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Audit of Organizational Accounting and Accounting Policies
Publication date/update: February 11, 2025
The audit of accounting policies within a company constitutes a critical facet of financial governance. Such audits may be initiated voluntarily by management or mandated during external tax inspections. Audits of accounting policies vary in scope and purpose. This article elucidates the diverse methodologies and considerations integral to this analytical process.
Features of Auditing Accounting Policies
Audit procedures may be commissioned under the following circumstances:
- To conduct an independent evaluation of accounting operations, whether obligatory or discretionary.
- To address specific organizational objectives, such as tax planning, pricing strategy formulation, or long-term corporate activity forecasting.
- In exceptional scenarios, including tax inspections or supervisory measures enacted by a parent entity toward its subsidiaries or branches.
Notably, large enterprises often prioritize the refinement of operational frameworks, investing in both human and financial resources. Conversely, smaller firms with underdeveloped accounting policies seldom engage external auditors. This deficiency frequently results in discrepancies between reported metrics and actual financial conditions, undermining compliance with statutory regulations and operational efficacy.
How Do Companies Plan an Audit of Accounting Policies?
If a company is exempt from mandatory audits, management may delegate the task to internal personnel, typically comprising accountants and financial officers. However, this approach harbors inherent limitations, as internal staff may lack impartiality in scrutinizing their own work.
Additional challenges include:
Additional challenges include:
- BiasAccounting personnel may prioritize favorable outcomes, impeding objective error detection.
- Resource ConstraintsConcurrent execution of audits and routine duties risks diluting audit thoroughness.
- Expertise GapsAccountants unfamiliar with industry-specific standards may struggle to evaluate policy adequacy or reliability.
While internal audits may suffice under budgetary constraints, independent audits by external firms yield superior outcomes. External auditors provide swift, unbiased assessments, ensuring comprehensive evaluations of accounting methodologies and their alignment with legal requirements.
How to Organize an Audit?
A comprehensive audit of accounting policies necessitates:
- Thorough Familiarization with OperationsUnderstanding the company’s business model, tax framework, and unique operational nuances.
- Examination of Chart of Accounts and Document FlowReviewing accounting ledgers, document workflows, and primary records governing financial reporting.
Auditors must possess expertise in accounting and tax legislation, coupled with industry-specific regulatory knowledge. Deficiencies in these areas diminish audit efficacy; for instance, an auditor unfamiliar with production processes may misjudge cost allocation accuracy.
Objectives of Conducting an Accounting Policy Audit
Auditors assess the following dimensions:
- Identification of Accounting MethodsDocumenting methodologies employed by the entity.
- Compliance VerificationEnsuring policies adhere to statutory norms and declared accounting principles.
- Data Accuracy ValidationScrutinizing the correctness of entries across accounting registers.
- Alignment with PBU RegistersCross-referencing operational records with the General Ledger and PBU (Russian Accounting Standards) registers.
Additional Audit Focus Areas
- Completeness of DataEnsuring all transactions are recorded per accounting guidelines.
- Timeliness of DocumentationConfirming adherence to statutory deadlines.
- Error DetectionVerifying absence of concealed reserves, misstated expenses, or liabilities.
- Formal CompliancePrioritizing proper documentation formatting.
- Consistency Between Analytical and Synthetic RecordsEnsuring coherence across accounting tiers.
- Methodology SuitabilityEvaluating whether chosen methods align with the entity’s operational parameters.
What Errors Might an Auditor Identify in a Company?
Vigilance is imperative, as audits frequently uncover lapses in policy formulation or implementation, including:
- Absence of formalized internal control procedures.
- Missing appendices, such as a chart of accounts, inventory protocols, primary documentation templates, or asset valuation guidelines.
- Ambiguities in leased asset valuation, particularly if lease agreements lack explicit terms.
- Failure to incorporate market value assessments for financial instruments.
- Omission of reserves for doubtful receivables.
- Inadequate procedures for inventory devaluation reserves.
- Unapproved methodologies for calculating current income tax liabilities.
Auditors may identify further irregularities, necessitating a holistic review beyond these focal points.
Conclusions
Auditing accounting policies serves multifaceted objectives, whether conducted internally or via independent review. It demands profound insight into the company’s operations, mastery of industry regulations, and adherence to fiscal and accounting mandates.
Frequently Asked Questions
Entities with annual revenues exceeding RUB 800 million, per Article 5 of Federal Law No. 307-FZ. Parent companies, creditors, or investors may also mandate audits.
The audit yields an expert opinion on financial statement reliability, highlighting breaches of accounting norms, legal noncompliance, or procedural errors.
Overly succinct documentation — such as internal policies, directives, or procedural manuals — frequently obscures clarity. Documentation must be both comprehensive and accessible to all stakeholders.
DVP | Moscow
ООО „Dr. Voigt & Partner"
107031, Moscow, Petrovka Street, 27 , Room 1/5
info@partnery-audit.com
+7 495 690 92 62
ООО „Dr. Voigt & Partner"
107031, Moscow, Petrovka Street, 27 , Room 1/5
info@partnery-audit.com
+7 495 690 92 62
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DVP Audit GmbH Wirtschaftsprüfungsgesellschaft
Erik-Blumenfeld-Platz 27 b, 22587 Hamburg, Germany
info@partnery-audit.com
Tel. +49 40 866 6740 Fax +49 40 866 67444
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DVP Consulting LLC
1401 21st ST STE R Sacramento, CA, USA
DVP Audit GmbH Wirtschaftsprüfungsgesellschaft
Erik-Blumenfeld-Platz 27 b, 22587 Hamburg, Germany
info@partnery-audit.com
Tel. +49 40 866 6740 Fax +49 40 866 67444
DVP | Los Angeles
DVP Consulting LLC
1401 21st ST STE R Sacramento, CA, USA
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