Rights and Obligations of the Parties in an Audit

Rights of the audit firm (Article 28)

• to determine the forms and methods of the audit independently;
• to receive all documentation and check the physical existence of assets and the status of liabilities;
• to receive oral and written explanations from management and the accounting team;
• to obtain written confirmations from third parties;
• to withdraw from the audit if the necessary information is not provided;
• to engage experts.

Obligations of the audit firm (Article 29)

• to comply with the Law, the standards and the Code of Ethics;
• to have at least four full-time auditors and a professional liability insurance policy;
• to ensure independence and confidentiality;
• to keep copies of audit reports for at least five years;
• to inform management in writing of identified accounting violations.

Rights and obligations of the company (Article 37)

• to receive the audit report, explanations of the auditor's opinion and advice on correcting deficiencies;
• to create conditions and provide documents within the timeframes set by the contract;
• within 30 days, to inform the auditor in writing of the results of reviewing the identified violations;
• to remedy violations in accounting, reporting and tax calculation;
• not to obstruct the audit.

In practice, the auditor may

• Request documents and information needed for the audit
• Obtain explanations from officers and employees
• Seek confirmations from third parties — banks and counterparties
• Attend stock counts
• Determine the forms and methods of the audit independently
• Disclaim an opinion if the scope is materially limited

In practice, the company must

• Provide the requested documents in full
• Not restrict the range of questions to be clarified
• Provide conditions for the audit to be completed on time
• Give explanations at the auditor's request

What a scope limitation means

Refusing to provide documents or forbidding contact with counterparties is not a neutral decision. The auditor records a scope limitation, and if it is material, the result is a qualified opinion or a disclaimer of opinion.