Criteria for audit. Statutory audit - grounds for conducting an audit
What criteria for conducting a mandatory audit are established by law? In what “other cases” provided for by the Federal Law of December 30, 2008 No. 307-FZ “On Auditing Activities” (hereinafter referred to as Law No. 307-FZ), is the company obliged to conduct an audit?
An exhaustive list of grounds for conducting a mandatory audit of companies’ accounting (financial) statements is given in Article 5 of Law No. 307-FZ.
How to find out whether a company is subject to mandatory audit or not? Article 5 of Law No. 307-FZ outlines the following grounds for conducting a mandatory audit.
Organizational and legal form of the company
Let us recall that the Federal Law of December 1, 2014 No. 403-FZ (came into force on December 2, 2014) expanded the type of organizations in respect of which a mandatory audit is established (clause 1, clause 1, article 5 of Law No. 307 -FZ, clause 5, article 67.1 of the Civil Code of the Russian Federation).
All JSCs without exception are subject to mandatory audit (regardless of the type - CJSC, OJSC, PJSC and JSC).
The current legislation of the Russian Federation provides for a special procedure for conducting a mandatory audit in a joint stock company, in the authorized capital of which there is a certain share of state participation (clause 4 of article 5 of Law No. 307-FZ).
An agreement to conduct a mandatory audit of the accounting (financial) statements of an organization in the authorized (share) capital of which the share of state ownership is at least 25%, as well as to conduct an audit of the accounting (financial) statements of a state corporation, state company, state unitary enterprise or municipal unitary enterprise is concluded based on the results placing an order through bidding in the form of an open competition in the manner prescribed by Federal Law No. 44-FZ dated April 5, 2013 “On the contract system in the field of procurement of goods, works, services to meet state and municipal needs” (hereinafter referred to as the Law No. 44-FZ).
From January 1, 2016, companies are required to carry out procurement planning, including planning for the acquisition of audit services. And according to Article 16 of Law No. 44-FZ, the costs of conducting a mandatory audit must be included in the procurement plan formed by the company organizing the competition for the period of the budget, i.e. for a period of at least 3 years. An open competition for the selection of an external auditor is held at least once every five years.
Carrying out certain types of activities
Credit, insurance, clearing organizations, mutual insurance companies, organizations that are professional participants in the securities market, funds (non-state pension funds (with the exception of state extra-budgetary funds), mutual funds, AIFs) are subject to mandatory audit.
Compliance with established indicators of financial and economic activity
Conditions for mandatory audit:
- with the volume of revenue from the sale of products (goods, works, services) for the previous reporting year exceeding 400 million rubles (with the exception of state and local government bodies, state and municipal institutions, state unitary enterprises and municipal unitary enterprises, agricultural cooperatives and their unions) or
- with the amount of balance sheet assets at the end of the previous reporting year exceeding 60 million rubles.
Let us remind you that currently “simplified” companies are required to maintain accounting records and prepare accounting (financial) statements. And if the revenue volume of the “simplified” exceeds 400 million rubles. or the amount of balance sheet assets at the end of the year exceeds 60 million rubles, then such companies are required to conduct an audit (letter of the Ministry of Finance of the Russian Federation dated January 30, 2013 No. 07-02-05/1677).
Carrying out certain actions by companies
The following companies are subject to mandatory audit:
- whose securities are admitted to organized trading;
- presenting and (or) publishing summary (consolidated) accounting (financial) statements. Exceptions include bodies of state power and local self-government, state extra-budgetary funds, as well as state and municipal institutions.
Other cases established by federal laws
In a number of cases, the obligation to conduct an audit is established by the provisions of federal law.For example, for organizers of gambling, the obligation to conduct an audit is established by clause 12 of article 6 of the Law of December 29, 2006 No. 244-FZ “On state regulation of activities for the organization and conduct of gambling and on amendments to certain legislative acts of the Russian Federation”, for political parties - Federal Law of July 11, 2001 No. 95-FZ “On Political Parties”, for the Russian Science Foundation - Federal Law of November 2, 2013 No. 291-FZ “On the Russian Science Foundation and Amendments to Certain Legislative Acts” RF".
