Reporting in the Ministry of Justice
Some organizations subject to mandatory audit are required to submit a report to the Ministry of Justice, namely:
- Structural subdivisions of non-commercial and non-governmental representations (only an audit must be carried out by a Russian auditor). Such organizations need to report for the previous period until April 1 of the current year.
- Russian non-profit organizations that have been recognized by foreign agents. Will have to report until April 15.
Stages of the audit
An audit is an expensive pleasure, with significant time costs. It is best to pre-draw her plan so that it is as effective as possible, and the conclusion is correct.
The documents and financial statements of the organization, which is subject to mandatory audit, include:
- source documents;
- accounting and tax reporting.
The planning steps are as follows:
- A proposal from the organization that needs to be audited.
- A brief introduction to financial and economic activities, without in-depth study and analysis.
- Formation of a plan and audit program, its coordination with the auditor and company management.
- Drafting, coordination and signing of the contract.
The contract must reflect the timing of the audit, the composition of the audit team, a list of issues to be verified and the cost. If an audit program is additionally compiled, then it should contain specific tasks that must be completed.
On the first day of the audit, it is recommended to hold a meeting, introduce staff to the auditors and give clear instructions to all those who will participate in the audit, and those who have to give answers to the questions of the auditors. If necessary, overalls are given to auditors. In any circumstances, the main responsibility of the manager is to establish a trusting relationship between staff and reviewers.
After that, the process begins within the framework of the approved plan. It is possible that employees will be selectively interviewed. Based on the results of the audit, an audit opinion is issued.
The report of the audit report consists of several sections:
- Period and place of inspection.
- The composition of the accounting and financial documentation that has been verified.
- Normative acts and methods by which the auditor was guided.
- Identified violations and possible sanctions for this.
- Detailed measures to eliminate identified violations.
The conclusion must be signed by the head of the audit organization, the qualification certificate (number and validity period) of the inspector is indicated, and the auditor is stamped.
The management of organizations that are subject to mandatory audit can go for its phased implementation. This means that the audit can be carried out on the basis of 6 or 9 months. The company will have time to correct all possible violations and, following the results of 12 months, completely eliminate all the deficiencies in the reporting. In addition, all audit costs can be evenly distributed throughout the current year.
International Auditing Standards
The reporting of which organizations is subject to mandatory audit is already understandable, but the cost of the services of auditors in 2017 will increase significantly. At the state level, new ISA standards have been introduced. This has led to an increase in the number of procedures; the auditor will have to fill out even more various tables and forms.
The government has introduced standards to make reporting more public and more transparent. However, the innovations entailed an increase in the cost of the corresponding services by about 50%, or even more. This rule does not apply to contracts that were concluded before the law came into force, that is, last year.
Rules for choosing an auditor
If the question no longer arises as to whether the organization is subject to statutory audit, then we can proceed to the selection of the auditor.
You should not rely solely on the experience of the auditor or audit company. It is better to give preference to the organization that specializes in a specific area of doing business or conducts audits in related industries. Be sure to read the reviews about the selected company, it is best to personally talk with the heads of enterprises who work with a specific auditor.
Naturally, check the documents: all certificates must be on hand, valid and in the registry. If the cost of services is not scary, then you can pay attention to companies that provide a range of services - not only conduct an audit, but also provide legal and accounting assistance. This means that the organization has practicing specialists, and this is a huge plus.