Экономика / 7. Учет и аудит

Tydykova T.D., Ostanina E.V.

T.F. Gorbachev Kuzbass State Technical University,

Russia

Legal regulation of audit in Russia and China

The audit is one of the most important economic activity in the modern world. Because of this, you can identify the weaknesses of the accounting reporting and eliminate them, to success of the financial and economic activity of enterprises. How to audit in the other countries? Do they follow the International Standards on Audit? Let's consider the example of China.

Today China has become the largest economic power in terms of GDP overtook the United States. This is due to the tireless work of the Chinese Government to strengthen and improve the economic control, including audits. 

A detailed comparison of the legislation on auditing in Russia and China on the basis of the federal law of the Russian Federation "About auditor activities" and Audit Law of the PRC in the table below.

Compare regulations Audit in Russia and China

Parameters	China	Russia
Notion and aims	Audit is a means of state control, the aim of which is maintaining the fiscal and economic order of the country, improving the efficiency in the use of fiscal funds, promoting the building of a clean government and ensuring the sound development of the national economy and society. (Article 1)	Audit is an independent check of the financial statements of an audited entity for the purposes of expressing an opinion on the reliability of said financial statements.(Article 1, item 3). An audit firm shall be a for-profit legal entity which is a member of one of the self-regulating organizations of auditors. (Article 3, item 1)
Subjects of audit and their responsibilities	The State uses a system of control through the audit. The State Council and the local people’s governments at or above the county level shall establish audit institutions. Audit institutions shall, according to law, supervise through auditing the authenticity, lawfulness and efficiency of the government or financial revenues and expenditures.(Article 2)	Audit firms, individual auditors (individual entrepreneurs engaged in auditing) shall not be engaged in any other entrepreneurial activity, other than the carring out an audit and rendering services stipulated by this article.(Article 1, item 6)
Dates of the audit	The State Council and the local people's governments at or above the county level shall annually present to the standing committees of the people's congresses at the corresponding levels the audit reports prepared by audit institutions on budget implementation and other government revenues and expenditures. (Article 4)	A mandatory audit shall be carried out annually. (Article 5, item 2)
Auditor’s skills and documents that confirm them	Auditors shall possess the professional knowledge and ability commensurate with the audit work they engage in. (Article 12)	An auditor is a natural person who has obtained an auditor qualification certificate and is a member of one of the self-regulating organization of auditors. (Article 4, item 1)
Mystery Audits	An auditor shall have the obligation to guard State secrets and the auditee’s business secrets which he has come to know in performing his duties. (Article 14)	An audit firm and its employees, an individual auditor and employees with whom employment contracts have been concluded, must maintain audit secrecy. (Article 9, item 2)
Rights of auditor	Audit institutions shall have the power to require companies to provide documents. Leading persons of auditees shall be responsible for the authenticity and completeness of the financial and accounting information provided by their units. (Article 31)	When carring out an audit, the audit firm or individual auditor may examine fully documentation related to the financial and business operations of an audited entity, and also verify that all the assets recorded in this documentation actually exist. (Article 13, item 1)
Rights of auditor	When conducting auditing, an audit institution shall have the power to carry out investigation among units or individuals concerned into issues relating to audit matters and obtain relevant testimonial materials. The units and individuals concerned shall support and assist the audit institution in its work by providing it with truthful information and relevant testimonial materials. (Article 33)	When carring out an audit, the audit firm or individual auditor may obtain oral and written clarifications and representations from the officials of the audited entity regarding issues that arose during the course of audit. (Article 13, item 1)
Submitting of audit report	After executing auditing of the audit matters, the audit team shall submit its audit report to the audit institution. However, prior to submission of the report to the institution, the team shall solicit opinions of the auditee. The auditee shall, within 10 days from the date it receives the audit team’s report, send its comments in writing to the audit team. The audit team shall submit to the audit institution the auditee’s written comments along with its own report.(Article 40)	The audit report shall be submitted by the audit firm or individual auditor only to the audited entity or person that concluded the audit contract.(Article 6, item 4)
Punishment for auditors	Where an auditor abuses his power, engages in malpractices for personal gains, neglects his duties, or divulge State secrets or business secrets within his knowledge, he shall be given a sanction in accordance with law; and if a crime is constituted, he shall be investigated for criminal responsibility in accordance with law. (Article 52)	The self-regulating organization of auditors may impose the following disciplinary measures against a member of the self-regulating organization of auditors that has committed a violation of the requirements of this Federal Law, auditing standards, independence rules for auditors and audit firms, or the code of professional ethics of auditors: 1. issue a directive that obligates the member of the self-regulating organization of auditors to eliminate the violations disclosed by the results of an external quality review and establishes deadlines for eliminating these violations; 2. issue a written warning to a member of the self-regulating organization of auditors on the unacceptability of violating the requirements of this Federal Law, auditing standards, independence rules for auditors and audit firms, or the code of professional ethics of auditors; 3. impose a fine on a member of the self-regulating organization of auditors; 4. pass a decision suspending the membership of an audit firm or auditor in the self-regulating organization of auditors until such time as they eliminate the disclosed violations, but not more than 180 calendar days from the day following the day the decision to suspend membership is taken; 5. pass a decision to expel an audit firm or auditor from membership in the self-regulating organization of auditors; 6. apply other measures established by the in-house documents of the self-regulating organization of auditors. (Article 20, item 1)