The accounting (financial) statements of state unitary enterprises and municipal unitary enterprises are subject to mandatory audit in cases determined by the owner of such property. Thus, according to clause 1 of Article 26 of the Federal Law of November 14, 2002 No. 161-FZ “On State and Municipal Unitary Enterprises” (hereinafter referred to as Law No. 161-FZ), the accounting (financial) statements of a unitary enterprise in cases determined by the owner of the property of a unitary enterprise, is subject to mandatory annual independent auditors. At the same time, the owner of the property of a unitary enterprise in relation to the specified enterprise makes decisions on conducting audits, approves the auditor and determines the amount of payment for his services (clause 16, clause 1, article 20 of Law No. 161-FZ).
In practice, this means that regardless of the indicators of financial and economic activity (in terms of revenue volume and the amount of assets), the financial statements of municipal unitary enterprises and state unitary enterprises are subject to mandatory audit in cases determined by the owner of the property.
If companies are subject to mandatory audit, it must be carried out annually (clause 2 of article 5 of Law 307-FZ).
In what cases is an audit mandatory? In what “other cases” provided for by the Federal Law of December 30, 2008 No. 307-FZ “On Auditing Activities” (hereinafter referred to as Law No. 307-FZ), is the company obliged to conduct an audit?
An exhaustive list of grounds for conducting a mandatory audit of companies’ accounting (financial) statements is given in Article 5 of Law No. 307-FZ.
How to find out whether a company is subject to mandatory audit or not? Article 5 of Law No. 307-FZ outlines the following grounds for conducting a mandatory audit.
Organizational and legal form of the company
Let us recall that the Federal Law of December 1, 2014 No. 403-FZ (came into force on December 2, 2014) expanded the type of organizations in respect of which obligatory , clause 5 of article 67.1 of the Civil Code of the Russian Federation).
All JSCs without exception are subject to mandatory audit (regardless of the type - CJSC, OJSC, PJSC and JSC).
Important!
The current legislation of the Russian Federation provides for a special procedure for conducting a mandatory audit in a joint stock company, in the authorized capital of which there is a certain share of state participation (clause 4 of article 5 of Law No. 307-FZ).
An agreement to conduct a mandatory audit of the accounting (financial) statements of an organization in the authorized (share) capital of which the share of state ownership is at least 25%, as well as to conduct an audit of the accounting (financial) statements of a state corporation, state company, state unitary enterprise or municipal unitary enterprise is concluded based on the results placing an order through bidding in the form of an open competition in the manner prescribed by Federal Law No. 44-FZ dated April 5, 2013 “On the contract system in the field of procurement of goods, works, services to meet state and municipal needs” (hereinafter referred to as the Law No. 44-FZ).
From January 1, 2016, companies are required to carry out procurement planning, including planning for the acquisition of audit services. And according to Article 16 of Law No. 44-FZ, the costs of conducting a mandatory audit must be included in the procurement plan formed by the company organizing the competition for the period of the budget, i.e. for a period of at least 3 years. An open competition for the selection of an external auditor is held at least once every five years.
Carrying out certain types of activities
Credit, insurance, clearing organizations, mutual insurance companies, organizations that are professional participants in the securities market, funds (non-state pension funds (with the exception of state extra-budgetary funds), mutual funds, AIFs) are subject to mandatory audit.
Compliance with established indicators of financial and economic activity
with the volume of revenue from the sale of products (goods, works, services) for the previous reporting year exceeding 400 million rubles (with the exception of state and local government bodies, state and municipal institutions, state unitary enterprises and municipal unitary enterprises, agricultural cooperatives and their unions) or
with the amount of balance sheet assets at the end of the previous reporting year exceeding 60 million rubles.
Let us remind you that currently “simplified” companies are required to maintain and prepare accounting (financial) statements. And if the revenue volume of the “simplified” exceeds 400 million rubles. or the amount of balance sheet assets at the end of the year exceeds 60 million rubles, then such companies are required to conduct an audit (letter of the Ministry of Finance of the Russian Federation dated January 30, 2013 No. 07-02-05/1677).
Carrying out certain actions by companies
The following companies are subject to mandatory audit:
whose securities are admitted to organized trading;
presenting and (or) publishing summary (consolidated) accounting (financial) statements. Exceptions include bodies of state power and local self-government, state extra-budgetary funds, as well as state and municipal institutions.
Other cases established by federal laws
In a number of cases, the obligation to conduct an audit is established by the provisions of federal law.
