How an Audit Works: Stages and Timing

Stage 0. Before the contract

• Determine the basis: a mandatory audit under Article 35 or an initiative audit under Article 36.
• Choose an auditor: the firm must be on the Register of Audit Organisations (Article 27), and for a mandatory audit it must meet the requirements of Article 35.
• Check independence: a firm that kept your books during the period under review cannot audit it (Article 34).
• Sign the contract: subject, scope, timing and format of results (Article 31).

Stage 1. Planning

The auditor studies the business, the accounting policy and major transactions, sets materiality and risk areas, and draws up a plan and a sample. The audit is conducted under International Standards on Auditing (Article 9). Whether the audit finds significant misstatements depends on the quality of this stage.

Stage 2. Fieldwork

• requests for ledgers and primary documents — the auditor is entitled to receive documentation in full and to check the physical existence of assets and the status of liabilities (Article 28);
• written confirmations from third parties — banks, counterparties (Article 28);
• oral and written explanations from management and the accounting team;
• observation of stock counts, recalculations, analytical procedures.

Stage 3. Discussion and adjustments

Misstatements found are discussed with management. The auditor informs management and the audit committee in writing of the violations identified (Article 28). The company must review this information and, within 30 days, inform the auditor in writing of the results, and also remedy violations in accounting, reporting and tax calculation (Article 37).

Stage 4. The audit report

The report is numbered, signed on every page by the auditors and the head of the audit firm, and the financial statements are attached to it (Article 39). For a mandatory audit, a copy is submitted to the tax authority within 15 days after the audit, but no later than 15 June (Article 35).

What is needed from the company

• closed annual financial statements and accounting ledgers;
• contracts, reconciliation statements, bank statements;
• access to warehouses and assets for observation;
• a responsible person who responds quickly to requests;
• no actions that obstruct the audit — this is expressly prohibited (Article 37).

What the timing depends on

• the volume of transactions and the number of accounting areas;
• the state of the books and the readiness of the financial statements;
• how quickly requests are answered and counterparties confirm balances;
• the number of misstatements found and the time needed to correct them.