Appendix No. 4

to the Order of the Ministry of Finance of the Russian Federation of November 9, 2016 No. 207n

The international standard of audit 260 (reviewed) "Information exchange with persons who are responsible for corporate management"

The international standard of audit 260 (reviewed), the International Standard of Audit (ISA) 260 (reviewed) "Information exchange with persons who are responsible for corporate management" should be considered together with MCA 200 "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 on information exchange with persons who are responsible for corporate management during financial records audit. In spite of the fact that application of this standard does not depend on structure of corporate management or organization size, its certain aspects are applied in cases when all persons who are responsible for corporate management participate in management of the organization, and also to the organizations which securities are admitted to organized trading. This standard does not establish requirements to information exchange of the auditor with management of the organization or its owners, except cases when they are also responsible for corporate management.

2. This standard is developed for financial records audit, but can be also applied, in case of the corresponding adaptation, to audit of other financial information of last periods in cases when persons who are responsible for corporate management exercise supervision of preparation of other financial information of last periods.

3. Recognizing importance of effective bilateral information exchange during financial records audit, this standard establishes the general principles of information exchange of the auditor with persons who are responsible for corporate management and determines number of specific questions, information on which needs to be informed such persons. Additional questions, information on which needs to be given and which supplement requirements of this standard are determined in separate MSA (see Appendix 1). Besides, MCA 265 <1> establishes special requirements for informing persons who are responsible for corporate management about considerable shortcomings of internal control system which the auditor revealed during audit. Reporting of information on the other questions which are beyond requirements of this standard or separate MSA can be required according to the laws or regulations, and also under the agreement with the organization or according to the additional requirements to task provided, for example, by standards of the national professional organization of accountants. Any of provisions of this standard does not prohibit to the auditor to inform persons who are responsible for corporate management on any other questions (see the Items A33 - A 36).

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<1> MCA 265 "Informing persons who are responsible for corporate management and managements about shortcomings of internal control system".

Role of information exchange

4. This standard is devoted first of all to questions of information exchange of the auditor with persons who are responsible for corporate management. At the same time effective bilateral information exchange is important process which:

(a) helps the auditor and persons who are responsible for corporate management to understand the questions relating to audit in certain context and to create constructive working relations. Such relations are created in the conditions of preserving by the auditor professional independence and objectivity;

(b) helps the auditor to receive from persons who are responsible for corporate management, information, significant for audit. For example, persons who are responsible for corporate management can help the auditor with understanding of the organization and its environment, identification of proper sources of receipt of auditor proofs, and also with provision of information on specific transactions or events;

(c) helps persons who are responsible for corporate management to carry out the obligations on supervision of process of financial reporting preparation that reduces risks of essential misstatement of the financial reporting.

5. Though the auditor bears responsibility for informing on questions according to requirements of this standard, the management of the organization also shall inform persons who are responsible for corporate management on the questions important for corporate management. Reporting of information by the auditor does not exempt management of the organization from this obligation. Also, informing by management of the organization of persons who are responsible for corporate management about questions which the auditor shall report, does not exempt the auditor from obligation to perform information exchange on these questions. The message management of information on such questions can affect form or terms of informing by the auditor of persons who are responsible for corporate management, however.

6. Accurate informing on certain questions, reporting of information on which is provided by International standards of audit, is integral part of each audit. International standards of audit, however, do not require that the auditor carried out special procedures for identification of other questions for the purpose of informing about them persons who are responsible for corporate management.

7. The laws or regulations can limit information exchange of the auditor with persons who are responsible for corporate management on certain questions. For example, according to the law or the regulation it can be forbidden to give information or to perform any other action which could influence the investigation made by the relevant authorized body upon committed or expected illegal action negatively. In some circumstances the potential conflicts between obligations of the auditor to observe confidentiality and its obligations to give information can be quite difficult. In such cases the auditor can resort to services of the lawyer.

The effective date

8. This standard becomes effective concerning financial records audit for the periods which are coming to an end on December 15, 2016 or after this date.

Purposes

9. The purpose of the auditor consists in that:

(a) accurately to inform persons who are responsible for corporate management on the auditor's obligations concerning financial records audit and to provide them summary of the planned audit scope and terms of its carrying out;

(b) receive from persons who are responsible for corporate management, information important for audit;

(c) timely to provide to persons who are responsible for corporate management, information on the observations received as a result of audit which are significant and are related to obligation of such persons on implementation of supervision of process of financial reporting preparation;

(d) provide effective bilateral information exchange between the auditor and persons who are responsible for corporate management.

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