The regulation of the activities of Russian business is increasingly approaching, which is associated with both the influx of foreign investment and the entry of Russian companies into foreign capital markets.
For effective interaction with Russian and foreign partners in Russia for 2020 international auditing standards were introduced which seriously influenced the established practice of conducting inspections.
The audit requirements for limited liability companies do not apply to all companies, but only to legal entities that meet certain criteria. This is due to the fact that the majority of LLCs belonging to small and medium-sized businesses have small financial turnover, do not bring their shares or bonds to the securities market by publishing an emission prospectus, do not attract money from individuals. Therefore, the need for additional verification of the reliability of their reporting does not arise.
Main criteria for verification
Mandatory audits must be carried out by companies whose activities affect the interests of many third parties or have sufficiently high financial performance. These criteria are established by the legislation on auditing activities and sometimes change in terms of increasing the thresholds for revenue and.
The requirements for an LLC are divided into two groups: by types of activity and other similar characteristics and by financial indicators. According to these features, LLCs can be distinguished, which are subjects statutory audit. Joint stock companies in the form of PJSC, whose shares are distributed by public subscription, are checked in any case, regardless of compliance with other criteria.
Subjects
The law establishes the following groups of limited liability companies for which the audit of annual accounts is mandatory:
- By type of activity- audits are required to be carried out by banks, insurance companies, pension funds, holding companies that prepare and publish consolidated financial statements for the holding, companies whose bonds are traded on the organized securities market.
- According to financial indicators these requirements apply to enterprises with revenue exceeding 400 million rubles, as well as if the balance sheet asset currency exceeds 60 million rubles.
If a limited liability company falls under these criteria, the requirements for an audit of the annual financial statements become mandatory for it. Compared to last year, nothing has changed in these criteria, no new subjects or requirements have appeared.
According to the new goals and objectives of the statutory audit in 2020, not only will the standard verification of the reliability of financial statements and the identification of errors that occur during accounting, but also business analysis. The first two tasks remain in full and are somewhat expanded, so the responsibility for checking the work of internal ones also falls on the shoulders of external auditors.
The task of business analysis is to identify risks, factors that cause obstacles in the development of the company's activities, and develop recommendations for such a change in financial and economic activities that will help eliminate these risks.
Despite the fact that the conclusion from this year is subject to mandatory publication, its business part must be completed most correctly and balanced, one should not allow an incorrect interpretation of certain facts of economic life.
Legislation
In addition to the basic laws, a mandatory audit is regulated according to the norms by the Order of the Ministry of Finance No. 192n, issued on October 24, 2016. They put into effect 30 International Auditing Standards.
Also, a little later, Order No. 203n was adopted, which approved 18 more standards. Among the most significant changes:
- introduction of the principles of a phased audit;
- introduction of the concept of audit evidence;
- changing the form of the conclusion, instead of a standard report, an extended document is proposed with an analysis of the organization's activities, business risks and other issues;
- preparation of a modified opinion;
- an auditor's report made for organizations that require a statutory audit should be published.
The responsibility of audit organizations with the introduction of new standards has increased, and competition will also increase, since the publication of reports will enable everyone to get acquainted with the quality of work of auditors before concluding contracts.
had a significant impact on the work of auditors. repeal of audit secrecy provisions. According to it, the employees of audit companies are required to report to the financial monitoring authorities about the so-called "strange" transactions of clients.
Changes in cost
The new standards have significantly increased the labor intensity of the work of specialists checking accounts. Seriously changed requirements, the need to fill in additional tables increased the labor costs of specialists by 30-40% , the price of these services should have increased proportionally.
In any case, the cost of the auditor's services must be approved by the company's participants, therefore, when the issue of a mandatory audit is brought to the meeting of participants, the price must be determined.
Checking procedure
Auditing and its essence have not undergone any changes. As a standard, the correctness of the maintenance is checked accounting on the basis of documents for a certain sample, a complete audit is not carried out. But the amount of information provided has increased significantly, and hence the burden on the accountant.
In addition, the need for business analysis forces the management of the enterprise to take part in the audit, which will require comments on certain risks in the activity. The auditors themselves are required by the standards to inform management of shortcomings in the work of internal audit systems.
The auditor must be determined at the meeting of the participants. He starts checking as soon as the reports are ready, but before they are submitted. Thus, the main work for the auditor will have for March- for accounting purposes, for June- for the tax office.
Given the significant complication of the requirements, it is better not to take risks and start checking as early as possible, there is a high risk of not having time to prepare a report, which can lead to various sanctions.
In addition, a phased audit will enable accountants and financiers to use auditors' advice on controversial issues of tax legislation and accounting throughout the year.