For example, for organizers of gambling, the obligation to conduct an audit is established by clause 12 of article 6 of the Law of December 29, 2006 No. 244-FZ “On state regulation of activities for the organization and conduct of gambling and on amendments to certain legislative acts of the Russian Federation”, for political parties - Federal Law of July 11, 2001 No. 95-FZ “On Political Parties”, for the Russian Science Foundation - Federal Law of November 2, 2013 No. 291-FZ “On the Russian Science Foundation and Amendments to Certain Legislative Acts” RF".
The accounting (financial) statements of state unitary enterprises and municipal unitary enterprises are subject to mandatory audit in cases determined by the owner of such property. Thus, according to clause 1 of Article 26 of the Federal Law of November 14, 2002 No. 161-FZ “On State and Municipal Unitary Enterprises” (hereinafter referred to as Law No. 161-FZ), the accounting (financial) statements of a unitary enterprise in cases determined by the owner of the property of a unitary enterprise, is subject to mandatory annual audit by an independent auditor. At the same time, the owner of the property of a unitary enterprise in relation to the specified enterprise makes decisions on conducting audits, approves the auditor and determines the amount of payment for his services (clause 16, clause 1, article 20 of Law No. 161-FZ).
In practice, this means that regardless of the indicators of financial and economic activity (in terms of revenue volume and the amount of assets), the financial statements of municipal unitary enterprises and state unitary enterprises are subject to mandatory audit in cases determined by the owner of the property.
If companies are subject to mandatory audit, it must be carried out annually (clause 2 of article 5 of Law 307-FZ).
An audit is an independent verification of these statements carried out to express an opinion on the reliability of the financial statements of a business entity (Part 3 of Article 1 of Federal Law No. 307-FZ of December 30, 2008). The audit can be carried out either voluntary or mandatory. In the first case we are talking about an initiative audit, in the second - about a mandatory audit. The obligation to conduct an audit is imposed on the organization by law. We will tell you about the criteria for conducting a mandatory audit in 2017 in our consultation.
When is an audit an obligation?
The criteria for mandatory audit in 2017 are contained in Art. 5 of the Federal Law of December 30, 2008 No. 307-FZ “On Auditing Activities”.
The main criteria for mandatory audit are legal and cost criteria. In the first case, the obligation to audit arises if the organization belongs to a certain organizational and legal form (for example, the company is a joint stock company) or if it conducts certain types of activities, and in the second - if the revenue or value of assets exceeds certain restrictions.
We present in the table for mandatory audit the 2017 criteria for LLCs and organizations of other forms. If at least one of the listed conditions is present, an audit is mandatory.
Statutory audit for 2017: criteria| Criterion | Condition |
|---|---|
| Organizational and legal form or type of activity | - Joint-Stock Company; - credit organisation; — credit history bureau; — professional participant of the RCB; — insurance organization; — clearing organization; — mutual insurance company; — trade organizer; — non-state pension or other fund; — joint-stock investment fund; - management company of a joint-stock investment fund, mutual investment fund or non-state pension fund (except for state extra-budgetary funds) |
| Circulation of securities | admitted to organized trading |
| Revenue from sales of products (performance of work, provision of services) for 2016* | exceeds 400 million rubles |
| The amount of assets of the organization as of December 31, 2016 according to the balance sheet* | exceeds 60 million rubles |
| Presentation (disclosure) of annual summary (consolidated) statements by the organization** | presents or discloses annual summary (consolidated) accounting (financial) statements |
* With the exception of state authorities, local governments, state and municipal institutions, state and municipal unitary enterprises, agricultural cooperatives, and unions of these cooperatives.
** With the exception of state authorities, local governments, state extra-budgetary funds, as well as state and municipal institutions.
Other mandatory audit criteria
Let us present some other cases of mandatory auditing, not mentioned above and provided for by separate Federal laws.
In 2019, many companies must conduct a mandatory audit of their financial statements. Read who exactly is subject to mandatory audit, what is the responsibility for failure to conduct it and how to choose the right auditor.
For whom is audit mandatory?
An audit is an event that allows a company to assess how correctly its financial statements are prepared, taxes are calculated, etc. In addition, it allows management to assess the financial situation of their company. In some cases, managers themselves appoint internal or external reviews. For example, before restructuring, selling, merging a company, sometimes this may be a requirement of a credit institution). Foreign companies often require audits of their Russian divisions. But there are also organizations that fall under mandatory audit according to the law.
