Financial audit in the Russian Federation

Speaking about the financial audit in Russia, we should mention that it can be mandatory or voluntary.

The mandatory audit is carried out on the basis of the requirements of legislative and regulatory acts of the Russian Federation, which establish the compulsory verification of annual accounting statements for some categories of economic entities.

The voluntary audit is carried out if the company decides to do that. It can take place, for example, in the following cases:

the organization’s directors want to ensure that the Accounting Department records and calculates the taxes correctly;
the owner does not trust the director of the organization and wants to check his work;
the Bank gives the organization a loan and wants to be sure of the balance and report on financial results.

Mandatory audit

Since January 2017, a mandatory audit in Russia is performed in full compliance with International Standards on Auditing (ISA).

The mandatory audit is an annual audit of a company’s accounting and financial statements in order to give an opinion on its reliability. The procedure is regulated by Federal laws. It can only be carried out by audit organizations or individual auditors who have the appropriate qualification certificate and are members of self-regulating auditors' organizations, as set out in Federal Law No.307-FZ dd December 30, 2008 "On audit activities".

It should be mentioned that only the audit companies (not individual auditors) can carry out the audit in companies where the share of state ownership is at least 25%, credit and insurance organizations.

The main document regulating the mandatory audit in the Russian Federation is the Federal Law No.307-FZ. Audit activities are also regulated by Federal Rules approved by orders of the Ministry of Finance and Government Resolutions of the Russian Federation, as well as documents approved by the Audit Council.

According to the Federal Law No.307-FZ, a mandatory audit is conducted annually. However, if the audit covers the entire volume of financial statements for the year and requires a lot of time, experts recommend organizing the audit in stages throughout the year. This distribution of work allows you to get more accurate data on reporting and, at the same time, does not distract the organization’s employees from their main activities.

The Federal Law No.307-FZ defines enterprises that are subject to mandatory audit:

joint-stock company;
state-owned companies, corporations and Federal State Unitary Enterprises;
public-law companies;
credit organizations;
insurance organizations;
microfinance companies;
non-state pension and other funds;
professional participants of the securities market and trade organizers;
management companies of a joint-stock investment fund;
political parties (in some cases).

The mandatory audit is carried out in organizations regardless of their legal form and forms of activities, including LLC:

if the company’s securities are traded;
if the value of the company’s assets for the previous period was 60 million rubles, and the balance sheet revenue was 400 million rubles or more;
if the organization presents or discloses consolidated financial statements.

The list of cases of the mandatory audit is updated annually and published on the Russian Federation’s Ministry of Finance website.

ISA standards for conducting mandatory audits

For the first time, ISA were defined by orders of the Ministry of Finance of the Russian Federation "On the introduction of International Standards on Auditing in the Russian Federation":

48 standards were introduced by order No.192n dd October 24, 2016;
18 more standards were introduced by order No. 207n dd November 9, 2016.

But in 2019, both of these orders were declared invalid — they were replaced by a new order dated January 9, 2019, No.2n with the same name. It has established 48 standards that should guide auditors in conducting a mandatory audit. In addition to the ISA, the International Standard for Quality Control (ISQC) has also been adopted in audit organizations.

Innovations also affected the form of the audit report. A new, more informative conclusion should be drawn up for all new contracts concluded for mandatory audit in accordance with the ISA. This form contains an assessment of the organization’s financial statements and should pay attention to the most important points in the activities of the audited company.

This conclusion should contain information that is relevant not only for the Accounting Department and the company’s managers but also for all interested parties — shareholders, the Board of Directors, and external users who make decisions about the organization’s development strategy.

Responsibility for failure to submit an audit report on time or failure to perform a mandatory audit

Russian legislation obliges the company to conduct a mandatory annual audit and submit an audit report to the statistical authorities simultaneously with the financial statements or within a time clearly defined by Law. This requirement is stipulated in Federal Law No. 402-FZ.

At the same time, administrative responsibility is provided not for failure to conduct a mandatory audit but for failure to provide information:

failure to submit an audit report to the Federal State Statistics Service’s territorial bodies within the prescribed period is subject to a fine of 300 to 500 rubles for officials and 3000 to 5000 rubles for legal entities;
for non-publication of the audit report on the JSC’s official website on the Internet within the established time frame — the fine is from 30,000 to 50,000 rubles, or disqualification for a period from one to two years is possible for officials, and a fine from 700,000 to one million rubles for legal entities.
if the absence of the audit report within the stipulated duration of storage (five years) was identified during a field tax audit — the penalty is from 5000 to 10 000 rubles.

You do not need to submit an audit report to the Tax Authorities since it is not included in the financial statements.

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