The result of the check will be drawing up a conclusion, which is seriously different from the previously accepted forms. The collection of recommended forms of conclusions is approved by the Ministry of Finance, it contains recommendations for ordinary and special conclusions, which are formed based on the results of the audit of consolidated financial statements.
Can an organization be penalized for not conducting a statutory audit? Yes, but sanctions will not follow directly. First of all, she will be denied acceptance of the annual financial statements. Such failure hello to the imposition of administrative responsibility on her.
The fact of a gross violation of the rules for maintaining accounting records may also be established, which will lead to an administrative fine in the amount of up to 20000 rubles. Small fines may be imposed for failure to provide an opinion along with reporting and statistics authorities.
Compared to previous periods, almost nothing has changed, except for the requirements to include data on the mandatory audit in the Unified State Register in accordance with Law 129-FZ and the requirements for mandatory publication of audit results.
Failure to comply with this requirement may be the basis for bringing to administrative responsibility, the head may be disqualified or fined up to 50000 rubles(Clause 6, 7, 8 Article 14.2 of the Code of Administrative Offenses).
Sanctions imposed on the auditors themselves have become tougher. For the unreliability of the conclusion, they may be subject to sanctions in accordance with the Code of Administrative Offenses, and it is also planned to introduce criminal liability if the preparation of a low-quality report led to significant losses. The law on criminal liability is still under consideration.
Changes in the procedure for conducting inspections, on the one hand, are positive, increasing the transparency of enterprises and the confidence of investors and partners in them, on the other hand, disclosure additional information, which has ceased to be a tax secret, may lead to an increase in the cost of bank loans due to the publicity of some risks. But in the end analysis of documentation on the new rules should benefit the business.
Why is an audit needed? Details are in this video.
Dear colleagues!
In connection with numerous requests from members of the SRO AAC on the issue of performing audit tasks related to auditing the accounting (financial) statements for 2016 in accordance with international auditing standards (hereinafter referred to as ISAs) or in accordance with federal rules (standards) of auditing approved by the Government Russian Federation, and federal auditing standards approved by the Ministry of Finance of Russia, the AAS SRO Committee on International Auditing Standards further explains the following.
By Order of the Ministry of Finance of the Russian Federation of October 24, 2016 No. 192n (as amended by Order of November 30, 2016 No. 220n), by Order of the Ministry of Finance of the Russian Federation of November 9, 2016 No. 207n, 48 documents containing international auditing standards were put into effect in the Russian Federation.
According to the Federal Law "On Auditing", ISAs are mandatory for audit organizations and auditors (part 1 of article 7), as well as audited entities and other persons who have entered into an agreement for the provision of audit services (part 2 of article 14). Auditing activities are carried out in accordance with the ISAs, starting from the year following the year in which the ISAs are recognized for use in the territory of the Russian Federation.
Since documents containing international auditing standards are recognized for use on the territory of the Russian Federation, then, following Article 23 federal law“On Auditing Activities” (parts 9.1, 9.2 of Article 23), auditing activities should be carried out on their basis, starting from 01/01/2017, and federal rules (standards) of auditing activities, federal auditing standards, cease to be valid.
At the same time, taking into account the provisions of paragraphs 3 of these orders of the Ministry of Finance of the Russian Federation, if the contract for the audit of the accounting (financial) statements of the organization was concluded before January 1, 2017, the audit organization, the individual auditor has the right to audit the accounting (financial) statements, including drawing up an audit report under such an agreement in accordance with the auditing standards that were in force before the entry into force of the international auditing standards specified in paragraph 1 of the orders.
The Ministry of Finance of Russia in its information message dated 12/21/2016 No. IS-audit-11 explains “At the same time, audit organizations and individual auditors in 2017 have the right to conduct (complete) an audit of financial statements for 2016 under an agreement concluded before January 1, 2017 in accordance with the federal rules (standards) of audit activity, approved by the Government of the Russian Federation, and federal standards of audit activity, approved by the Ministry of Finance of Russia”.
Thus, based on the above:
- if the contract for the audit was concluded before 01/01/2017, then following the provisions of the Federal Law "On Auditing" (part 1 of article 7, part 2 of article 14, part 9.1, 9.2 of article 23), taking into account the provisions of clauses 3 of orders of the Ministry of Finance of Russia dated October 24, 2016 N 192n, dated 09.11.2016 No. 207n, the audit organization has the right to audit the accounting (financial) statements, including drawing up an audit report, under such an agreement in accordance with the auditing standards that were in force before the entry into force international auditing standards (that is, in accordance with the federal rules (standards) of auditing activities approved by the Government of the Russian Federation, and federal auditing standards approved by the Ministry of Finance of Russia).