As can be seen from the table above, the main difference between auditing in Russia and China is that in China it is a part of state control, in the Russian Federation it is commercial activities.

Consider the features of the audit in the PRC:

·              Audit institutions in China are based on a hierarchical system. This can be seen in the 2nd section, Articles 17-25 of the law on auditing in the PRC;

· When an auditee, in violation of the provisions of this Law, transfers, conceals, falsifies or destroys accounting documents, account books, financial statements, or other materials relating to government or financial revenues and expenditures, or transfers or conceals the assets in its possession that are obtained in violation of State regulations, and the audit institution considers that the persons directly in charge and the other persons directly responsible should be given sanctions according to law, the audit institution shall put forward suggestions to this effect. The auditee, or its superior authority, or the supervisory department shall, in accordance with law, make a decision without delay and notify the audit institution of the results in writing. If a crime is constituted, the criminal responsibility shall be investigated according to law. (Article 44);

· Audit institutions and auditors shall, in handling audit matters, be objective and fair, practical and realistic, clean and honest, and keep secrets. (Article 6) The Russian law principles are not spelled out, but they can be found in the Code of professional ethics of auditors.

Russian features of the audit:

·         Due to changes in the audit legislation on 12.01.2014 auditing activities in the Russian Federation in accordance with international auditing standards that are mandatory for audit firms, auditors, self-regulating organizations of auditors and their employees, as well as auditing standards of self-regulating organizations of auditors. On the territory of the Russian Federation apply international auditing standards adopted by the International Federation of Accountants and recognized in accordance with the procedure established by the Government of the Russian Federation (Article 7, item 1);

·         In the Article 11 and 12 detail the issue, cancellation of the qualifying certificate of the auditor;

·         State control (oversight) over the activity of self-regulating organizations of auditors shall be carried out by the authorized federal agency (Article 22).

China is an excellent example of state capitalism, properly regulating the transition of state property for more efficient and enterprising private owners and street vendors, not forgetting the strict state control.

Literature:

1.          Audit Law in China. Adopted at the ninth session of the Standing Committee of the National People's Congress of the 8th convocation, August 31, 1994.Fixed in accordance with the Decision on amendments to the Law of the People's Republic of audit adopted at the 12th session of the NPC Standing Committee of the Tenth Convocation February 28, 2006;

2. The federal law of the Russian Federation from 30.12.2008 N 307-FZ (Last edition from 01-12-2014) "About auditor activities".