Statutory audits are required under Russian law for joint stock companies, branches of foreign organizations, and companies with an annual turnover over 400 million RUB or a balance sheet total over 60 million RUB. Audits help companies detect financial misstatements, tax risks, regulatory violations, embezzlement, and fraud. While avoiding an audit has no penalty, it is not a good long-term strategy as it can lead to major problems being missed. Audits are conducted through sampling procedures to assess the accuracy of financial statements in a cost-effective manner.

1. ACCOUNTOR
Sadovnicheskaya nab. 79 Moscow Stockholm
115035 Moscow, Russia St. Petersburg Oslo
+7 495 788 00 05 Kyiv Copenhagen
accountor.ru Helsinki Utrecht
info@accountor.ru
Audit in Russia
Author:
Evgeny Sumin
Deputy Director
of the Accounting Services Department
Lots of companies in Russia encounter
the need to conduct either a statutory
or non-statutory audit, while their
managers are not always aware of
what it is and how it must be carried
out. Here we are going to describe the
audit procedures under Russian law.
Statutory Audit in Russia
The audit regulation requires statutory audit in many situations, in particular for the
following entities:
 Joint stock companies (OAO), even if not publicly traded.
 Branches of foreign NGOs
 Companies with turnover in excess of 400 million RUB or the balance sheet total
over 60 million RUB.
The main purpose of statutory audit is to protect public interests. However, audits are
useful not only for the public, but also for companies, their management and
shareholders.
Audits help to timely detect problems such as:
 Financial misstatements and misrepresentation
 Tax risks
 Business regulatory violations
 Embezzlement and fraud
 Internal control weaknesses

2. ACCOUNTOR
Sadovnicheskaya nab. 79 Moscow Stockholm
115035 Moscow, Russia St. Petersburg Oslo
+7 495 788 00 05 Kyiv Copenhagen
accountor.ru Helsinki Utrecht
info@accountor.ru
Companies, which avoid statutory audit, will not face a penalty, because the Russian
audit regulation does not stipulate any. Some managers treat the avoidance as a
tolerable technical violation with no fines, but such approach can hardly be considered
as professional.
Let’s compare a business with an expensive and beloved car. If the owner doesn’t
perform routine maintenance then he can save some money at the beginning, but
sooner or later some major problem will occur, and the cost of fixing will be many times
greater than the initial saving.
Regular company auditing is a precautionary measure, something like an annual
medical check-up. The federal audit regulation requires a written contract, which
documents the agreed-upon terms of the audit engagement. An auditor can offer you
provision of the service in several steps, e.g. auditing of interim financial statements
for 6 months or 9 months and the second step – annual reports.
For the client the advantage of auditing in steps is that they receive the preliminary
professional opinion in the current reporting period and can make corrections before
the end of the period. The audit procedures normally take place in the client’s office,
this gives the auditor access to all the documents he needs.
First of all the auditor assesses client’s business and receives information from its
management on internal control in the organization, important events that took place
in the reporting period, etc.It is mandatory for the auditor to assess the company’s
compliance with the provisions of laws, regulations, and contracts, e.g. whether all the
necessary licenses and permissions are in place or not.
Audits are conducted on a sample basis, and clients are often wary of it considering
that any failure on the auditor’s part to detect a mistake can be attributed to the
sample nature of the procedure. However, these concerns come only from a
misunderstanding of audit procedures.
The auditor uses sampling relying on the materiality assessment. In general, this
process is based on the Pareto principle, stating that 80 percent of the effects come
from 20 percent of the causes. Of course, the auditor can overlook a mistake, but with
appropriate sampling design this mistake will not be material. For the most significant
operations included in the sample, the auditor reviews all the supporting documents
and test for accuracy of financial statements records. If a company has the massive
size of inventory, the auditor will need to observe the physical inventory count. As a

3. ACCOUNTOR
Sadovnicheskaya nab. 79 Moscow Stockholm
115035 Moscow, Russia St. Petersburg Oslo
+7 495 788 00 05 Kyiv Copenhagen
accountor.ru Helsinki Utrecht
info@accountor.ru
result of the service an audit report is issued to a user of an entity's financial
statements.
The typical audit report contains the following information:
1) The responsibilities of the auditor and the management of the entity.
2) The scope of the audit.
3) The auditor's opinion of the entity's financial statements.
Alternatives to Audit
In addition to audit, simpler and less-costly alternatives exist, including review.
The difference between the audit and review is described below:
Audit
(Statutory or Non-Statutory)
Non-Audit
Review
Independence Required Not required. The client
decides which operations
are to be reviewed.
Scope of the tests All accounts Accounts that are
important for the client. The
client does not need to
waste money on reviewing
the operations that he is
sure are recorded correctly.
Tax risks assessment Is not the main purpose of
an audit.
Can be the main purpose of
the review. The performer
can assess the tax exposure
and offer detailed
recommendations for their
elimination.
Audit working papers The auditor has to prepare
working papers on all
procedures. Time spent on
copying supporting
documents and preparing
the audit paperwork
accounts for 10-15%.
Working papers are not
required.

4. ACCOUNTOR
Sadovnicheskaya nab. 79 Moscow Stockholm
115035 Moscow, Russia St. Petersburg Oslo
+7 495 788 00 05 Kyiv Copenhagen
accountor.ru Helsinki Utrecht
info@accountor.ru
Therefore, in some cases non-audit reviews can be much more beneficial for the client
than audits.
Accountor is an officially licensed auditor and we provide you with high quality audit
reporting (including financial statement auditing) in accordance with Russian and
International standards (IFRS, US GAAP). We have solid experience in providing audit
services for international clients and work under international auditors’ instructions.
For further information on our auditing services, please contact us:
Samuli Pesu
Deputy CEO
Mobile: +7 926 710 43 61 / +358 50
553 20 34
Office: +7 495 788 00 05
Email: Samuli.Pesu@accountor.ru
Daniil Berlizov
Senior Business Development
Manager
Mobile: +7 916 539 68 66
Office:+7 495 788 00 05
Email: Daniil.Berlizov@accountor.ru
Pertti Särösalo
Sales Director Nordics
Mobile: +358 40 590 7603
E-mail: Pertti.Sarosalo@accountor.ru