Registered by
Ministry of Justice
Russian Federation
On January 31, 2019 No. 53639
Appendix No. 7
to the Order of the Ministry of Finance of the Russian Federation of January 9, 2019 No. 2n
The International Standard of Audit (ISA) 250 "Consideration of the laws and regulations during financial records audit" should be considered together with MCA 200 "Main objectives of the independent auditor and carrying out audit according to International standards of audit".
MCA 250 (reviewed) was approved by Council for supervision of observance of public concerns (PIOB) which came to conclusion that the procedure of development of the standard had proper character and public concerns were properly observed.
Scope of this standard
1. This International Standard of Audit (ISA) establishes the auditor's obligations on consideration of the laws and regulations when carrying out financial records audit. This standard is not applied to the tasks providing confidence within which before the auditor the specific purpose of check and forming of the separate conclusion about observance of certain laws or regulations is set.
Operation of the laws and regulations
2. The laws and regulations considerably differ on influence on the financial reporting. Those laws and regulations which are applied to the organization constitute the legislation. Provisions of some laws or regulations exert direct impact on the financial reporting in such a way that they determine numerical indicators and disclosure of information in the financial reporting of the organization. Other laws or regulations shall be observed by management or establish provisions according to which conducting activities is allowed to the organization, but they do not exert direct impact on the financial reporting of the organization. Some organizations conduct the activities in industries with tough normative regulation (for example, banks and the chemical companies). To activities of others set only of those laws and regulations which belong in general to operational aspects of activities is applied (for example, the laws and regulations relating to labor protection and health and also to providing the equal rights in case of employment). Non-compliance with the laws and regulations can lead to penalties, legal proceedings or other consequences for the organization which can have significant effect on the financial reporting.
Responsibility for compliance with laws and regulations (see the Items A1 - A 8)
3. Responsibility of management, under the supervision of persons who are responsible for corporate management is in providing implementation of organization activity according to provisions of the laws and regulations, including observance of provisions of the laws and regulations which determine numerical indicators and disclosure of information in the financial reporting of the organization.
Responsibility of the auditor
4. Requirements of this standard are designed to help the auditor with identification of essential misstatement of the financial reporting owing to non-compliance with the laws and regulations. However the auditor does not bear responsibility for prevention of such non-compliance, and it is impossible to expect that he will find all facts of non-compliance with the laws and regulations.
5. The auditor bears responsibility for ensuring reasonable confidence that the financial reporting in general does not contain essential misstatement both owing to unfair actions, and for cause of error <1>. When carrying out financial records audit the auditor considers the applicable legislative and regulatory base. Owing to the integral restrictions of audit there is inevitable risk that some essential misstatements of the financial reporting will not manage to be found even if audit is properly planned and carried out according to International standards of audit <2>. In the context of the laws and regulations possible influence of these integral restrictions for capability of the auditor to find essential misstatements amplifies owing to the following reasons:
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<1> MCA 200 "Main objectives of the independent auditor and carrying out audit according to International standards of audit", Item 5.
<2> MSA 200, the Items A53 - A54.
- there is body of laws and the regulations relating in general to operational aspects of business of the organization which usually do not exert impact on the financial reporting and are not fixed by the information systems of the organization relating to the financial reporting;
- non-compliance with the laws and regulations can become the reason of the actions directed to concealment of the facts of non-compliance such as collusion, counterfeit, intentional omissions in accounting of transactions, bypass management of control facilities or intended representation of false information to the auditor;
- the final decision on whether action is non-compliance, is accepted by court or other relevant competent authority.
As a rule, the connection with the events and transactions reflected in the financial reporting is weaker the probability that the auditor learns about cases is less and will elicit the facts of non-compliance with the laws and regulations.
6. This standard differentiates the auditor's obligations concerning respect for two categories of the laws and regulations as follows (see Items A 6, A12 - A 13):
(a) provisions of the laws and regulations which usually are recognized exerting direct impact on determination of essential indicators and disclosure of information in the financial reporting, such as the tax and pension laws and regulations (see Items 14, A 12);
(b) the other laws and regulations which do not exert direct impact on measure definition and disclosure of information in the financial reporting, but observance of which can be fundamental in relation to operational aspects of business, to capability of the organization to continue its activities or to avoid essential penalties (for example, observance of conditions of licensing, observance of requirements of regulating authorities for maintenance of solvency or observance of regulations on environmental protection); non-compliance with such laws and regulations can have, thus, significant effect on the financial reporting (see Items 15, A 13).
7. In this standard requirements for each of above-mentioned categories of the laws and regulations are separately described. On the category mentioned in Item 6(a), responsibility of the auditor consists in collecting enough competent auditor evidences concerning observance of provisions of these laws and regulations. On the category mentioned in Item 6(b), responsibility of the auditor is limited to carrying out the specific audit procedures directed to identification of non-compliance with those laws and regulations which can have significant effect on the financial reporting.
8. This standard demands from the auditor to keep special attention concerning opportunity that other audit procedures applied for the purpose of forming of opinion on the financial reporting can draw attention of the auditor to cases of non-compliance with the laws and regulations. Preserving professional scepticism throughout all audit according to requirements of MCA 200 <3> is of great importance in this case, considering amount of the laws and regulations influencing the organization.
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<3> MSA 200, Item 15.
9. According to the law, the regulation or the conforming ethical requirements the auditor can have subsidiary duties in connection with non-compliance by the organization with the laws and regulations which can differ from the obligations provided by this standard or go out of the sphere of its application, for example (see Item A 8):
(a) holding procedures in response to the revealed non-compliance or suspicion of non-compliance with the laws and regulations, including fulfillment of requirements about the message of certain information to the management or persons who are responsible for corporate management, evaluating proper nature of actions taken by them in connection with non-compliance and determination of need of acceptance of additional measures;
(b) informing other auditors on the revealed non-compliance or suspicion of non-compliance with the laws and regulations (for example, in case of financial records audit of group);
(c) fulfillment of requirements to documentary registration of the revealed non-compliance or suspicion of non-compliance with the laws and regulations.
Accomplishment of any subsidiary duties can provide new information. the auditor belonging to work according to this standard and other MSA (for example, concerning honesty of management or, when applicable, persons who are responsible for corporate management).
The effective date
10. This standard becomes effective concerning financial records audit for the periods beginning on December 15, 2017 or after this date.
Purposes
11. The purpose of the auditor consists in that:
Disclaimer! This text was translated by AI translator and is not a valid juridical document. No warranty. No claim. More info
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