According to the Law, auditing is an entrepreneurial activity for the independent verification of the accounting and reporting of organizations in order to express an opinion on the reliability of financial statements and the compliance of financial and business transactions with legislation. However, in our practice, we are constantly faced with the fact that today there is no unambiguous understanding of the principles, goals and objectives of audit among its customers, and this situation applies equally to both accountants and the owners and management of companies.
Audit (audit) – an independent audit to express an opinion on the reliability of financial statements. The word “Audit” translated from Latin means “hearing” and is used in world practice to denote verification.
The purpose of an audit of financial statements is to provide the auditor with an opportunity to express an opinion on whether the audit reports, in all material respects, are prepared in accordance with the financial reporting framework.
An audit of financial statements is an assurance engagement.
Why do you need an audit?
Someone orders an audit to confirm economic viability in front of foreign partners (that is, really to confirm the accuracy of accounting and financial statements), someone wants to get rid of the alleged tax risks. Someone does not trust their accountant or does not find a common language with him, someone just wants to be confident in the future without looking back at the mistakes of the past – in general, through audit, everyone pursues their own goals.
Some companies have been cooperating with auditors all these years, while many are just taking the first steps towards such cooperation. Those companies for which auditors have saved a lot of money no longer imagine their activities without auditors, as external consultants, and do not need explanations about the need to interact with them. For such companies, auditors are a kind of “family doctors” from the moment of the first mutually beneficial cooperation.
Audit of accounting, financial condition of the object for the presence of incorrect documentation, financial calculations. Usually it is carried out to improve the efficiency of the facility, as well as to avoid various incidents during inspections by state authorities. It is advisable to conduct an audit at the facility annually for your own interest – to check the state of affairs of the facility.
Why hire an accounting firm when you can hire an accountant? Do you need an auditor?
I would like to give some explanations about the activities of auditors, supported by the experience of communication with the management of the enterprises we inspect. Why do auditors find major errors even among the most highly qualified accountants? The accountant, as a rule, takes the lion’s share of his time with current affairs – preparation of primary documents, recording business transactions, working with debtors and creditors, calculating and paying taxes, etc. The auditor is never busy with “routine” – he is engaged daily studying accounting and tax legislation, keeps track of all the innovations and problematic issues in their wide range, i.e. constantly deals with those issues for which the accountant usually does not have enough time.
Very often, where the company can afford one (single) accountant, the salary is also not very high. For such positions, a person is hired who has little work experience or a lot of part-time jobs or many other nuances. On accounting forums you can find: “Good afternoon! I was hired as an accountant, but they cannot teach me, since the enterprise has just opened. I have a question…”. To be honest, it is not clear who should teach whom and whether or not, because a person is paid money for the fact that he will work. This raises doubts about the quality of such accounting, and therefore the problems that will arise, and they will certainly arise.
What to do if the accountant does not agree with the opinion of the auditor?
This is the right of the accountant, moreover, as already mentioned, the auditor is an external consultant, and your company has the right to either accept or not accept the comments and recommendations of the auditor. It should be noted that the auditor’s opinion is always based on legislation, with the obligatory reference to regulations.
What is the difference between a statutory audit and an initiative audit?
The criteria for compulsory audit are given in Decree No. <N> 67 of 12.02.2004. In general, the criteria for conducting a statutory audit is the presence of foreign investments in the authorized capital of an enterprise or revenue for the previous reporting year exceeding 600 thousand EUR. In turn, an initiative audit is carried out at the request of the owner or top management of the enterprise, and, as a rule, when they feel the imminence of a tax audit or simply want to have an objective picture of the financial condition of their business. In the overwhelming majority, a proactive audit is ordered when changing the chief accountant or materially responsible persons, as well as when expanding activities, increasing sales, and also so that the shortcomings of the past do not ruin the activities of the future.
Do not auditors make it easier for tax inspectors?
The auditor’s report on the audit carried out is strictly confidential information, and it is in it that the violations revealed by the audit are indicated – this is information inaccessible to the tax authorities. Only the audit client is the user of this report. A completely different document is submitted to the tax inspectorate by the enterprise itself – an audit report containing a general opinion on the reliability of the financial statements, and the conclusion is submitted to the Inspectorate of the Tax Inspectorate only in the event of a statutory audit.
The presence of an audit report increases the confidence of tax workers in your company, and an audit report helps to control the introduction of corrections recommended by auditors by the accounting department and other services. The higher the business reputation of the audit firm that issued the opinion, the less willing the tax authorities are to conduct an on-site audit at this enterprise.
Can the cost of an audit exceed the size and cost of tax risks?
Maybe yes, but we have not encountered this in our practice. The fact is that tax legislation is imperfect and often does not have unambiguous answers to the questions that arise, in addition, it is dynamic and is in the stage of permanent revision.
At one time, we even kept statistics and came to interesting conclusions. On average, the economic effect of an audit (prevention of possible penalties, tax optimization, etc.) exceeds the cost of its implementation by 6-7 times. In addition, the costs of the audit are projected and also reduce taxable profit. Compared to this, the companies do not plan or reserve the penalties, together with the underestimated taxes revealed after the tax audit, and, accordingly, never pleasantly surprised anyone. In addition, the consequences of a tax audit often paralyze the activities of an enterprise, and sometimes, as a result of economic insolvency, even lead to its liquidation.
How, except for his reputation, can the auditor answer for the audit he has carried out? Is it possible to audit with a guarantee?
Indeed, auditors often have little to guarantee the quality of their audit. In the event of any disagreement with the regulatory authorities, which entailed penalties after the audit, all that the auditor can do is just sympathize with the customer. Indeed, as a rule, the working capital and solvency of consulting companies are low, and the penalties can be billions of dollars. Of course, the loss of reputation is the worst thing that can happen to a professional consultant, because a disgruntled client will tell everyone about it. But the client himself is not any easier from this.
And so, to summarize:
An auditor is a person engaged in auditing (revision of accounting books, documents and reports) and consulting activities related to the adjustment of accounting and who is highly qualified and experienced to cope with many tasks, it is a “walking knowledge bank”.
An audit firm is:
– the cost of the work is at the same level as the expected salary of the hired accountant;
– this is the entire cost of services included in gross costs and you do not pay huge contributions to all kinds of funds that take up to 50% of the possible salary of a hired accountant;
– You always know for sure that your bookkeeping is carried out accurately and on time;
– all the “novelties” of the legislation have been tracked. And in our country you never know what else the state will come up with to “replenish the budget”;
– You come to our office at any time and receive a summary of your business.
Who needs it?
As in any business, we have a circle of Customers, most often they are:
– founders who want to check their accountants for honesty;
– founders, if the enterprise does not work, nevertheless, numerous reports must be submitted;
– founders when changing the chief accountant;
– directors who, like the founders, can hire an audit firm to audit their affairs or conduct accounting;
– director when changing the chief accountant;
– chief accountants who check their subordinates or recheck themselves;
– all of the above users in preparation for the audit by the tax inspectorate and other authorities;
– and finally, a statutory audit that cannot be avoided.
Besides:
– potential investors;
– potential buyers of the enterprise.