When carrying out audit activities, the choice by audit organizations (individual auditors) of enterprises to conduct an audit is important.

It is very important for audit organizations to have a balanced selection system and reliable criteria for assessing potential clients. This will reduce risks during the audit and avoid significant financial and moral losses.

The following basic techniques for selecting clients by audit organizations are identified.

1. Determination of the audit objectives pursued by the client and the possible use of its results. The purposes of an audit can be very diverse: mandatory audit in accordance with legal requirements; the presence of accounting problems that need to be given special attention; the need to verify the reporting of subsidiaries or affiliates; verification of consolidated statements, etc. The goals set affect the scope of audit procedures, labor costs and the cost of conducting the audit.

2. Preliminary assessment of the potential labor intensity and complexity of the audit, as well as audit risk. In a preliminary risk assessment, a client is considered to be at low risk if:

3. Determining the client’s reputation and clarifying the characteristics of the enterprise’s management. When studying the client's reputation, the absence or presence of lost or unfinished court cases, problems with tax and other government authorities is considered. When analyzing the features of management, they consider the composition of the board of directors, the list of major shareholders, highlighting their share in the share capital, to determine the actual owners of the organization, etc.

4. Features of the client’s business. Here it is necessary to study the industry of activity and types of products.

5. Assessing the reasons for changing the previous auditor. The period of work of the previous audit firm with this client, the types of services provided, the form of the issued audit report and disagreements between the auditor and the client on the form of the report, on the problem of reflecting events that occurred before the date of drawing up the audit report, or other issues are taken into account.

6. Clarification of the nature of relationships with third parties: tax authorities, banks, partners, other consumers of financial reporting information of a potential client. Information obtained from lawyers is very important in identifying actual and potential litigation. If there is a high probability of losing litigation for significant amounts, the auditor should warn management of the client enterprise about the possibility of expressing a qualified or negative opinion.

7. The presence of problems associated with violation of the independence of auditors (related, property, financial, etc.).

The main task of management in an audit firm is the most effective use of professional services of employees and coordination of the activities of the firm's divisions.

Since each audit firm independently determines its organizational structure, it is quite difficult to generalize the experience of different audit firms. Nevertheless, in the management structures of audit firms, the following divisions and management bodies can be distinguished:

• Board of Directors;
• CEO;
• Executive Director;
• profit center:
  • Department of Financial and Management Consulting;
  • tax consulting department;
  • Banking Audit Department;
  • insurance audit department;
  • department of audit of extra-budgetary funds, exchanges and
  • investment institutions;
• cost center:
  • Department of Accounting and Auditing Methodology;
  • Human Resources Department;
  • business development department;
  • information department;
  • marketing department ;
  • maintenance department;
  • secretariat;
  • security Service;
  • driving group;
  • service staff.

The work of all these departments must be well coordinated so that the company is able to most effectively solve the problems determined by its overall strategy.

A clear definition of the place of each division in the company is achieved with the help of job descriptions, as well as a well-founded structure of the company.

The organizational structure of management of an audit firm is formed based on the theory and practice of management, as well as the types of services provided by the audit firm.

The largest audit firms (both in countries with developed market economies and in the Russian Federation) employ the following specialists with the corresponding rights and responsibilities:

• partner;
• manager;
• señor (senior auditor);
• assistant (line staff).

Each economic entity is served by a group of specialists, which includes an audit service group; it includes:

• leading partner responsible for the development and level of relationships with an economic entity;
• technical partner responsible for the technical quality of audit services;
• a manager who assists the technical partner in conducting audit work that requires significant experience and informed decision-making;
• señor (senior auditor), who assists the technical partner and manager, works directly with assistants (local staff), distributes and supervises their work;
• assistant (line personnel) who directly performs the audit and assists the senior auditor in preparing the report.

Departments of large Western audit companies have the following structure: partner - manager - senior auditor - assistant.

In this structure, the manager prepares and organizes work on the project carried out by his department.

Direct work is performed by a senior auditor with at least three years of production experience in this area, and one or more assistants with at least one year of experience, as well as trainees from among employees who have recently joined the company.

The partner and manager prepare contracts (most contracts are open-ended), plan audit procedures for this project, and also prepare reporting documentation for presentation to the client.

Disagreements that arise between team members during the audit are resolved by contacting a higher-level team member.