- if the contract for the audit was concluded after 01/01/2017, then following the provisions of the Federal Law "On Auditing" (part 1 of article 7, part 2 of article 14, part 9.1, 9.2 of article 23), taking into account the provisions of clauses 3 of orders of the Ministry of Finance of Russia dated October 24, 2016 N 192n, dated 09.11.2016 No. 207n, the audit organization is obliged to audit the accounting (financial) statements, including drawing up an audit report, under such an agreement in accordance with international auditing standards. At the same time, we draw attention to the fact that the contract for the audit of accounting (financial) statements cannot contradict the requirements of the Federal Law "On Auditing", applicable standards of auditing, the Rules for the Independence of Auditors and Audit Organizations, the Code of Professional Ethics of Auditors. When carrying out audit activities, in addition to ISA, it is necessary to apply a number of IFAC documents related to ISA, but not being them, these include:
- The concept of audit quality: key elements that form the environment for ensuring audit quality;
- International concept of assurance engagements;
- Glossary of terms;
- Structure of the compendium of standards issued by the International Standards Board on Auditing and Assurance Engagements;
- Preface to a compendium of international standards for quality control, auditing and reviews, other assurance engagements and related service engagements.
The texts of these documents are published on the official website of the Ministry of Finance of Russia www.minfin.ru, and are also posted on the SRO AAC website in the section:.
Please note that this clarification is for informational purposes only and was prepared only for the purpose of assisting members of the SRO AAS in applying the provisions of the legislation governing auditing activities in the Russian Federation.
The position of the ISA Committee cannot be considered as an official interpretation of the requirements of regulatory legal acts, replacing the auditor's own professional judgment on the issues set out.
Chairman of the SRO AAS Committee
according to international auditing standards
Mikhailovich Tatyana Nikolaevna
For answers, we turned to the specialists of the company.
In general, how will the changes in auditing since 2017 affect the business?
Starting next year, the Russian authorities decided to make the financial statements public and even more transparent. They did not experiment, but decided to put into effect international auditing standards. From January 1, 2017, 30 International Auditing Standards (ISAs) will come into effect in the Russian Federation, in accordance with the order of the Ministry of Finance of October 24, 2016 N 192n. Also, by Order of the Ministry of Finance dated November 9, 2016 No. 207n, from January 1, 2017, another 18 new audit standards will be applied.Oh, after all, then the complexity of the audit will surely increase, including for an accountant?
Yes, and this is bad news. There are already opinions that all these innovations will increase the complexity of the audit by 30-40%. After all, according to the requirements of these 48 international auditing standards, the number of audit procedures will increase, it will be necessary to fill out new forms and tables and other working documents.There are several main standards: agreement on the terms of audit assignments; quality control during the audit financial reporting; audit documentation; forming an opinion and drawing up an opinion on the financial statements; communicating key audit matters in the auditor's report; modified opinion in the auditor's report.
Do you need the appropriate competence of auditors to do such complex checks? Or will accountants and directors of companies remain extreme?
Fortunately, Russian legislators understand this and, without waiting for a flurry of protests from the professional community, they plan to increase the responsibility of auditors as early as 2017. The Ministry of Finance proposes to punish them not only with fines, according to the Code of Administrative Offenses, but also to introduce criminal liability for issuing a knowingly false audit report. The corresponding draft is posted for public discussion on the website of the federal portal of NLA projects.Should the new rules include some innovations in the form of an audit report?
Indeed, the idea behind the new standards is to make the audit report more informative and public. It was conceived that instead of the usual form of an auditor's report on several sheets with a standard text, for all new contracts concluded from January 1, 2017, a more information-rich report is drawn up in accordance with ISA.Wherein new form audit report (AR) will contain not only an assessment of the company's financial statements, but also pay attention to the most important points in the activities of the audited entity. For example, what attracted the most attention of the auditor, what the auditor sees as the most significant risks for the business, etc.
Why complicate things so much? Many people think that all this listening is nothing more than an empty formality?
Probably, that's the idea, so that a well and correctly done audit according to new standards will help entrepreneurs develop their business and make informed decisions. That is, the new form of AZ assumes extended information not only for accounting, but also for external and internal interested users: shareholders, board of directors, etc., that is, a wider range of people who make decisions about the business development strategy.But after all, all this information is extremely important, and may be of interest to competitors of the audited company?
