Problems and prospects of development of audit in Russia

Tolkacheva Daria, Kazaryan Manik

Kuzbass state technical university of T.F. Gorbachev, Russia

In a modern world, information has more and more influence on our lives. Whoever owns information, owns the world. Modern economic reality demands more from accounting information, beginning with operational documents to the annual reports. Its’ relevance, shape and, most importantly, reliability. Because of globalization of the economy, the question of comparability of information provided by Russian organizations on the external market became more and more relevant. Now focus is on independent audits.

According to “Russian newspaper” from 14.01.2014, National Organization for Financial Accounting and Reporting Standards and International Federation of Accountants (IFAC) signed an agreement about the official translation into Russian International standards on auditing (ISA). Nowadays, when you draw up an audit report, you should use national and international standards, it can be a source of misunderstanding and increase a paper work.

The transition to the ISA is a logical and consistent decision after Russia's transition to International Financial Reporting Standards (IFRS). Now, an international audit in the Russian Federation is not governed by legal norms. In other words, practically every auditor can write a report, drawn up according to ISA,  and it can be not even relevant to the auditor conducting the audit according to the Federal standards.

Similar are the mechanisms for the adoption of international standards. According the published documents, it takes 15 month to translate ISA into Russian, it means that in 2015 the Russian companies will have a real opportunity to present to their foreign partners of audit reports made in accordance with global rules.

But, as in all economic processes, there are several pitfalls:

1. One of the most important problems of modern audit is price dumping. A large number of audit organizations provide their services at reduced prices and, respectively, low quality to the international market. It lowers confidence in the mass Russian audit Committee.

2. The lack of qualified personnel. Recently, it has become harder and harder to get a certificate of professional auditors. Less and less experts have enough qualifications to make really professional reports. Probably, with using of the ISA, the situation will become even more difficult. It will be a catastrophic shortage of experts.

3. Financial expenditure. At present, on a market of audit services there are a lot of companies, with employees of different qualifications. High levels of audit give an opportunity to get the whole picture of the financial and economic situation of the organization, helps build public trust and assists to make correct managerial decisions. Accordingly, qualitative audit should be well-paid.

4. Monopolization of the international auditing services. Typically, audits in large international corporations spend on “The Big Four” companies (PricewaterhouseCoopers, Deloitte, Ernst & Young, KPMG). Qualifications of the employees of these companies enables auditing qualitatively and in within deadlines. The audit of smaller organizations remains for the smaller turnover of audit firms. Now there is a process of enlargement of audit firms, small firms do not survive, they have to do is join or work for other services relating to audit and related audit services.

5. For transition to the ISA, it is necessary to make amendments to the current legislation. The draft of these changes is already developed. In the law «About auditor activity», art. 23 there will be new items, with information that  no later than 1 August 2014, the procedure for the recognition of the ISA in the territory of the RF will approve by the Russian Government. ISA subject should be recognizing in Russia not later than two years from the date of entry into force of the order of recognition. To put in another words, in 2016 all market in Russian audit should agree with international standards and rules.

6. ISA is not ideal AS they are regularly updated by International Auditing and Assurance STANDARDS Board, International Federation of Accountants (IFAC).

Some branches of audit activity, that are regulated by national rules are not regulated by international standards. For example, in the sphere of tax accounting. Now it’s very important to find a decision to this question. Maybe, using some national standards combined with international

As can be seen, transformation Russian audit by international rules has a lot of controversial aspects that require improvement, explanations and adequate legal regulation.

On the other hand, before using ISA, it would be logical to establish functioning of the market of auditing services at the national standards. Not a long time ago, the list of criteria for compulsory audit was expended. Because of this, customer base was decreased and raised threshold revenues for companies who need to undergo a mandatory audit. This decision, without doubt, weakened burden on business, but had an influence on the market of audit services. This significantly decreased the number of clients of small audit firms.

Also, the audit market of the Russian Federation depends a lot on government, and the Ministry of Finance in particular. Even the advent of self-regulating organizations could not radically influence the situation. The main problems in this sphere, such as dumping, the low quality of services and unfair competition were not solved.

But, despite the great numbers of difficulties in implementation and operation of ISA in Russian Federation can make a decision so that these activities are completed as is necessary and logical.

Besides a significant part of national auditing standards based on ISA, making the transition is not so complicated.