Lead Partner Responsibility. Lead partner responsibilities include:

• coordination of the integration of the company’s services provided to this client, as well as its representative offices around the world, and the specialists capable of providing these services;
• ensuring high quality of services provided;
• ensuring the emergence of client “resonance” in response to critical remarks.

The Lead Partner is responsible for:

• understanding the full range of services provided, including potential ones provided in accordance with the client’s needs;
• development and determination, together with other partners, of the level of requirements that knowledge must meet,
• skills and experience of customer service team members; drawing up a work plan with the client, holding periodic meetings with technical partners and other members
• teams for assessing and analyzing new information; ensuring team members transfer information to each other;
• assessing the degree of client satisfaction with the level and quality of services provided to him;
• providing support during additional work;
• management of changes in the general price level in accordance with the estimates of the International Council.

When communicating with a client, the lead partner plays the role of director of the company.

Responsibility of the technical partner. The technical partner's responsibilities include:

• developing an audit strategy and communicating it to team members;
• aligning the audit with company policy and professional requirements; formation of the auditor's opinion.

The technical partner is responsible for:

• maintaining the company's independence from the client;
• command layout;
• ensuring information confidentiality;
• decisions regarding access to third party audit documentation;
• agreeing with the client on the timing of the audit;
• review and approval of all audit plans (for each project), documented in the planning memorandum, before work begins on site;
• informing partners about the progress of the audit and the results of the relevant procedures;
• Supervising and training the manager and, as necessary, coaching other team members;
• checking the auditor’s working documentation containing a critical assessment of the audit results;
• assessing the compliance of the collected audit evidence with the prepared audit report;
• assessment of the absence of material errors in the financial statements;
• assessing the presentation of financial statements; signing the audit report;
• conducting relevant negotiations with the client and preparing a report to management;
• conducting an audit debriefing indicating ways to improve both individual and collective work in the future.

Manager's responsibility. The manager is responsible for:

• review and approval of the plan of audit procedures documented in the audit program before starting work on the site;
• compiling a list of specialists to work on this project and maintaining constant communication with the client during the period of work on this project; reconciliation of the progress of audit work with the schedule and budget, as well as control of the cost of work;
• resolving disagreements that arise when there is a difference of opinion between the senior auditor and the team as a whole, and discussing them with the technical partner;
• developing, together with a technical partner, additional professional services that can be offered to a given client;
• supervising the work of the senior auditor and, as necessary, conducting training and instruction for line personnel and the senior auditor;
• overseeing the preparation of the management report; checking the auditor's working documentation.

Responsibility of the senior auditor. The Senior Auditor assists the Technical Partner and Manager. He typically works alongside line staff on site and distributes audit work among staff throughout the project. In addition, the senior auditor is responsible for:

• preparing budgets and reconciling actual hours worked with the budget;
• identification of accounting and audit data for discussion with the manager;
• drafting responses for management;
• drawing up, together with the manager, a list of professional services that can be provided to this client;
• providing supervision, holding meetings and on-the-job training with line personnel, assisting line personnel in understanding the goals and compliance of work procedures with a specific type of documentation;
• reviewing working papers prepared by line staff, then highlighting issues and assessments for review
• the suitability and appropriateness of the audit evidence obtained; preparation of proposals for improving audit services.

Responsibility of line personnel. Audit personnel perform the audit and assist the senior auditor in preparing the report. Line audit personnel are responsible for:

• understanding and implementing audit procedures signed by them;
• preparation of relevant working documents;
• informing the senior auditor of audit or accounting inconsistencies or calculation problems;
• preparation of proposals to improve the quality of the company’s audit services;
• keeping the senior auditor informed of all aspects of the professional services that may be of benefit to the client.

In the Russian Federation, professional employees of an audit organization, depending on the functions they perform during the audit, can be divided into the following categories (in accordance with the Audit Rule (standard) “In-house audit quality control”):

• heads of the audit organization;
• audit supervisors;
• senior auditors (heads of units or groups);
• ordinary participants in audits.

The head of the audit organization performs the following functions:

• negotiates with the management of the economic entity;
• appoints an audit manager and assembles a team of specialists to conduct an audit of an economic entity;
• expresses the opinion of the audit organization on the reliability of the financial statements of the audited economic entity, reflected in the auditor’s report.

