For a complete, reliable understanding by users financial reporting the comparability of the information presented in it with the reporting information for previous periods is necessary.
ISA 710 Comparables - Comparables and Comparable Financial Statements deals with the auditor's responsibility to consider comparable information in an audit of financial statements.
The nature of comparable information that is presented in an entity's financial statements depends on the requirements of the applicable financial reporting framework. There are two broad approaches to the auditor's responsibility with respect to the auditor's report on such comparable information:
Significant differences between approaches with respect to
the auditor's report are as follows:
MCA 710 identifies the following types of basis for comparing financial statements.
Comparable information - The amounts and disclosures included in the financial statements for one or more prior periods as required by applicable financial reporting principles.
Comparable indicators - comparable information in which the amounts and disclosures are included in the financial statements as an integral part of the current financial statements and are to be read only in conjunction with the amounts and disclosures related to the current period (referred to as "current period figures"). The level of detail presented in figures and disclosures is dictated by their relationship to current period figures.
Comparable financial statements - comparable information, in which quantitative indicators and other disclosures for the previous period are included for comparison with the financial statements for the current period, but if they are audited, then information about this is presented in the auditor's report. The degree of breadth of information included in these comparable financial statements is comparable to that in the financial statements for the current period.
The auditor is required to determine whether the financial statements contain comparable information required by the applicable financial reporting framework and whether such statements are appropriately classified. For these purposes, the auditor is required to evaluate:
If the auditor becomes aware of possible material misstatements in the comparable information during the current period audit, the auditor is required to perform such additional audit procedures as are necessary in the circumstances to obtain sufficient appropriate audit evidence that the material misstatement exists. If prior period financial statements have been modified, the auditor should be satisfied that the comparable information is consistent with the revised financial statements.
If comparable figures are presented in the financial statements, then the auditor's opinion should not refer to comparable figures, except in the following circumstances.
The financial statements for the prior period were audited by the predecessor auditor.
If the prior period financial statements have not been audited, the auditor is required to indicate in the paragraph on other matters in the auditor's report that comparables have not been audited. Such an indication, however, does not relieve the auditor of the obligation to obtain sufficient appropriate audit evidence that the opening balances do not contain misstatements that materially affect the financial statements of the current period.
If comparable financial statements have been presented, the auditor's opinion shall apply to each period for which comparable financial statements are presented and for which the auditor's opinion is expressed.
If, when expressing an opinion on prior period accounts during the audit of the current period, the auditor’s opinion on prior period accounts differs from the auditor’s opinion that was previously expressed, the auditor should disclose significant reasons for the difference of opinion in the paragraph on other matters in the audit report. conclusion in accordance with MCA 706.
If the prior period's financial statements were audited by the predecessor auditor, then in addition to expressing an opinion on the financial statements of the current period, the auditor is required to include the following in the paragraph on other matters in the auditor's report, unless the predecessor auditor's opinion on the prior period's financial statements again expressed in the financial statements:
If the auditor concludes that a material misstatement has been identified that affects prior period financial statements on which the predecessor auditor expressed an unmodified opinion, the auditor is required to communicate the misstatement to the appropriate level of management and, if appropriate, to the owner’s representatives (if they do not take part in direct management organization) and require that the predecessor auditor be informed of this. If the prior period financial statements are amended and the predecessor auditor agrees to give a new auditor's report on the amended prior period financial statements, the auditor expresses an opinion only on the current period financial statements.
If the prior period financial statements have not been audited, the auditor is required to indicate in the paragraph on other matters in the auditor's report that the comparable financial statements have not been audited. Such guidance does not relieve the auditor of the obligation to obtain sufficient appropriate audit evidence that the opening balances do not contain misstatements that materially affect the financial statements of the current period.
There are qualitative characteristics of financial statements. If reporting meets these characteristics, it is useful to users. Qualitative characteristics of financial statements include understandability, relevance, reliability and comparability.
Clarity
Understandability, according to IFRS, is the main quality of information. This criterion assumes that users will quickly understand the information being communicated to them. Users, in turn, must have sufficient knowledge in the field of doing business and accounting. However, difficult-to-understand information that is necessary for making economic decisions should not be excluded from financial statements simply because it may be incomprehensible to individual users.
In accordance with Russian accounting practice and relevant regulatory documents according to its regulation, the clarity of reporting is related to its content and format, established by the Ministry of Finance for all commercial organizations production, trade and service character. Currently, if there is insufficient data to form a complete picture of the financial position of the organization, the financial results of its activities and changes in its financial position, then the organization includes relevant additional indicators and explanations in the financial statements. At the same time, the neutrality of the information contained in the financial statements should be ensured.
Relevance
In accordance with IFRS and FRMS, information that is useful to users is relevant information. Information is relevant when it influences the economic decisions of users by helping them evaluate past, present and future events and confirm or correct their past estimates.
The predictive and confirmatory functions of information are interrelated. For example, information about modern level and structure of assets held is of value to users when they are trying to predict a company's ability to take advantage of favorable opportunities and respond appropriately to an adverse situation. The same information plays a confirmatory role in relation to past forecasts, for example, regarding the possible structural organization company or the result of planned operations.
Information about the financial position and performance of past periods is often used to predict future financial position and performance, as well as other aspects of direct interest to users. These include dividend payments and wages, changes in securities prices and the company's ability to meet its obligations on time. The predictive power of the income statement is enhanced if non-standard, unusual and rare items of income or expense are disclosed separately.
Reliability
According to IFRS, to be useful, information must also be reliable. Information is reliable when it is free from material error and misstatement and when users can rely on it to represent faithfully what it is either supposed to represent or reasonably expected to represent.
