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Russian Federation

On January 31, 2019 No. 53639

Appendix No. 6

to the Order of the Ministry of Finance of the Russian Federation of January 9, 2019 No. 2n

The international standard of audit 240 Obligations of the auditor concerning unfair actions when carrying out financial records audit

The International Standard of Audit (ISA) 240 "The auditor's obligations concerning unfair actions when carrying out financial records audit" should be considered together with the MCA 200 standard "Main objectives of the independent auditor and carrying out audit according to International standards of audit".

Introduction

Scope of this standard

1. This International Standard of Audit (ISA) establishes the auditor's obligations concerning unfair actions when carrying out financial records audit. So, in it reveals how it is necessary to apply MCA 315 (reviewed) <1> and MSA 330 <2> to risks of essential misstatement owing to unfair actions.

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<1> MCA 315 (reviewed) "Identification and risks assessment of essential misstatement by means of studying of the organization and its environment".

<2> MCA 330 "Audit procedures in response to the estimated risks".

Characteristics of unfair actions

2. Misstatements in the financial reporting can arise or owing to unfair actions, or owing to mistake. The decisive factor allowing to distinguish unfair actions from mistake is premeditation or not premeditation of those actions which as a result led to misstatement of the financial reporting.

3. In spite of the fact that unfair actions - wide legal concept, for the purposes of International standards of audit concern the auditor such unfair actions which lead to essential misstatement in the financial reporting. For the auditor two types of intentional misstatements - misstatements owing to unfair financial reporting preparation and misstatement owing to illegal assignment of assets are significant. In spite of the fact that the auditor can suspect or, in rare instances, reveal availability of unfair actions, he does not determine from the legal point of view whether unfair actions (see the Items A1 - A 6) really took place.

Responsibility for prevention and detection of unfair actions

4. The main responsibility for prevention and detection of unfair actions is assigned as to persons who are responsible for corporate management and to management of the audited organization. It is important that the management under the supervision of persons who are responsible for corporate management paid priority attention to prevention of unfair actions that could minimize opportunities for their making and promote control therefore employees will prefer not to make them in connection with high probability of detection and punishment. Such responsibility implies commitment to creation of culture of honesty and ethical behavior which can be supported further by active measures for supervision from persons who are responsible for corporate management. Supervision from persons who are responsible for corporate management includes accounting of opportunities of bypass of control facilities or other illegal forms of influence on process of preparation of the financial reporting, such as attempts of management to manage profit for the purpose of influence on how analysts perceive performance indicators and profitability of the organization.

Auditor's obligations

5. The auditor booking audit according to International standards of audit shall receive reasonable confidence that the financial reporting in general does not contain essential misstatement both owing to unfair actions, and owing to mistake. Owing to the integral restrictions inherent in audit, there is inevitable risk that some essential misstatements of the financial reporting can be not revealed even in spite of the fact that audit was carefully planned and carried out according to international standards of audit <3>.

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