The head of the audit organization must be aware of all the significant reasons that determined the content of the audit report issued by this organization.

The head of an audit organization is, as a rule, a person certified to carry out audit activities in one of the audit specializations.

An employee of the audit organization is appointed as the head of the audit, who is entrusted with conducting the audit and managing the personnel involved in the audit of a specific economic entity. The head of the audit is accountable to the head of the audit organization.

The audit manager is responsible for:

• organization and ongoing control of work with a specific economic entity;
• work planning procedure (approves the general plan and audit program);
• compliance of the audit and the working documentation prepared based on its results with the rules (standards) of auditing activities and internal company requirements;
• bringing to the attention of the head of the audit organization the main audit results that may affect the content and conclusions of the audit report.

The head of the audit can only be a person certified to carry out audit activities in an audit specialization that meets the requirements of this audit assignment.

A senior auditor is an employee of an audit organization who is or may be assigned, during a given audit, to manage ordinary participants in this audit. The senior auditor is accountable to the head of the audit and is an executor in relation to him.

The senior auditor is responsible for:

• preparation, direct implementation and documentation of the results of audit procedures;
• organization and control of the work of ordinary inspection participants reporting to him.

A senior auditor can, as a rule, be a person certified to carry out auditing activities in one of the audit specializations.

An ordinary participant in an audit is an employee who reports to the senior auditor or directly to the head of the audit and is a performer in relation to these persons. Ordinary employees may include auditors, junior auditors, assistants, interns and other specialists who are not technical personnel who can be entrusted with work only under the supervision of a senior auditor. Ordinary audit staff are responsible for performing the duties assigned to them during the audit.

Auditing organizations have the right to establish a different management structure, provided that such a structure will ensure the proper distribution of employee responsibilities for the quality of the audit and the reliability of its results.

Audit organizations related to small businesses may have a simplified two-level management system: the head of the audit organization, who, as a rule, is also the head of the audit, and ordinary audit participants subordinate to him.

Auditors working independently as individual entrepreneurs are responsible for the quality of the audit performed in accordance with current legislation.

If auditors use the services of assistants in their work, they are required to use the organizational structure intended for audit organizations that are small businesses.

Selection of clients by audit firms

To reduce the risk of audit failure, auditors and accounting firms must have reliable criteria for evaluating potential clients.

An unsuccessful, ill-considered choice of a client can lead to significant financial and moral costs and damage the image of the company and the auditor. It is especially important to have a well-thought-out system for selecting clients by audit firms during the period of market formation in the Russian Federation, when a significant number of commercial structures violate the current rules of accounting and reporting.

The main procedures for selecting clients by audit firms are as follows:

1. assessing the nature of the industry;
2. assessment of the purpose of the audit for a given client and the possible use of its results;
3. clarification of the characteristics of managers;
4. preliminary assessment of the potential labor intensity and complexity of the audit, as well as audit risk;
5. assessing the reason for the change or changes of auditors;
6. familiarity with the caveats of previous audit reports on audit results;
7. clarification of the nature and problems of relationships with tax authorities, banks, partners, shareholders and other consumers of information, financial statements of a potential client;
8. receiving recommendations (for example, from various organizations, professionals, etc.);
9. analytical verification of reporting;
10. preliminary acquaintance with the state of accounting and reporting, as well as with the current and upcoming problems of a potential client;
11. assessment of the audit firm's or auditor's own ability to perform the work in terms of availability of appropriate personnel, knowledge of the client's industry, etc.

If the results of these or other procedures reveal a high audit risk or the task is too complex and time-consuming for the auditor, the client is denied service.

The audit firm must record all facts of client requests.

Choice of audit firms by economic entities

Currently, there are a large number of audit firms operating in the Russian Federation, and economic entities are faced with the problem of choice. The easiest way to choose an audit firm is to trust the advertisement. However, this is also the most unreliable method, since there is no confidence in the quality and reliability of the work of the advertised company.

The main criteria for selecting audit firms are:

• number of personnel and their experience;
• company turnover;
• the company's largest clients;
• price level for services;
• possible benefits provided;
• degree of responsibility for audit quality;
• presence of branches in the regions;
• duration of work on the market;
• availability of an appropriate license;
• range of services provided.

The number of personnel and turnover of an audit firm can be determined using ratings of audit firms regularly published in the press.