Naturally, auditors are responsible for non-disclosure of information. But, we recall that from October 1, 2016, legally significant information about the facts of the activities of legal entities, including information about a mandatory audit, is entered into the Unified Federal Register. At the same time, the audit customer is obliged to disclose the circumstances that have a significant impact on the reliability of the statements listed in the audit report. Information must be entered into the Register within three working days from the date of occurrence of the relevant fact (paragraph 2, clause 9, article 7.1 of Law No. 129-FZ). If this deadline is violated, officials of the organization may be held administratively liable, up to and including disqualification.Surely all this will greatly complicate the work of an accountant, financial specialists, company management?
Yes, from January 1, 2017, the new ISA requirements will affect both the auditors and the audited companies. Significantly increases the amount of data required to analyze the activities of audited organizations, as well as increasing the degree of publicity of the results of the audit.As a result, we should expect not only an increase in the quality in business risk assessment, but also an increase in the cost of an audit from 2017.
What other side effects can happen?
Financial risks are increasing, since an increase in the level of transparency of the company's activities and the reflection in the audit report of all identified business risks will automatically lead to an increase in the cost of bank loans for companies.The new ISA rules and the formation of AZs have more long-term implications for business. It is planned that from 2018 the IFTS will be able to require auditors to disclose audit secrecy. A draft federal law on amendments to articles 82 and 93.1 of part one of the RF Tax Code has been posted for public discussion on the federal portal of draft legal acts (regulation.gov.ru).
It is planned that during the tax control it will be allowed to collect, store, use and disseminate information about the taxpayer (fee payer, payer of insurance premiums, tax agent) received from audit organizations and individual auditors.
That is, tax officials can really find out everything about a business?
Yes, according to the draft law, the tax authorities will be able to demand from the auditors the documents (information) received by them during audits and the provision of other audit services that serve as the basis for the calculation and payment (withholding, transfer) of tax (fee) by the organization. These documents may be requested by the tax authority if they are not submitted to in due course by the taxpayer himself.The current version of the Tax Code does not yet allow the collection, storage, use and dissemination of information about taxpayers obtained in violation of the requirement to ensure the confidentiality of information constituting professional secrecy of other persons, in particular audit secrecy, while exercising tax control.
From all of the above, the conclusion suggests itself: is it better to audit the financial statements of 2016 not according to ISA?
Yes, and while there is such an opportunity! If the audit contract was concluded before January 1, 2017, then the audit organization has the right to conduct an audit and draw up an audit report in accordance with the auditing standards according to the old rules that were in force before the entry into force of the ISA, approved by order of the Ministry of Finance dated November 09, 2016 No. 207n).For contracts concluded after January 1, 2017, the new ISAs will be applied in the audit for any reporting period.
With the introduction of ISAs, it is important for companies to take seriously the timing of the audit of financial statements, since during the course of the audit a sufficient number of questions usually arise, and sometimes the need to make corrections to the accounting. It is better not to schedule an audit for the last days before the submission of accounting or tax reports, when the accounting department is already heavily loaded.
But is it already the end of the year? What to do? Is it already too late?
The best option is to conduct an audit for 2016 in two stages (based on the results of 9 months and for the year). In this case, the auditors will perform almost the entire amount of work before the end of the reporting year, which will allow the organization to avoid haste, take into account their conclusions and recommendations in order to approach the annual report without distortions and accounting errors.As you know, the audit report may be negative, which will require the organization to additional costs associated with the correction of identified violations. Carrying out the bulk of the work based on the results of reporting for 9 months will help both the accounting department and the auditors to avoid these troubles. And even having received a report with a list of significant errors made in the preparation of reports for 9 months, the organization will have time to make the necessary corrections to the accounting and receive a positive audit report at the end of the year.
P.S.: So, if you have not yet concluded a contract for the audit of financial statements in 2016, then you should hurry up and do it before the end of this year in order to pass the audit and get an audit opinion according to the old rules.
Vartan Khanferyan
The next, 23rd, annual issue of the rankings of the largest Russian audit organizations and groups, compiled by the agencyRAEX(RAEKS-Analytics), revealed a decrease in income in this service sector. The resumption of growth here is closely related to the state of the economy as a whole, an increase in the level of technological effectiveness of the industry, and in the medium term, to the impact of the planned regulatory changes.
The 2017 ranking, like the previous one, was created on the basis of an updated methodology (see the "As we thought" reference), which aims to increase the objectivity and reliability of the information taken into account when compiling the lists, as well as to separate the core activities of participants as clearly as possible from numerous side services. This approach, formed through active interaction with the audit community itself, is bearing fruit. Evidence of the support of the professional community for the updated methodology can be considered that a number of old-timers of this market, for example, Inaudit, MKD, MKPTsN and others, took part in the current lists for the first time or after a long break, as well as the fact that For the ranking of audit firms, all Big Four companies, without exception, provided information , some of which were previously included in the lists only as groups.
