Audit is an independent review and assessment of a company’s financial statements by third-party specialists or firms. A certified specialist or a third-party firm comes to the company, who go through all financial documents, study production and business processes and give their opinion. The main purpose of the audit is to stop abuses, identify errors and shortcomings in the activities and express an opinion that will eliminate the problems.
Audit options: mandatory, initiative.
A mandatory audit is carried out in relation to the companies specified in Art. 5 of the Federal Russian Law, for example: credit companies; professional participants in the securities market; Insurance companies; mutual insurance society, trade organizers. Mandatory audit is carried out annually.
A initiative audit is an audit on a voluntary basis, i.e. the company itself is the initiator of the audit. For example, at the initiative of the founders, or when the management or chief accountant has changed. Foreign companies operating on the territory of the Russian Federation, in frequent practice, conduct audits on their own initiative, for complete control and understanding of activities, and translate the auditor’s report into English, as this makes understanding more convenient.
The main difference between an initiative test and a mandatory one is the voluntariness of its implementation. The company is not obliged to carry out it, therefore, for the absence of an audit report based on the results of such an audit, it cannot be fined.
In turn, proactive audit can be internal and external.
Internal initiative audit is conducted by its own internal audit service. This is an activity to assess the company’s performance and improve the efficiency of corporate governance, risk management, and internal control processes. The advantage of internal audit is that the auditors know the company well from the inside, advise the heads of individual departments on legal, financial, organizational issues, taking into account the specifics of a particular production, and help eliminate inaccuracies in the work. However, for an objective analysis of the financial and economic activities of the company, the state of its affairs and obtaining an impartial report, we recommend using the services of independent audit firms.
Find out if you are subject to statutory audit – contact Valen Group for advice on any financial issues.