Since in market conditions the price of services varies among different firms, economic entities have the opportunity to choose audit firms based on this parameter.

Some audit firms provide their regular clients with certain benefits regarding price, time of service, provision of specific auditors, and in their advertising brochures (or using other forms of notification) they list their most famous clients for additional confirmation of their status, solidity and significance in the audit services market . These factors should also be considered when selecting auditors.

An important criterion for choosing an audit firm is the degree of responsibility for the quality of its work that the audit firm is willing to bear in accordance with the audit contract (the range of responsibility that the audit firm agrees to assume under the audit contract is very wide). The presence of branches in the regions can only be an auxiliary criterion in cases where this is important for an economic entity.

The duration of work in the audit services market is a criterion indicating the existing experience.

Of course, an economic entity should make sure that the audit firm has an unexpired license for the relevant type of service.

The wider the range of services provided by an audit firm, the more convenient it is for an economic entity, since, if necessary, in the same company he can obtain comprehensive information necessary to solve a particular problem.

When holding a competition to select an audit organization, the rules for such selection are determined by the terms of the competition. The conditions of the competition can be individual or standard, approved by government bodies (for example, when conducting an audit of organizations in the authorized capital of which there is a share of state property).

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Basic criteria for choosing an auditor or audit organization by an economic entity. Client selection procedures and documents regulating the obligations and responsibilities of the client and the auditor. Agreement for the provision of audit services, assessment of their cost.

In order to reduce audit business risk, i.e. risk of audit failure, audit organizations must have reliable criteria for assessing potential clients, including the inclusion of certain additional conditions in the text of the contract.

An unsuccessful, ill-considered, rash choice of a client can lead to significant financial and moral costs and damage the reputation of the audit organization.

Before starting an audit or providing related services, the audit organization must familiarize itself with the activities of the economic entity in order to understand it and correctly evaluate events, operations, and accounting methods used. In this case, the rule (standard) of audit activity “Understanding the activities of an economic entity” should be used.

At the preliminary planning stage, the auditor must become familiar with the external and internal factors affecting the client’s financial and economic activities and assess the possibility of conducting an audit.

The audit organization must collect objective information about the potential client.

External sources such information may be:

· mass media: newspapers, magazines, radio, television, etc.;

· insurance organizations;

· business partners of a potential client;

· other sources.

Internal sources obtaining information:

· charter, registration documents, minutes of meetings of the management body, document on accounting policies;

· accounting and statistical reporting;

· plans, estimates, projects;

· contracts, agreements, agreements;

· internal reports of auditors, consultants;

· internal instructions;

· materials of tax audits, lawsuits and arbitration claims;

· documents regulating the production and organizational structure of an economic entity, the list of its branches and subsidiaries;

· information obtained from conversations with the management and executive staff of an economic entity, to confirm the assumption of continuity of activity of the enterprise, as well as for an initial assessment of the reliability of the accounting and internal control systems of the economic entity;

In the process of making a decision to start working with a new economic entity, it is necessary to find out:

1. the nature of relationships with tax authorities, banks, insurance organizations, shareholders and other users of the potential client’s reporting;

2. the reasons that prompted an economic entity to seek the services of an audit organization (especially in the case of a proactive audit);

3. the reasons that prompted the potential client to change the audit organization, if this fact occurred;

4. the volume and nature of violations of the procedure for maintaining accounting records, drawing up financial statements, and the economic legislation of the Russian Federation in the implementation

financial and economic activities, deficiencies in the organization of the internal control system identified by previous audits and inspections of tax authorities. If the economic entity has previously been audited by audit organizations, he must present to the new auditor copies of written information for at least three financial years, preceding the planned inspection;

5. types of activities of an economic entity and the availability of licenses for them, if any of them are subject to mandatory licensing. In this case, one should be guided by the list of licensed types of activities established by Federal Law of the Russian Federation No. 158-FZ of September 29, 1998 “On licensing of certain types of activities”;

6. availability of all documentation necessary for the audit - primary documents, analytical and synthetic accounting registers, accounting reports for all branches and divisions, as well as for all types of activities;

7. whether during the reporting period for which the audit is planned, there was a change in the management of the economic entity, chief accountant, or other personnel;

8. Does the enterprise plan to significantly reduce production volumes (works, services), declare bankruptcy, or liquidate in the near future?

