Auditing activities will become more transparent

As of September, 2015, there are 5 self-regulated organizations (SRO) of auditors registered in Russia. According to its own data, they include a little more than 9,5 thousand organizations.

In spite of the fact the quantity of auditors is small, the importance of the auditing activity for the economy in the whole and for specific organizations cannot be overestimated.

The Federal law as of December 1st, 2014 №403-FL “On introducing amendments to legislative acts of the Russian Federation” might be confirmation to it.

In the new version the Article 42 “Accounts audit of credit organizations, banking group, banking holding” of the Federal Law “On Banks and Banking Activities” is stated fully. Editorial corrections have respect to Art. 9, para. 1, second sub-paragraph of the Federal Law as of July 24th, 2002  №111-FL  “Concerning the Investment of Resources for the Financing of the Funded Component of a Retirement Pension in the Russian Federation”.

The most significant changes which came into effect since January 1st, 2015 deal with the Federal Law as of December 30th, 2008 №307-FL “Concerning Auditing Activities”. The amendments are made to the overwhelming majority of the law articles. Briefly it might be represented in the following manner:

• the list of enterprises which accounts are subject to statutory audit is corrected. Currently these are accounts of: each and all joint stock companies, as well as all credit organizations, credit bureaus, professional securities traders, insurance and clearance companies, non-state pension and other funds, management companies of investment and pension funds, organizations, dealing with preparation of consolidated financial accounts, accounts on securities admitted to trading;
• the audit is statutory when the following economic criteria take place: revenue amounts to more than RUB 400 million or the amount of balance sheet assets exceeds RUB 60 million;
• both accounts in the whole and their parts are subject to audit; 
• at present only auditing organizations are entitled the right to carry out audit of companies which securities are admitted to trading, state corporations, as well as companies with a government stake exceeding 25%; 
• contest on selection of auditing organization might be held once every five years. The participation of the auditing organization, being a representative of the small and medium business, is compulsory, providing the revenue of the company, holding the contest, doesn’t exceed RUB 1 billion;
• requirements to audit documentation are now imposed not by the federal standards but by the international standards of auditing activity.  The documentation is to be stored within 5 years after a year of its receipt or implementation;
• the limit in the number of the members of SRO auditors is increased: from 700 to 10 000 natural entities and from 500 to 2000 organizations;
• only the authorized auditor might be a general director of the auditing organization, having no right to transfer the management to individual entrepreneur or to administrator;
• in case of the statutory audit, the absence of the audit report on the meeting of shareholders, company participants, holders of equity interests might be qualified as non-compliance of the legislation on preparatory set and holding of the corresponding meetings and is punished in the form of penalty from 500 to RUB 700 thousand.

According to experts, such significant changes in the auditing law might have positive and negative effects. On the one hand, the unification of the Russian law with the international standards of auditing activity will certainly have a positive effect on the quality and transparency of the domestic auditors. On the other – it may lead in the foreseeable future (till 2017) to essential repartition of the audit market, as well as to reduction in number of few and far between self-regulated organizations of auditors.