Angle of incidence
The total revenues of the largest audit organizations decreased by 5% in 2017, amounting to 35.717 billion rubles (see the table "List of the largest Russian audit organizations (subjects of audit activities) in 2017"). A year earlier, we recall, there was an increase of 6%. The most significant contribution to the final disappointing result was made by the top participants of the list: although only a third of the ranking audit organizations (42 companies) ended the year with a negative result in terms of revenue, they accounted for 70% of the total indicator. In the list of 2016, there were slightly fewer such companies (36), but their share occupied only 11% of total revenue.
The drop in demand observed in the ranking affected the absolute market leaders – the Big Four. The reason for this was the reorientation of a number of large clients to companies perceived as unconditionally Russian, plus increasing price competition in the market.
However, the overall negative result for the total revenue of audit organizations is “ average temperature for the hospital”, aggregating multidirectional trends in certain market sectors. If you look at them separately, the picture is less unambiguous, even variegated.
Revenues in the largest sector by size - statutory audits -- according to the results of 2017, they decreased by 5.9% (from 16.646 billion rubles a year earlier to 15.664 billion rubles). The desire to save money on the procedure imposed by law leads not only to the migration of customers from top companies, whose services cannot be cheap, but at the same time puts pressure on general level average market prices - the very possibility of paying less for obtaining an audit report gives the client additional leverage even on the largest audit companies. Victoria Salamatina, Energy Consulting, head of HLB International's international network in Russia, explains: “In the procurement procedures, within the framework of which the selection of a supplier - an audit organization takes place, the pressure of the low price factor has not been overcome. Audit firms that do not want to accept the deterioration in the quality of their work are forced to minimize revenues, and sometimes even actually pay for maintaining a decent level of services at their own expense. Svetlana Romanova, CEO and managing partner of Nexia Pacioli, adds: “There are tenders in which we do not participate, because we cannot guarantee the proper quality of services at such low prices. Dumping in the audit still remains, but the reform is designed to eliminate this, and the prerequisites for this are observed. There is hope for the establishment of healthy competition between equivalent firms - market leaders.
A noticeable decrease in indicators was shown by the segment designated in the reporting as “ other services related to audit activity" -- Most of it is consulting. It brought the list participants 15.5% less than a year ago: 18.452 and 15.589 billion rubles, respectively (see Chart 1). The negative dynamics in this type of service is associated with a number of factors.
Firstly, in connection with the introduction of International Auditing Standards (ISA) in 2017, part of the income that was entered in the column “Other services related to audit activity” in 2016 is now recorded in the lines “Services related to audit” or “ Initiative audit. As a result, both of these sectors grew in 2017. So, audit related services , increased by a fantastic 170.5% and reached 1.903 billion rubles (against 703.6 million rubles a year earlier; see charts 2 and 3). At the same time, revenues from audit in the ranking of organizations increased by 5.5% over the year and amounted to 20.128 billion rubles, while from consulting, on the contrary, decreased by more than 15 percent to 15.589 billion rubles. The income from proactive audits – from 1.735 billion rubles in 2016 to 2.561 billion rubles in 2017: an increase of 47.6%. (Let's note in parentheses that the achievements of these two sectors made it possible to bring the total audit indicator, which is not limited to mandatory audits, into the positive zone).
Let's return, however, to the indicators of consulting. The second reason for the reduction in income from it, obviously, is economic turbulence - the customer saves as much as he can, including doing part of the work on his own. Nina Kozlova, managing partner of the international audit and consulting network FinExpertiza, gives an example: “The decrease in consulting volumes in 2017 was due to a decrease in the volume and cost of transfer pricing projects. In addition, the number of IFRS audit projects has increased with a simultaneous decrease in demand for services for the transformation of IFRS reporting – companies are building up their own competencies in this area.”
And finally, thirdly, in some cases, consulting projects of audit organizations can be transferred to affiliated consulting companies, due to the presence of the latter in the relevant specialization.
In a slightly less pronounced form, the trends arising from the analysis of the ranking of audit organizations also follow from the results of the ranking of the largest audit groups and networks (see the table "List of the largest Russian audit groups and networks, according to the results of 2017"). Their total revenue in 2017 amounted to 66.4 billion rubles, having decreased by 1% over the year. At the same time, the total income from consulting fell by 2% 1 , while from audit, albeit slightly - by 0.8% - increased.
