Audit according to sectoral accounting standards

Jun, 10 2020

Audit according to sectoral accounting standards is a mandatory procedure for companies which are legally bound to comply with sectoral accounting standards. This category includes non-credit financial and microfinance organizations, management companies, and other businesses. For such companies timely and careful reporting is essential part of business legitimacy.

Sectoral accounting standards or SAS are part of mechanism regulating accounting. They operate in parallel with other standards and represent legal requirements for accounting in a particular area.

The law «On accounting» divides sectoral standards into 3 groups. The first two groups are federal and sectoral standards. They are mandatory for all companies operating in the Russian Federation in a certain area. However, there is a third group – internal acts. They cannot contradict the law and can be only applied to individual organizations.

How do sectoral accounting standards differ from other requirements? They regulate peculiarities of applying federal standards, considering specifics of the type of activity. Another important feature is controllability. SAS could be applied only after a special examination by the Board of accounting standards was held. 

Sectoral standards have many features. They can specify separate accounting requirements considering the specifics of the company’s business. In addition, each organization is entitled to develop its own internal accounting standards, but it must rely on current legislation. Internal accounting requirements shall not contradict federal laws, nevertheless they may supplement and clarify them. In addition, sectoral standards developed by a particular enterprise can be considered as part of internal accounting policy.

Mandatory sectoral standards are developed in accordance with direction and type of activity. They differ significantly depending on the field for which they are created, because it is impossible to develop requirements that are equally suitable for all areas: mechanical engineering, coal mining and light industry. The task of SAS is to ensure that the rules and regulations satisfy the specifics of the activity.

While the audit of accounting in accordance with sectoral standards is held a specialist conducting audit assesses whether internal regulations comply with federal legislation. Valid SAS are aimed at clarifying peculiarities of common standards application. They contain the same information but considering the specifics of the industry. In other words, they specify the classification of accounting objects, rules of accepting and debiting them, and methods for determining prices. One of the important points is the specification of financial reporting requirements.

Peculiarities of documentation examination for compliance with sectoral standards

The complexity of working with sectoral standards is that they must be constantly updated, improved, and supplemented. First of all, it is due to federal and local legislative amendments. Secondly, it is due to changes and development of the industry itself. The market and technologies can significantly change the business operation, and this has to be taken into account.

Knowing these features and other peculiarities, specialists conduct a careful and prompt audit according to sectoral accounting standards in one or more stages. The result of a careful audit is an audit report. This is a document that contains an assessment of the accounting condition, reflects the detected inaccuracies and mistakes as well as ways to correct them. In addition, auditors provide advice to organizations that are being checked.

Prior to audit there is a preliminary stage when an audit company or a specialist asks the organization to provide all necessary documents. Based on them, they calculate the duration, complexity, and cost of work as well as audit methods.

Many specialists insist on conducting an audit in several stages. In most cases, this is a justified decision since this approach to documentation check reduces the risk of not finding or not correcting all the violations and mistakes in the documents.

Finally, while audit is held, auditors do not only work with the company’s records. They can make requests to outside sources as well as communicate with company’s employees engaged in accounting and taxation. After the work is completed, specialists will present an official report as well as discuss the audit results with company’s managers.

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