Checkup of accounting

Jan, 21 2024


Russian laws oblige all companies that are engaged in entrepreneurial activities to maintain accounting records. This requirement also applies to individual entrepreneurs, regardless of whether they have employees or not. Accounting is an integral part of the work of any organization. By its state, you can determine how successful the business is, and checking the accounting allows you to track errors in business activity. Thus, it affects efficiency of the entire enterprise. Without expertise, it is easy to miss serious risks and mistakes, fraught with fines or even criminal liability.

Examination of accounting is a voluntary procedure. It can be initiated by the director or the owner of the business. But independent assessment of the company’s financial documents cannot be neglected.

Checkup of accounting is carried out by professional accountants and auditors. Based on its results, they draw up a conclusion that fully and objectively reflects state of affairs of the organization, indicates shortcomings and errors. Experts also suggest ways and means to eliminate the identified deficiencies, prepare recommendations on how to avoid problems and worries in the future.

When checking accounting, auditors carefully examine the correctness and reliability of the primary documentation. They are also interested in financial and tax reports, balance sheets and company registers. Their field of vision is the reports that the company has submitted or is about to submit to the regulatory authorities. The volume of documentation analyzed by independent experts depends on the state of affairs of the enterprise.

When accounting check is necessary

  • Managers, owners, responsible specialists of the company doubt the correctness of accounting.
  • The owners plan to sell the business or, conversely, attract investors and new partners.
  • Over the past year, the company’s profit has significantly decreased, the business is in financial difficulties.
  • Pending verification of documentation by regulatory authorities.
  • One finance manager or chief accountant is fired and a new specialist is being recruited.

In the latter case, an examination is necessary to bring the new manager up to date, and at the same time to get an idea of ​​the state of accounting at the time of his inauguration. Also, checking will help to avoid mistakes that a new specialist could repeat after his predecessor before he had time to delve deeply into the essence of the matter.

First stage: preparation

If you invite an external specialist or even an organization for examination, they first need to familiarize themselves with the specifics of your company, study some documents. Then they will develop a verification plan and offer it to you. If it suits you, you can conclude a contract and trust the auditors. But you can also try to analyze the accounting yourself. However, if you are not a professional auditor, the quality of the audit will be inferior to an independent examination.

Second stage: access to the accounting database and express check

Most companies use the 1C: Accounting software for accounting. The specialist who will undertake the examination will need access to the database. Through it, he will first make an express analysis of the accounting. The program allows you to execute it automatically, it has a similar option.

You can do it yourself. To do this, find the “express check” option in 1C, specify the report period and run the test. If the program finds errors, it will display information about them on the screen. This is the easiest way to make sure that gross errors have not crept into the calculations, fraught with fines and other sanctions from the regulatory authorities.

Third stage: obtaining a certificate of taxes and fees

If no errors are found in the database, you can proceed to the next stage: requesting information on taxes and fees through electronic reporting services. This is usually used by managers, but sometimes external analysts also use it. As a rule, in their inquiries, they are most interested in information about taxes, penalties and fines. If everything is in order, then the company will not have debts, as well as accrued fines.

Fourth stage: checking the possibility of fraud with the current account

An unscrupulous accountant can create serious problems with a company’s bank account. In the worst-case scenario, this will be the theft of money through shell companies, cashing out funds for third parties, illegal lending. There is only one way to detect such frauds: through checking bank statements. What data in the statements will attract the attention of auditors:

  • An unknown counterparty transfers large amounts that are quickly cashed out. This is one of the most obvious signs that firms are laundering money through the current account, and this threatens the company with a criminal case.
  • There are payments to unknown organizations or individuals with a vague basis. It may even be small amounts, but this is often the mask for stealing company money.
  • Erroneous transfers to third-party organizations, which after a while are returned to the account. As a rule, this is what illegal hidden lending to third parties looks like, for which the company’s accounting department can receive remuneration.

Fifth stage: control of transactions on the current bank account

The auditors recommend company’s management to review the previous day’s bank statements daily. This is the only way to control the state of the current account without fear of fraud. Typically, when management personally controls the statements, there is no possibility for abuse in the finance department. Independent experts themselves must check incoming and outgoing payments. If in doubt, they make a request to the accounting department.

Sixth step: check for cash errors

To do this, experts check the cash book. Managers can also look at this document to check how much money was at the beginning of the day and how much is left at the end. The golden rule is: “there should be no minus at the checkout”. There are no exceptions to this rule. Please note that if a surplus is found in the cash register, the tax service can withdraw them to the state revenue, therefore, a careless approach to cash management is fraught with large financial losses for business.

To effectively control the cash register, it is useful for the manager to know the signs of the most common violations:

  1. There are no entries in the cash book completely or partially.
  2. The accountant does not use cash register equipment or commits violations when working with it.
  3. New rules for working with cash registers allow tax authorities to track online any transactions on the cash register and quickly detect violations.
  4. The cash limit has been exceeded. The amount of money that can remain at the end of the day in the cash desk of the enterprise is calculated according to a special formula of the Central Bank of the Russian Federation and depends on the revenue and type of activity of the company. If at the end of the day the amount in the cash office exceeds the maximum cash limit, then this is considered a violation of the procedure for working with the cash desk and cash (Article 15.1 of the Administrative Code of the Russian Federation).
  5. The owner contributes his personal money to the cashier of the company without drawing up a loan agreement.
  6. In many organizations, business owners cover cash gaps with their own funds. In such cases, accountants sometimes neglect the preparation of loan agreements: when checking cash discipline, this is also classified as a violation of the procedure for working with cash and cash.

Seventh stage: checking the accounting of primary documentation

Primary documents are perhaps the most important part of accounting. It is their auditors who check first of all, since this is the documentation that confirms the business operations of the company. If there are errors in the primary documentation, it is not taken into account. Moreover, during the inspection, specialists are interested in both the formal and the substantive side. That is, auditors control the correctness of paperwork and their content.

What flaws the management can track down on its own:

  • there are not enough signatures and seals;
  • not all fields of documents are filled in, there are corrections;
  • originals are missing or replaced by copies;
  • documents are stored in folders or boxes, not ordered registers.

Audit report

Accounting checkup ends with drawing up an opinion. This document objectively and fully describes the state of affairs of the company, specialist points out the identified errors and inaccuracies, and at the same time explains how to eliminate them. The opinion of an independent expert is an official document that confirms the state of accounting for managers, partners, investors, and sometimes for regulatory authorities. But sometimes companies do internal audits without outsourcing. This is acceptable when the examination is designed to solve the internal problems of the firm, and its results will not affect government agencies, other organizations or third parties.

It is useful for managers, business owners and financial professionals to understand how the auditor will review the accounting of the enterprise, how the examination proceeds, and what benefits a company gains by initiating an independent accounting review. So, if you are interested in qualified expertise, be prepared for the auditor to consistently perform a number of actions. 

Author of the article
Checkup of accounting
Valentina Khlavich
Managing Partner
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