An auditor is a necessary and demanded profession in market economies. In Russia, firms engaged in relevant activities can act as partners of both private organizations and government agencies. This is predetermined by the specifics of the socio-economic development of the Russian Federation, as well as the specifics of building a national economic system at the present stage. What are the nuances of the audit business? What are the specifics of the activity of firms of this profile in Russia?
Audit as a form of financial control
Russian legislation governing the financial, tax and budgetary spheres provides for the conduct of appropriate audits of organizations through various control methods. One of its common forms is audits. What are their specifics?
Organization of financial control can be carried out in various forms. There are relevant checks carried out by state bodies, and there are those carried out by private entities.
Financial control can be classified as external or internal. The first is carried out if the subject of verification is a structure legally independent of the object. There is also internal financial control (also called on-farm), which organizations or government agencies carry out using their own resources. The need for inspections of both types, as well as their frequency are regulated by law.
Audit financial control is one of the most common forms of audits conducted by private organizations. It can be both external and internal. The quality of the relevant audits is indirectly guaranteed by the presence of a special license from the auditing company (since 2010 - if we talk about the Russian audit market - a special kind of accreditation in specialized structures) for conducting core activities.
Types of audit
As we said above, an audit can be external and internal. These are the two main classification criteria for this type of activity. Internal financial control of the corresponding type is carried out by specially formed services in the enterprise structure. The main task during its implementation is to optimize the effectiveness of management policy. Especially in those areas that are associated with the use of economic resources involved in economic activity. The external audit of the enterprise is carried out, in turn, by structures that are de jure not related to the organization being audited. The main criterion here is complete independence. The purpose of an external audit is to verify the financial and accounting documentation (usually related to the reporting category) of an enterprise and the firm's activity for compliance with relevant legal standards.
An audit may also be mandatory or initiated by the enterprise itself. Inspections related to the first type are carried out on the basis of the requirements of the relevant legal acts. In addition, audit financial control may be initiated as a result of decisions by authorities, including law enforcement. An internal audit, as a rule, takes place on the initiative of the company's owners, investors, and in some cases, management structures responsible for managing key economic resources of the enterprise.
The economic value of audit
The concept of audit in countries with extensive experience in economic development in a market environment has existed for a long time. Experts attribute the emergence of control of the appropriate type mainly to evolutionary changes in the structure of national economies. The market is becoming more competitive. And therefore, private enterprises strive to fully comply with the criteria for the correctness of financial and accounting documentation, as well as the provisions of regulatory law. This feature becomes one of the competitive advantages in a free market: the investor or potential partner will probably prefer to deal with a company whose activities are completely legal, and financial and accounting policies are as transparent as possible. On the other hand, the role of the state in the national economies of even those countries where the level of market freedom is undeniably high remains significant. In the structure of the country's GDP and other macroeconomic aspects, budgetary financial flows are significant. In this connection, the state has a need for the formation of control and supervision structures designed to monitor the effectiveness of budget spending.
The concept of audit in the Russian business community, academia, the system of state institutions as a whole is quite close to those concepts that exist in Western countries. For the first time in the Russian Federation, audits received legislative "registration" in 1993. Then the Decree of the President "On Auditing" came into force. According to this normative act, the audit of financial control received an official definition, which sounded like entrepreneurial activity on the implementation of independent audits related to the type of extra-departmental, financial (accounting) statements, various kinds of payment documents, tax documents and other financial obligations of enterprises. The subjects of the relevant control, according to the legislation of the Russian Federation, are organizations of the widest range of business segments - banks, manufacturing enterprises, public funds, as well as individuals engaged in individual business.
Features of auditing in the Russian Federation
What kind of organizations have the right to perform the functions of financial control related to audit activities? According to Russian law, this can be either a legal entity or an individual entrepreneur. However, their activities should be concentrated exclusively in the field of audit. Until 2010, the work of such firms was subject to compulsory licensing. But after this practice was canceled. However, in order for their activities to be legal, Russian auditors must be part of one of the self-regulatory organizations of auditors, or SROs. That is, to have a kind of accreditation.
Moreover, as many experts note, registration of membership in an SRO is a procedure that in many aspects has become more demanding than obtaining a license. Why? The fact is that obtaining a license, as some analysts note, was actually a formal procedure. It was enough to pay a fee, as well as to form a small staff of auditors, the qualifications of which, as a rule, were not checked in any way.
Instead of a license - fees
From the moment of innovations, companies need to show that their activities comply with the most stringent audit standards in order to enter the SRO. In addition, the financial bar for entering the legal audit market has also increased. Membership in SROs in most cases is a paid procedure. Organizations need to pay entrance fees, and in many cases also deductions to the so-called SRO compensation fund, intended for penalties in case the service customer suffers due to poor-quality work of the audit organization.
Methods of financial control
Having examined some of the features of audit financial control in terms of the requirements for the companies that conduct it in the Russian Federation, we can continue our theoretical excursion into the subject of the current issue. We will study the nuance associated with the methods of the corresponding checks. Which of them are most often applied when there is an independent audit of financial control?
Experts identify the following main ones:
- revisions;
- analysis of documentation;
- study of financial plans;
- study reports;
- study of information about officials.
