Drawing up a contract for an auditing services provision

Jan, 14 2021

Contents:

Auditing services are a diverse audit of financial and tax documents of an enterprise. It allows to identify errors and inaccuracies before the inspection of state bodies. In addition, the audit allows to optimise the internal document flow.

You have to know/It is important to recognize that auditing activities are carried out by special organizations and individual auditors. It does not include checks carried out by the Federal Tax Service (FTS). Also, all activities that violate the requirements and procedures established by law cannot be considered as auditing activities.

The main requirements and procedures, as well as the auditor-client relationship are set out in the Federal Law No. 307-FZ “On Auditing Activities” of 30.12.2008.

Why is it necessary to draw up a contract for an auditing services provision

It is necessary to consolidate auditor-client relationship before conducting an audit of any company. Evidence of cooperation is considered to be a civil contract.

The contract for an auditing services provision is an official document signed by both parties. It regulates the relationship between the audit organization (an individual auditor) and the customer.

The document states that the company-auditor is obliged to conduct an audit of the economic and financial activities, tax and accounting statements of the client. Apart from audit, the contractor may also provide any other related services. At the end of this procedure, the contractor provides a detailed report. The customer, for its part, is obliged to pay for inspection company work at the rates specified in the contract.

You have to know/It is important to recognize that the price indicated in the documents is valid only during one check. It is not a reason to demand other services from the contractor at the same rates.

Thus, a contract is necessary to legally confirm and record the cooperation between the two parties.

An important point: a contract between the two parties also regulates that the auditing services provided are strictly confidential. The inspection company does not have the right to disclose any details of cooperation or information obtained from the customer’s documentation! The auditor also undertakes to return all the documents used for the audit in the same form in which he/she accepted them.

What is required in the contract

When drawing up a contract for an auditing services provision, it should be remembered there are mandatory points that must be described in detail:

  • contract subject (list of services the contractor undertakes to provide);
  • rights and obligations of the parties;
  • services cost;
  • conditions under which one of the participants may terminate the contract;
  • agreement termination consequences;
  • procedure and deadlines for submitting reports;
  • bank details of both parties and their legal addresses.

The contract subject is the most important point. It is he who discloses what services the auditor undertakes to provide. This can be a quick, standard or in-depth check, as well as advice, legal support, etc.

It is also necessary to specify in the contract the conditions under which the auditor may refuse to issue an opinion on the results of the audit. This section also specifies the time frame within which the client must provide all the necessary documents for verification. Similarly, the conditions under which the customer him/herself can interrupt the inspection are prescribed.

In addition to the basic conditions necessary for the agreement conclusion, the contract may specify other points:

  • degree of security of documents;
  • confidentiality and its violation consequences;
  • requirements for assistance from the client;
  • quality of the audit and the auditor’s responsibility for the work performed improperly;
  • rights to the results of intellectual work and creativity;
  • the order of acceptance of work;
  • force majeure, etc.

What else should be specified in the contract? To quickly learn about the work progress, it is necessary to prescribe the auditor’s obligation to periodically notify about the interim results of the examination. In addition, the document can specify organizational issues, as well as oblige the contractor to familiarize the management with all the documents the auditor received from third parties.

At the end of the audit, the contractor is obliged to issue an audit report to the client. This document reflects all the results of the audit and analysis of the company’s activities. Please note: the report is issued only to the organization ordered the audit. The contractor has no right to transfer it to anyone else.

Agreement terms

When drawing up a contract for the auditing services provision, the valid time frame must be clearly specified in the documents. The agreement is considered to be concluded from the moment of its signing. It is valid until the date specified in the agreement as the final one.

If one of the parties has terminated the agreement, it ceases to be valid. In this case, the break initiator is responsible for his/her decision. For example, if the customer decided to refuse the audit, they must pay for the work of specialists. The same applies to the contractor – in case of non-performance of duties, he/she pays compensation. Also, the contract must specify the period in which the other party should be notified of the cooperation termination.

In whole or in part, one of the parties can be released from liability only in court. As a rule, the reason for such a decision is the occurrence of force majeure or other circumstances beyond the control of the parties.

If there is a situation not provided for in the document, the current legislation of the Russian Federation is used to solve it. The regulatory framework is the basis for any relationship. Therefore, there should be nothing in the audit contract that can be considered illegal or violating the rights of one of the parties.

Author of the article
Drawing up a contract for an auditing services provision
Valentina Khlavich
Managing Partner
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