Among consulting practices, the largest part of revenue in 2017 came from services financial management – 3.447 billion rubles, or 19% of the total revenue of the ranking participants (hereinafter, the structure of consulting revenue is given without the Big Four data due to the lack of a detailed revenue structure for ranking purposes). During the year, this sector grew by 12%, primarily due to the demand for accounting outsourcing. “The main driver for the development of outsourcing is savings in the cost of maintenance, which can reach 80% compared to the costs of maintaining your own accounting department,” shares his opinion Ruslan Rumyantsev, partner of CBS group.
Services tax and legal consulting in total brought to the ranking participants 2.636 billion rubles (14% in the total structure), having decreased by 2.6% over the year. Comparative stability of demand for tax consulting and legal services explains Marina Rizvanova, General Director of the Ural Union audit group: “On the one hand, the state continues to strengthen tax administration, and on the other hand, the demand for auditors’ services is updated due to the “digitalization” of tax authorities. It has led to an increase in requirements for the submission of documents on various control ratios, which should be quickly and competently analyzed for validity in order to correctly answer them. The price of a mistake has increased today, since, for example, penalties have already been introduced at a double rate from the second month of the formation of arrears.
According to Viktoriya Salamatina, the demand for tax advice is also driven by legislative innovations related to the implementation of the requirements of the Action Plan on Base Erosion and Profit (BEPS) Action Plan on Base Erosion and Profit: the presence of controlled foreign companies, the expansion and improvement of the reporting of international groups of companies on intra-group transactions, the change in focus from formal compliance with the criteria of tax residency to the actual right to income and place of activity - all this has changed and will continue to change approaches to international tax planning, the application of agreements to avoid double taxation".
Another 2.335 billion rubles, or 9%, in 2017 amounted to total income from appraisal activities , which decreased by almost 18% over the year. Traditionally, a significant share of services IT consulting : 2.946 billion rubles (16%) - a decrease over the year by 10%. “In 2017, we saw demand for ERP solutions implementation services, including large complex business transformation programs based on SAP technologies. This confirms the current shortage of SAP specialists in ERP functionality in the market. At the same time, there is a clear trend towards the deployment of projects and the creation of their own digital laboratories for large clients to promote solutions for digital transformation of business (digital transformation) and corporate data management (data governance). As before, these topics are driven by vendors and consulting companies that actively offer new solutions and services in the field of business digitalization,” comments Andrey Yakymenko, Senior BDO Unicon Business Solutions.
When predicting trends in the consulting part of the business of audit organizations, market participants are quite cautious, although in general they tend to be optimistic. “The fundamental drivers of demand for consulting services are investment activity and the tasks of strategic development and management. And although we are currently seeing a decline in these areas, there are more and more consulting tasks related to increasing the transparency of business processes, automation and a risk-based approach - this is due to the general trend of strengthening control and responsibility of the business in many aspects,” says Vera Konsetova, CEO of AFK-Audit. BUT Vladislav Pogulyaev, General Director of BDO Unicon JSC, adds optimism to the indicated market factors due to the introduction of new technologies: “Their impact on the audit can significantly increase its efficiency, reduce labor costs and . For example, already well-established statistical computer processing of data and electronic means of working documentation complement data analytics technologies. They help to abandon the selective approach in favor of analyzing the entire array of data of audited companies and searching for logical relationships, as well as identifying anomalies that materially distort financial statements. Despite the fact that Russian audit lags behind many business sectors in terms of transformation speed, the largest Russian audit companies are actively implementing IT technologies, integrating them into the Russian legal field and are already ready to offer high-tech solutions to their clients.”
The impact of digitalization of business processes on customer needs is noted and Alexander Ivlev, EY Russia Managing Partner: “Companies have to adapt to this. More and more popular among our clients are services for the creation of a digital strategy, process robotization, predictive analytics, and cybersecurity. The further development of digital technologies forces us to develop innovative approaches to the audit process in order to ensure confidence and trust in the capital markets. Since companies are also seriously working on how to integrate new technologies, such as blockchain, into their financial processes, we apply innovative solutions in the audit process. For example, we recently announced the launch of a pilot version of the EY Blockchain Analyzer, a toolkit for auditing blockchain solutions that significantly expands the ability to audit transactions with cryptocurrencies. This technology is designed to support EY audit teams in the process of auditing companies working with cryptocurrencies, and will lay the foundation for automating the procedures for testing assets, liabilities, capital and smart contracts using blockchain technology as its use in companies expands.”
