16.01.09

The new law is to change the current system of regulating auditing activities. Licensing will be eliminated and replaced by self-regulating structures and guidelines based on common standards of auditing activities, and the introduction of compulsory membership of auditors and audit organizations in self-regulatory auditing associations. In addition, a number of the regulatory functions of the federal government will be transferred  to these associations.

The new federal law will ease audit regulations. In particular these activities include the developing proposals for federal standards for auditing activities, external quality control of audit organizations that work outside the financial markets, the organization and conducting of the quality examination of auditors, the organization of auditor training programs, etc.

 
The law differentiates auditing from audit activities (at present they are almost identical), and stipulates that an audit activity includes the audit and audit related services.

 
The law establishes additional requirements for auditors and audit organizations. In particular, audit organizations will be required to have a certain work experience and an immaculate business reputation. Requirements will also be placed on the audit organization’s authorized capital and on the composition of their executive bodies. These requirements are designed to improve the quality of auditing services and to reinforce the independence of auditors and audit organizations.

 
Federal law preserves the existing procedures for the mandatory audit of those organization that are "of particular public interest." The law establishes a comprehensive list of such organizations - these are organizations whose securities are admitted to trade at stock exchanges and/or other trade organizers in the securities market, insurance and other credit organizations, and the private pension funds.

 
The law reduces the requirements for the number of auditors in an audit organization and permits an individual auditor to conduct a mandatory audit (with some exceptions) These exceptions are related to the small business support measures and are expected to contribute to the development of competition in the audit market.

 
The law also establishes a single standard in the field of auditing activities, which is being developed in accordance with international auditing standards.

 
For the first time, federal law defines a code of professional ethics for auditors.

The law changes the competency and function of the Audit Council, which will actually become a public oversight body for the development of auditing activities and the audit profession. This profession is of particular importance due to the public nature of the activity. The law also determines the purpose, functions and procedures for the activities of the Council, as well as its formation mechanism and independence.

 
The law changes audit organizations’ procedures of external quality control, which will be implemented by the professional community independently (in connection to audit organizations working in the financial market).

 
The federal law thoroughly regulates the relations arising from the acquisition and termination of the status of self-regulatory audit organizations, their activities, and their interaction with their members and consumers.

 
One of the main requirements is that the organization provide additional liability for each of its members by establishing an indemnification fund(s).

 
An authorized federal body will carry out the functions of governmental control of auditing activities. The functions include: development of public policy in the sphere of audit activity, regulation of auditing activities (including the adoption of federal standards for auditing activities), and maintaining a state register and master copy of self-regulatory audit organizations .

 
To improve the quality of auditing services, the law provides for the creation of a single certification for auditors in all sectors of the economy.

 
The certification process stipulated in the law ensures a unified approach to determining the professional level of auditors and promises to guarantee equal rights and opportunities for all persons wishing to engage in the audit business.

 
The examination will be given by single commission, created jointly by all self-regulatory audit organizations. The latter also approves the founding documents of the commission and may change them. The activities of the sole certifying commission are based on the principles of independence, impartiality, openness, transparency, and self-financing.

Federal law sets out specific disciplinary actions in respect to auditing companies and auditors, which can be applied to the self-regulatory organization by the authorized federal agency.

 
In order to avoid disruptions in the auditing organizations’ activities during transition to the new system of regulations, the Federal Law provides a transition period and relevant transitional provisions.

 
Implementation of the federal law may make significant progress in bringing the Russian Federation’s auditing legislation up to par with recognized international standards.

 
The law came into force January 1, 2009.

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Source: LEGIS.RU