If the results of the work performed indicate that the audit professional risk of the audit organization will be too high when working with a given client, and the audit is too labor-intensive, then the client is not accepted for service, and a corresponding notification is sent to him.

If the audit organization agrees to work with this client, then it sends him a letter of commitment agreeing to conduct an audit, forms a staff to conduct the audit and prepares an agreement for the provision of audit services.

In order to reduce the risk of audit failure, audit organizations must have clear criteria for assessing potential clients. The Russian market for audit services is currently quite dynamic. Auditing organizations are looking for new clients, and enterprises are trying to work with different auditing firms. Therefore, for primary clients in the total volume of the audit firm is quite high. Auditing standards and auditing ethics require that audit organizations be thoughtful in selecting new clients.

An audit firm, by associating its name with an economic entity that has a bad reputation, risks ruining its own.

Audit firms must be careful when working with new clients. They should have special procedures for selecting clients. Such procedures should be formalized by internal company standards or instructions. Auditing organizations should refuse to provide services to unscrupulous firms.

An approximate list of procedures for selecting new clients of audit organizations:

– check the business reputation of the potential client’s former auditor and establish the reasons for his replacement;

– make the necessary inquiries about the potential client’s business reputation;

– obtain information about the owners of a potential client who actually control its activities;

– check whether there are family and business relationships between the management of the potential client, its owners and officials and employees of the audit organization;

– obtain information from the potential client about his needs and any specific services expected from the auditor;

– determine whether the potential client has unusual problems regarding the preparation of financial statements and auditing;

– assess the competence of accounting specialists, the state of accounting documentation and the effectiveness of the internal control system;

– check whether the potential client submits reports to regulatory authorities in the prescribed manner;

– obtain copies of financial statements, tax calculations, reports to other regulatory authorities of a potential client;

– make inquiries about proceedings, investigations, complaints or trials in which the potential client took part;

– know the names of credit institutions in which the potential client has accounts, the main creditors, and obtain permission to talk with them;

– obtain financial and credit information from independent sources;

If the audit organization refused to conduct an audit, the working documentation drawn up in connection with this refusal should be stored in the archives of the audit organization. This is done so that if a potential client re-applies for services to an audit organization, the reason for the refusal can be analyzed.

In addition, such working documentation is a means of monitoring the reliability of employees’ work, and it may also be required by external regulatory bodies of the audit organization (example 3).

Information about the client's activities

Client: JSC "Awakening"

1.Owners

1.1. Main owners

1.2. Manager – Oleg Vyacheslavovich Kruglov; chief accountant – Olga Aleksandrovna Smirnova; accountant – Yudina Anna Alekseevna.

2.Type of activity

2.1. Main activity – production of agricultural products

2.2.Other activities – partial processing of manufactured products

3.Buildings and other production premises

4.Main suppliers and contractors

5.Main buyers and clients

6. External factors influencing the activities of the enterprise

6.1. Economic: production reduction, price competition, market saturation

6.2.The organization’s position in the industry and market (average)

6.3.Main competitors: Agricultural Association “Zarya”, Peasant Farming Enterprise “Pervy”

7. Internal factors influencing the activities of the enterprise

7.1. Sales features (the company sells milk, meat and feed grain)

7.2.Procurement features

8. Subsidiaries and dependent organizations and features of operations with them - no

9.Features of accounting policies

10.Main sources of financing

11.Review of materials from previous inspections

Auditing firms must not only carefully select new clients, but also periodically evaluate their actions. if in the course of work it turns out that the client does not fulfill its obligations, does not eliminate the noted violations, tries to interfere with the audit, makes changes in the composition of the owners or management that may adversely affect the reliability and reputation, the audit firm should consider terminating relations with such clients. To do this, the audit firm must develop appropriate instructions and procedures must be archived.

Clients of audit firms can be divided into several types depending on the relationship with the audit firm:

- formal and official. Clients of this type do not establish close contacts with audit firms and demand that the audit be completed as quickly as possible. In this case, the auditor is only required to issue an audit report, with minimal time and costs for the client;

– informal. This type includes clients who establish close contact with the audit firm and hope for its help. In this case, the external auditor performs the functions of an internal auditor and provides a number of related services.

The auditor must determine the type of client before concluding a contract for the provision of services with him. If the client belongs to the informal type, then it is necessary to find out the list of additional services. It is advisable to reflect these points in the contract.