Project of the future
In 2017, the audit services market was on the verge of significant changes associated with the transformation of the regulatory and supervisory system in the industry. And although the final decisions here are yet to be made, the general outline of the reforms has already taken shape. So, we can say that in the near future, the powers of the regulator of the audit market from the Ministry of Finance will be transferred to the Bank of Russia, which wants to purge the audit community from dealers in certifying seals. The Central Bank directly encountered the latter when clearing the banking market, when it turned out that some of the banks that had been deprived of a license or were subject to reorganization, on paper - according to reports certified by auditors - looked quite “white and fluffy”. Viktoria Salamatina explains the prerequisites for the reform: “The reason is the negative financial consequences of the increased revocation of licenses of credit institutions, whose statements, being certified by the auditor, contained indicators that differed from the data during the subsequent assessment by the Central Bank. In order to control the audits carried out in relation to the reporting of socially significant organizations (mainly the financial sector), the state decided that it is the Central Bank that should be involved in the regulation and control of the audit. Sergei Nikiforov, General Director of FBK-Povolzhye, Chairman public organization"National Union of Auditors," adds: "In last years the functioning regulator of audit activity [Ministry of Finance of Russia] ignored the increase in the proportion of audit entities that only formally fall under the definition of an audit organization, did not pay attention to the fact that the existing criteria stimulated the majority of organizations subject to statutory audit to either evade or simulate its implementation” .
Throughout 2017, the Central Bank, together with the trade union community, worked on a draft package of amendments to the Law "On Auditing", which has already passed the first reading in the State Duma and should soon pass the second. “The opinion of the audit community was listened to. Discussions of the draft law were held in many regions with representatives of SROs and the business community. The problems of the industry were discussed at various venues, including now during the adoption of the bill at the expert council under the State Duma, where regional auditors are also invited, ”says Egor Churin, General Director of Invest-Audit LLC, Chairman of the Compulsory Audit Commission of the Ural branch of the SRO Russian Union of Auditors.
The draft amendments to the legislation can be divided into the following main groups. First, it is supposed to narrow the range of companies subject to mandatory audit. Secondly, the requirements for entering the audit market will be tightened. Thirdly, it is planned to strengthen the requirements for certification of financial statements of banks and other organizations supervised by the Central Bank. Fourth, it will become more difficult for auditors to confirm the statements of socially significant economic entities. Fifth, it is planned to introduce a qualification and reputational qualification for organizations included in the register of the Central Bank, as well as a rotation of auditors, limiting the period of work with one client to seven years. Finally, the model of self-regulation in the financial market should change, increasing the responsibility of SROs.
If the law is adopted, and it is recognized by the market as practically inevitable (the only question is the timing and nuances of the wording), one of the most important consequences of the reform will be a decrease in the number of subjects and objects of audit activity. Elena Loss, president of RSM RUS, believes that “the reform may lead to a reduction in the number of small audit companies. As a result of such a reduction, the cost of auditing large companies, in particular, the statutory audit of the OHS, may increase due to a decrease in dumping. In addition, the exit from the audit market of small companies with a staff of three or four employees will improve the quality of audits.”
“The introduction of a requirement for the number of auditors with a single certificate for audit companies has already led to a market race for specialists - highly qualified auditors. At the same time, the implementation of projects by them, in addition to improving the quality of services, can cause an increase in the cost of the audit,” adds Elena Laskeyeva, Development Director of JSC Audit and Consulting Firm MIAN.
Vera Konsetova also predicts a reduction in the number of audit companies, however, according to her, after stabilization, the volume of revenue in the market should recover due to new approaches to pricing for the service. “Also, the forthcoming audit reform will help to increase the prestige of the profession, which, in the medium term, can eliminate the shortage of qualified personnel,” she said.
More careful in assessments possible influence To the market Oleg Goshchansky, Chairman of the Board and Managing Partner of KPMG in Russia and the CIS: “In terms of the size of the audit market, I would point out two vectors that are often opposite. On the one hand, the market will shrink, because the list of those companies that will be subject to the mandatory market for audit services is shrinking. On the other hand, the pricing in the audit market is at such a depressing level that all measures to improve the quality of the audit will lead to the fact that these prices will no longer allow audit companies to maintain a normal quality and level of services. This should inevitably lead to a change in the pricing policy, to a decrease in dumping in the audit of socially significant organizations. I hope this will lead to a recovery in the audit market in terms of revenue, because a quality audit cannot be cheap.”
one . Comparable figures excluding Big Four companies.
04.04.2017
Despite the fact that 2016 is not yet closed for all companies and audits are in full swing, those who have already managed to obtain an audit opinion are starting to prepare for an audit at next year. A number of changes have been made to the current legislation, which should be taken into account when concluding an audit contract. Let's see what you need to pay attention to when working with auditors.
