№4(15)(2013)

Decree of the National Commission, providing state regulation of financial services, from 26.02.2013 № 640 approved the new Order to keep Register of audit firms and auditors who can conduct audits of financial institutions

Analysis of the document text points to significant tightening of requirements for eligibility and remain in the registry for those who is allowed to conduct audits of financial institutions. Conducting mandatory audit on financial institutions becomes not available to auditors and firms that have not been tested with quality control system, as well as audit firms, which do not have at least three certified auditors. There is evidence of risk at any time to be out of register for those who are allowed to conduct audits on financial institutions in case of non-compliance with legal requirements for provided audit reports and everything connected with them. In addition, there are additional costs for auditor: mandatory improvement of professional knowledge, notarization of documents. Let's hope that Natcomfinservice’s requirements are the same for all market participants, and now let’s look at the most important changes.

To start, let’s note at once that those auditors, who received certificate of inclusion in register of auditors who can conduct audits on financial institutions before the Order entered into force shall have right to audit non-bank financial institutions under issued certificates till 30 of June, 2013.

The main innovation in order of receiving certificate is that previously each auditor received such certificate, as an individual, but now it is obtained directly by audit firms and those auditors who are subjects of entrepreneurial activity.

In this case, list of documents has grown considerably. In addition to standard - applications, card and a copy of auditor’s certificate, now one should submit the following:

- copy of valid certificate of inclusion in register of auditors and audit firms issued by the Chamber of Auditors certified by the Chamber of Auditors or by a notary;

 copy of valid certificate of compliance with the quality control system, which is issued by the Audit Chamber;

- copy of document confirming improvement of professional knowledge in a program approved by the Audit Chamber and consistent with Natcomfinservice, and passing on results of such knowledge to improve control test with a Test Representatives Committee on the Audit Chamber and Natcomfinservice. This document should also be certified by a notary or by the Audit Chamber. At audit firms, this requirement will affect the head of firm and employees (certified auditors) who are directly involved in carrying out audits of non-bank financial institutions;

- copies of valid certificates of auditor at least of two auditors working in audit firm as their main job.

However, it is worth noting that the last two requirements come into force 6 months after the date when the new Order entered into force.

Conditions for decision to exclude audit firm or auditor from Register significantly tightened. In addition to standard application of self-exclusion, or in case of losing right for audit activities, list of reasons for exclusion have expanded seriously:

- identification by Natcomfinservice facts of unreliability of financial statements, consolidated financial statements and other information about financial and economic activities of non-bank financial institutions, accuracy of which was confirmed by audit conclusion (report);

- providing false information in documents of audit firm or an auditor, filed in Natcomfinservice that became known to Natcomfinservice after audit firm or an auditor in register;

- incompliance (two or more times during term of certificate) of auditor's conclusion (report) with requirements of Ukrainian legislation, including regulatory acts of Natcomfinservice, regulations and auditing standards approved by the Chamber of Auditors in accordance with international auditing standards and ethics.

When making decision to exclude an audit firm or auditor from register in the above cases, applicant can be re-included in registry, not earlier than one year from the date of decision to exclude from registry.

Among other grounds for exclusion from registry I shall mark:

 - not providing by auditor or audit firm the documents required for renewal of certificate within specified time;

- systematic (two or more times during validity of certificate) failure to meet requirements for correction of violations, sent to audit firm or auditor.

In case of decision to exclude an audit firm or auditor from register in such cases, applicant may be included in register, not earlier than three months from the date of decision to exclude from registry.

In addition, in case when Natcomfinservice identified non-compliances in audit conclusion (report) with requirements of Ukrainian legislation, including regulatory acts of Natcomfinservice, regulations and auditing standards approved by the Chamber of Auditors in accordance with international auditing standards and ethics, Natcomfinservice shall notify the Audit Chamber about it.

The new order comes into force on the day of its official publication.