Экономические науки/7. Учет и аудит

Postgraduate, assistant of economical analysis and audit department

N.N. Kozlova,

Institute of Economics and Finance of Kazan
(Volga region) Federal university, Russian Federation

Review financial statements of small enterprises as alternative to financial audit in the light of the international standards on auditing

The procedure of review financial statements is regulated by the Federal rule (standard) on auditing (FR(S)A) No. 33 "Review financial (accounting) statements". According to item 15 FP(S)A No. 24 "The basic principles of federal rules (standards) on auditing concerning services which can be offered by audit organizations and auditors" the objective of a review financial statements is to enable an auditor to state whether, on the basis of procedures which do not provide all the evidence that would be required in an audit, anything has come to the auditor’s attention that causes the auditor to believe that the financial statements are not prepared, in all material respects, in accordance with the applicable financial reporting framework [1]. FP(S)A No. 33 was prepared on the basis of the international standards on related services.

In the system of the international standards on auditing International Standards on Review Engagements (ISRE 2000 – 2699) is a group of standards which is devoted to review financial statements. This group is devoted to review of reporting and interim financial information. Review financial statement is considered by ISRE 2400 "Engagements to Review Historical Financial Statements" [4]. It should be noted that in September, 2012 the International Auditing and Assurance Standards Board (IAASB) published the revised standard on engagements to review historical financial statements. The revised international standard effective for review engagement reports dated on or after December 31, 2013. This standard is designed to help meet the growing demand for non-audit assurance services. So, in the revised standard the explanation is made to the concept "sufficient appropriate evidence", which is used in a context of the standard. Also if sufficient evidence has not been obtained from inquiry and analytical review, the practitioner performs additional procedures judged necessary to form a conclusion. Need of application of such additional procedures is based on practitioner’s professional judgment of review financial statement. The additional procedures to be performed by the practitioner depend on the circumstances. However, some experts of standards’ developers disagreed that the review engagement should extend to performing procedures other than inquiry and analytical procedures, and several of them considered that doing so would blur the distinction between an audit and a review. In this regard, the example of using additional procedures by practitioner is given in the standard. Also despite on additional procedures review engagement provides a moderate level of assurance that the information subject to review is free of material misstatement, this is expressed in the form of negative assurance [4].

The practitioner performs inquiry and analytical procedures to obtain sufficient evidence to conclude on the financial statements as a whole. It is necessary to consider that the review ordinarily does not require tests of the accounting records through inspection, observation or confirmation. Besides, a review financial statement isn’t so detailed, as obligatory audit.

A review financial statement in audit is need for creation of the independent conclusion about a correctness and reliability of received information. Among features of carrying out this procedure – short time, low service prices, and also negative assurance in the conclusion (that is, the evidence of lack of the irregularities). Review financial statements will help to reveal the main problems for carrying out subsequently deeper checks. Also it is used as a fast analysis which will allow receiving the main information about enterprise.

Having analysis the official sites of a number domestic audit companies it is possible to note that many of them offer such service as "express audit", meaning by it review financial statements. In our opinion, it is connected with that the term "review financial statements" for the majority of audit services’ consumers is a new and unclear, unlike the concept "express audit". However, a number of audit services’ consumers don’t know about possibility of carrying out review financial statements. Because potential users and audit’ clients don’t know about opportunities of use review financial statements instead of audit so it is necessary for auditors to discuss with their clients to carry out review financial statements other than audit [3, p.52].

Pankova S. V. recommends carrying out review financial statements in the following cases [3, p.55]:

- at check for the period, other than a year, in case of obligation audit;

- at issue of securities;

- when receiving the credit;

- at verification of the reporting made on other from accepted rules or having non-financial character;

- in cases when prior to check there are serious doubts in reliability of the reporting.

It should be noted that with development and increase of small enterprises demand for taking independent verifications of financial (accounting) statements grows also. However, taking audit for such enterprises will be very expensive therefore such demand can satisfy by carrying out review financial statements which is much cheaper, than carrying out audit.

Thus, a review financial statement is an economic profitable option which allows to lower possibility of risks of mistakes in the reporting.

The list of the used literature:

1. The federal rule (standard) of auditing No. 24 "The basic principles of federal rules (standards) of the auditor activity concerning services which can be provided by audit organizations and auditors" (it is approved as the resolution of the government of the Russian Federation of September 23, 2002 No. 696 with amendment and additional).

2. The federal rule (standard) of auditing No. 33 "Survey verification of financial (accounting) statements" (it is approved as the resolution of the government of the Russian Federation of September 23, 2002 No. 696 with amendment and additional).

3. Pankova S. V. "Review financial statements: standard regulation and main characteristics" / Pankova S.V.//International accounting. – 2010 - No. 8.

4. International Standards on Review Engagements 2400 "Engagements to Review Historical Financial Statements", 2012.