Criteria for mandatory audit in 2019
What companies do not have the right to evade the eye of auditors? According to Federal Law No. 307 of December 30, 2008, audit is mandatory for:
- Joint stock companies.
- Firms whose securities are participating in trading.
- Credit, insurance organizations and investment funds (including pension funds) and their management companies.
- Large companies (except government agencies, etc.). These are companies whose revenue for the year before the reporting year exceeded 400 million rubles or whose assets at the end of the same period were more than 60 million rubles.
- Organizations (except for state or municipal bodies and other government institutions) presenting (disclosing) annual consolidated accounting or financial statements.
- Certain other organizations (subject to other applicable laws).
Verification phase. cases of conducting a mandatory audit of accounting (financial) statements. At this stage, the inspector examines the statements themselves and other necessary documents, and, if necessary, requests clarification from the financial department/accounting department.
Preparation of the conclusion. The auditor draws up a report in which he points out any deficiencies found and makes recommendations to the management and financial department of the company. Then the conclusion must be bound and certified with a signature and seal.
When conducting an audit and writing a report, you must be guided by the International Standards on Auditing (ISAs, which can be read on the website of the Ministry of Finance (effective from January 1, 2017). In addition, the rules developed by the self-regulatory organization are also applied. It is important to remember that they should not contradict ISAs and their compliance is mandatory for all members of the organization.
An innovation that appeared in 2016: the customer must register the results of the mandatory audit in the Unified Federal Register of Information on the Facts of the Activities of Legal Entities.
Conclusion structure
The legislation describes in detail the mandatory components of the conclusion.
So, at the beginning there is the title “Audit Report”. Then the addressee is indicated (this can be shareholders, LLC participants, as well as other persons).
Information about the company must be provided: its name, state registration number, as well as location.
Information about the auditors themselves is also necessary: registration data, the name of the self-regulatory organization of auditors, which includes the audit firm or auditor.
Next comes data on the audited accounting (financial) statements: their list, the period for which they were compiled, the distribution of responsibility in relation to them between the customer and the audit organization (or individual entrepreneur).
A mandatory part is information about the audit performed by auditors.
A very important part of the conclusion reflects the experts’ opinion about the reliability of the reports they have studied. At the same time, circumstances that may significantly affect its reliability are indicated.
The conclusion can be unmodified or modified. The first option is drawn up if the specialist does not find any significant discrepancies in the reporting rules, that is, all data is reflected in it properly. The second option implies three possibilities.
- Opinion with reservation. This is possible only if the detected (or possible, but not proven) discrepancies, although significant, do not affect the most significant elements of the reporting.
- Negative opinion. It is included if the expert has found evidence that the distortions, collectively or individually, significantly affect the reliability of the statements.
- Disclaimer. This option is possible if the inspector does not have enough evidence to allow him to come to any opinion regarding the reporting. At the same time, he may believe that possible distortions can significantly negatively affect it.
The criteria by which the necessary audit is carried out are exclusively the norms of the Federal Law. If the enterprise falls under the forms of ownership subject to verification, then the entity is obliged to carry out this procedure within the established time frame. In this case, a fine is provided for failure to do so. Such verification is carried out by the organization with which the relevant agreement was concluded.
Mandatory audit criteria 2016
The necessary audit must be carried out in any company whose activities fall under the criteria of the law. In particular, in all joint-stock companies. If such accounting is not carried out, then the law on compulsory audit is in force; when conducting a compulsory audit, the audit organization is obliged to insure liability risks. In other words, if such an audit did not reveal any violations, but after that the Tax Service imposed a fine, then the company undertakes to pay this due fine.
Which organizations are subject to mandatory audit in 2016
The law clearly defines which economic entities must carry out the additional control established by law. So, every joint stock company (CJSC, OJSC) is subject to it. This is also an LLC and any tax agent whose reporting for the financial period has revenue of more than 400 million rubles or balance sheet assets of more than 60 million rubles. If all these criteria or at least one are met, then these are already sufficient grounds for conducting a mandatory accounting audit. The Federal Law also determines the list of organizations that submit an audit report, regardless of their volumes and turnover. These include: financial organizations, banks, insurance companies, etc.