The most common method in the aspect of departmental inspections is the one that comes first on the list. Revision is, according to many analysts, one of the most complete and comprehensive methods for studying the economic activities of organizations that are used by government agencies that implement the functions of financial control. In turn, for the audit activity itself, the remaining methods are most characteristic, which we have listed above. Some experts fundamentally distinguish between the purpose of audit and audit. When conducting inspections of the second type, the controlling organization mainly intends to identify violations. During the audit, as we said above, there is a study of the economic activity of the enterprise for compliance with the standards, that is, rather, gaps in the work made by managers unintentionally are revealed.
State inspections
Having studied what is characterized by audit financial control, we can consider aspects that reflect the specifics of state audits. That is, those conducted by authorities. The main factor that determines the conduct of appropriate audits is the need to increase the effectiveness of fiscal policy.
Experts identify four main types of financial control conducted by the state:
- parliamentary;
- administrative;
- departmental;
- special.
The control of the first type is carried out mainly by the accounting authorities located in the structure of the Federal Assembly of the Russian Federation and the relevant legislative bodies in the regions. Administrative checks are carried out by executive bodies reporting to the government, the president, and also regional power structures.
Departmental control implies the conduct of appropriate procedures within individual authorities. This is a kind of internal audit. It is carried out by units and services established within specific departments. The object of inspections of this type is the financial or production activity of the authorities themselves, as well as organizations reporting to them.
Special control provides for a narrower specialization of the relevant checks. Their focus can be specifically focused on the banking or, for example, tax and budget areas.
The ratio of public and private control
How do the non-state financial control (one of the most common forms of which, in fact, is the audit) relate to the one that the authorities conduct? Many experts believe that both types of control interact with each other, but they are isolated due to the specifics of the methods, the difference in powers, and the objectives of the relevant checks.
State financial control is mainly a set of procedures based on the legislation of the federal (or national - if political and administrative division presupposes a unitary format) level, as well as those legal acts that reflect the powers of power structures in the regions. Some analysts prefer to separate municipal financial control from the state (about its specifics - a little later), although they are very close in tasks and methods.
The content of the rules and regulations governing inspections depends on the characteristics of the political system and the specifics of the socio-economic development of a particular state. What mainly distinguishes financial control systems in different countries is the level of involvement of relevant authorities in the affairs of private corporations. This factor also largely determines the properties that characterize non-state financial control practiced in national economic systems. In some countries, its methodology is very similar to that used by power structures, in others it has completely different features from official concepts.
Budget and Benefit
However, the main criterion that determines the differences between such phenomena as audit independent financial control and state audit are goals (in fact, we already spoke about this at the beginning of the article). Let's try to summarize their essence regarding both types of control. The main goal of state inspections is to maximize the efficiency of budget spending, as well as to minimize other costs that are typical for the development of cash flows from the treasury. In turn, the audit of the enterprise, carried out outside the direct competence of the authorities (although carried out in accordance with official legislative norms), is designed to increase the efficiency of spending funds in terms of maintaining the maximum level of company capitalization. Some experts highlight another noteworthy criterion. According to it, the state financial control is aimed at giving maximum dynamics to the flow of funds to the treasury, to the budget. And the audit of the enterprise is designed to help solve the completely opposite problem - to minimize deductions in favor of the state. Of course, through legal mechanisms. That is, the auditor helps the company determine where loopholes exist in legal acts that allow you to legally avoid paying such taxes and fees (or minimize the amount to be paid).
Another criterion that determines the dissimilarity of state and audit audits is publicity. In many cases, the financial control exercised by the authorities must be extremely transparent. The results of relevant audits are often publicly disclosed - through the media or information resources of departments. All this, however, in the framework of achieving the main goal that we voiced is the effective implementation of the budget. It is calculated thereby that other departments and organizations receiving budget financing will pay attention to issues related to control over the spending of funds from the treasury. This is on the one hand. And on the other - society. Appropriate social control also in many cases helps enterprises that receive funds from the treasury to spend them more efficiently. While the results of private audits are far from always subject to publication, moreover, they are often a trade secret. This is especially true of internal financial control.
Municipal Audit
Above, we noted the following fact: along with the state, there is also a municipal financial control separate from it. What is its specificity? The fact is that in the political structure of many countries there is a separation of powers of the authorities on several levels. Among them - municipal, or local. It implies the presence of self-government bodies in cities, regions and individual settlements (if we talk about the Russian model). At the level of each of the subjects of self-government, a separate budget can be formed. The effectiveness of the implementation of which local governments must also control. The methods for conducting relevant checks at the municipal level are very similar, if we talk about Russian practice, with those for state control. These are mainly the same revisions. There is also an internal municipal financial control, in a form similar to departmental, which is implemented at the state level.
In some cases, if it is predetermined by local legislation (and it does not contradict federal or regional), then the relevant authority at the local level can also initiate audits of enterprises with the involvement of private experts and organizations of the necessary profile. The criteria by which an auditor is selected may be different, but we determined the basic one above - this is accreditation in the SRO. Internal municipal financial control, in turn, boils down to a study of the effectiveness of budget utilization within the framework of specific local government structures. At the same time, calls to third-party organizations, as a rule, do not occur.