A statutory audit of financial statements is an audit of financial statements of those business entities which should disclose their financial statements or provide them together with the audit report according to the legal requirements. First of all, the list of such entities is specified in the Law
“On Accounting and Financial Reporting in Ukraine” (hereinafter referred to as “Law no. 996”).
The obligation to audit financial statements can be specified in other legislative acts for particular entities or particular cases of their activities.
According to Law no. 996, a statutory audit includes an audit of financial statements of those enterprises that are the enterprises of public interest; public joint-stock companies; subjects of natural monopolies in the national market; business entities that carry out activities in the resources industries; medium-sized enterprises (within the meaning of Law no. 996); financial institutions related to micro and small businesses.
It should be separately noted that since 2018 it is mandatory to audit financial statements of the enterprises of all forms of ownership corresponding to the category of a medium-sized enterprise (paragraph 2, clause 3, article 14 of Law no. 996), namely, the indicators of which for two consecutive years correspond to at least two out of the following three criteria:
- the assets of the company are 4-20 million euro.
- the net income from product sales is 8-40 million euro.
- the average number of employees is 50-250 persons.
The audit can be initiated by:
- the owner of the company who will receive, as a result of the audit, not only the independent auditors’ report regarding the reliability of financial statements but also the timely information about the significant shortcomings in the internal control system of the company;
- the management of the company (organization) – in the case when it is necessary to provide the audited financial statements to users such as banks, potential partners or investors or in other cases when it is necessary to take an important managerial decision related to the further development of business.
- the management of the parent company (for the companies belonging to some group) responsible for preparation of consolidated financial statements. The audit of financial statements of daughter companies facilitates preparation of qualitative statements at the group level. We perform the audit of consolidated packages of financial statements according to the IFRS and explain the results of our work to the auditor of the parent company.
We usually perform the assessment review in regard with the interim financial statements or during preparation of consolidated financial statements for daughter companies whose scope of activity is insignificant (review of financial statements).
A successful outcome of audit is imperative for further cooperation between a donor and a non-profit organization and provision of grants for future projects. According to the donors’ requests, the audit company should have enough experience in the sphere of audit of grants and be a member of an international audit organization. Our company meets those requirements as it is a member of a worldwide Association of Independent Advisors AGN International.
We provide services according to which our auditor can confirm:
- the grant contract performance (Agreed procedures related to the verification of the grant contract performance);
- the financial report on project provided to the donor (Audit of statements related to the application of funds under the contract);
- the financial statements of the organization(Audit of financial statements according to the Accounting Provisions (Standards));
- the availability of good internal control system in the organization.
Why is it important?
- An independent auditors’ report enhances the credibility of financial statements among the users (shareholders, financial institutions, potential investors, contractors).
- The owner of the company will receive, as a result of the audit, not only the independent auditors’ report regarding the reliability of financial statements but also the timely information about the significant shortcomings in the internal control system of the company.
- Taking into consideration the auditors’ conclusions and recommendations, the company management can improve the accounting system and eliminate the detected accounting shortcomings and errors in a timely manner.
- An independent auditors’ report is the best evidence of future benefits of the economic transaction related to the purchase/sale of company or investments, and it is an ideal confirmation of integrity of the organization.
The audit of financial statements is performed in complete compliance with the International Standards on Auditing (IAS) recognized in Ukraine as national standards. In Ukraine the auditors should also meet the requirements of the International Code of Ethics for Professional Accountants (Auditors).