1) International Auditing Standards
Since January 1, 2017, International Auditing Standards (ISA) have been in force in Russia. The new requirements will affect both the auditors and the audited companies. Significantly increases the amount of data required to analyze the activities of audited entities, as well as increasing the degree of publicity of the results of the audit. The transition to ISA for many small audit companies will require serious methodological support, changes in internal regulatory documents. Before concluding a contract, it will not be superfluous to make sure that the auditor has the resources and experience to conduct an audit in accordance with ISAs, to analyze the contract proposed by the auditor for the presence of all conditions required for agreement in accordance with ISA 210 “Agreement of the terms of audit assignments”.
2) Membership in a self-regulatory organization
On January 1, 2017, amendments to the law on auditing came into force. They provide for an increase in the minimum number of members of SRO auditors from 500 to 2 thousand audit organizations or from 700 to 10 thousand auditors. These changes led to the fact that today only two self-regulatory organizations remain in the state register of SRO auditors: the Russian Union of Auditors (Association) and the Commonwealth Association. SRO "Audit Chamber of Russia", NP "Institute of Professional Auditors" and NP "Russian Collegium of Auditors" ceased to exist. But not all auditors have left the three SROs excluded from the state register. Therefore, before concluding an audit contract, be sure to check whether your auditor is a member of one of the current SROs.
3) Unified qualification certificate
Starting from January 1, 2012, the audit of a number of organizations that belong to socially significant economic entities (OSEA) can only be carried out by auditors with unified qualification certificates. The Ministry of Finance of the Russian Federation annually publishes a list of cases of a mandatory audit of accounting (financial) statements, which indicates who can audit an organization. Thus, the list of cases in 2016 was increased by 9 points compared to 2015, including three categories of companies that can be audited by an audit organization that has an auditor with a new qualification certificate. Thus, the scope of professional application of auditors with the "old" certificate is reduced over time. At the same time, there are many practicing auditors on the market who received a certificate on January 1, 2011. If your company falls into the SHS category, ask the auditors you plan to contract with if they have the workforce (including interchangeable) to comply with these legal requirements.
4) Reporting the results of the statutory audit
In connection with the change in the Federal Law "On Auditing" from October 1, 2016, the customer of the statutory audit must independently enter information about the results of the statutory audit into the Unified Federal Register of Information on the Facts of the Activities of Legal Entities (www.fedresurs.ru) in the form of a message indicating data identifying the audited entity (name of the organization, PSRN, TIN, for individuals - last name, first name, patronymic, SNILS). Despite the fact that these requirements have already been established since the audit of financial statements for 2016, as practice has shown, not all organizations were ready for this. To enter information into the register of an organization, it is necessary to issue an electronic signature for an authorized employee through the Certification Authority (http://iitrust.ru/region/uc/tarif.php) or be ready with a package of documents to contact a notary who will go to the website www.fedresurs .ru with its certificate and submit information to the Register on behalf of the organization. Information must be posted within three days from the date of issuance of the auditor's report.
5) Additional audit quality assurance
Auditors are regularly checked by SROs and the financial treasury. The issue of transferring part of the powers of the regulatory body to the Central Bank of the Russian Federation is being actively discussed. Information on the results of an audit company passing external quality control, as well as information on the application of disciplinary measures, is posted on the official website of the Ministry of Finance of the Russian Federation. The key point in the issue of the quality of services provided is an effectively functioning internal quality control system in the company. Such a system, among other things, may include an internal control department, consisting of independent controllers with the necessary experience, due skills and qualifications, who check the quality of the audit assignments. It is also important that the auditor has a professional liability insurance contract and the amount of liability limit specified in it. Separately, I would like to note the advantages of membership of audit companies in international networks. This allows auditors to use the experience and achievements of colleagues from abroad in their work. And of course, nothing characterizes the work of auditors as much as customer reviews and recommendations.
Of course, in the presence of a huge market for the company's proposals, it is difficult to solve the problem of choosing an auditor. We hope that the above nuances will help the company make the right choice.
Sources of information about the audit company:
- the register of audit organizations is posted on the official website of the Ministry of Finance of the Russian Federation on the Internet? http://minfin.ru/ru/perfomance/audit/reestr_audit/auditor_org/;
- corporate website of the audit company. On June 19, 2014, the Audit Council approved recommendations to audit organizations on disclosure of information on their official website, in accordance with which a list of data to be posted was established;
- A unified federal register operating at an address on the Internet? http://fedresurs.ru.
Anna Gulyaeva, Director of the Audit Department of the audit company MKPTs