Information may be relevant but unreliable in nature or presentation. For example, if the validity and amount of a damages claim being considered by a court is disputed, it may not be appropriate for a company to recognize the full amount of the claim in the balance sheet, although it may be appropriate to disclose the amount and circumstances surrounding the claim.
truthful performance
To be reliable, information must faithfully represent transactions and other events. For example, the balance sheet should fairly reflect transactions and other events that result in reporting date assets, liabilities and equity of the company that meet the recognition criteria.
There is a risk that most financial information not as true as it is supposed to be. But this is not the result of distortion, but rather a difficulty either in identifying transactions and other events to measure, or in choosing and applying methods of measurement and presentation. In certain cases, the magnitude of the financial impact of assets could be so uncertain that the company as a whole would not recognize it in the financial statements.
In RSUiO, the truthfulness of information in accounting reports is ensured by using accounting methods and valuation procedures approved by the Ministry of Finance of the Russian Federation. The accountant must disclose the essential methods of accounting in an explanatory note, which is part of the organization's annual financial statements. The veracity of the reporting data also implies the absence of significant errors and deviations in the financial statements. In accordance with the Law "On Accounting", the financial statements must include an auditor's report confirming their reliability and truthfulness. Thus, the state protects the interests of users of accounting information.
Comparability
According to IFRS, the information contained in the financial statements of an entity must be comparable over time and comparable with information from other entities. This allows you to trace trends in the financial position of the enterprise and the results of operations. Therefore, the measurement and reflection of all business transactions should be carried out sequentially, in accordance with the chosen accounting policy. This principle does not mean uniformity. However, to ensure comparability of data, it is necessary to know the accounting policy, its changes and the consequences of these changes during the current period and a number of previous years.
In the Russian practice of accounting and reporting, the comparability of information is guaranteed by the Law "On Accounting". This law provides stability accounting policy, the sequence of data processing methods, as well as the procedure for changing accounting policies in cases where this has significant consequences for the understanding of reporting information by users. AT methodological recommendations on the procedure for the formation of indicators of the organization's financial statements, a significant place is given to explanations related to the comparability of reporting data. Organizations can show in the financial statements data not only for the reporting and previous years but for more than two years. When deciding to reflect data for more than two years in the financial statements, an organization must ensure the comparability of data for all periods. At the same time, she can provide comparative information on numerical indicators both in the form of separate tables included directly in the forms of the balance sheet (form No. 1) or profit and loss statement (form No. 2), in an appendix to balance sheet(form No. 5), and in the form of independently developed forms or in an explanatory note. Adjustment of the data of previous periods should be made according to the rules of the accounting policy of the reporting year. At the same time, changes in accounting laws and regulations, reorganizations and other cases that have significant consequences for the understanding of reporting information by users should be taken into account. The reasons that caused the adjustment should be reflected in the notes to the balance sheet and income statement.
It is known that abroad, in the accounting practice of various organizations in one country, for example, the United States, the calendar boundaries of the reporting year may not coincide. This is mainly due to the seasonal nature of the activities of organizations from various industries, Agriculture, education and service delivery. Article 14 of the Law of the Russian Federation "On Accounting" establishes uniform calendar boundaries for the reporting year for all organizations operating in Russia. Quarterly reporting for Russian organizations is interim and is compiled on an accrual basis from the beginning of the reporting year. However, the absence in Russian practice of a standard on the preparation of financial statements in conditions of hyperinflation limits their comparability over time.
To the quality features financial reporting , compliance with which makes it useful to users, include:
comprehensibility;
· appropriateness;
materiality;
Reliability
a true representation
the predominance of essence over form;
Neutrality
prudence;
completeness;
Comparability
timeliness;
balance between benefits and costs;
a balance between quality characteristics;
Reliable and objective representation.
Clarity, or transparency , according to IFRS , is the main quality of information. This criterion assumes, that users will quickly understand the information provided to them. Users, in turn, must have sufficient knowledge in the field of maintaining business and accounting . However, difficult-to-understand information necessary for making economic decisions should not be excluded from financial statements simply because it may be incomprehensible to individual users.
Relevance. Under IFRS, information is relevant when it influences users' economic decisions by helping them evaluate past, present and future events and confirm or correct their past estimates.
materiality. The relevance of information is greatly affected by its nature and materiality. In some cases, the nature of the information alone is sufficient to determine its relevance. For example, the announcement of a new segment may affect the valuation risks and opportunities available to the organization. In other cases, both nature and materiality are of great importance, for example, when it comes to size reserves companies (by type).
Information is considered material if its omission or misstatement could affect economic solution users, adopted on the basis of financial statements.
In accordance with Russian practice and accounting regulation and reporting financial reports should contain all data that significantly influences the decisions of users. Materiality of information, its significance in financial statements Russian organizations are achieved due to the fact that they are drawn up in accordance with the requirements of legislative and regulatory documents in accordance with the Law "On Accounting". The Accounting Regulation “Accounting Statements of an Organization” (PBU 4/99) contains an exhaustive list of indicators that are required to be reflected in the statements in the interests of all its users. In Russian practice, such indicators are recognized as significant, specific gravity exceeding 5% of the total.
Reliability. Under IFRS, information must be reliable to be useful. Information is reliable when it is free from material errors and distortions. This is because the information may be relevant but unreliable in nature or presentation.
True representation. To be reliable, information must truthfully represent operations and other events such as balance sheet faithfully reflect transactions and other events that result in reporting date become assets , obligations and capital organizations that meet the recognition criteria.
There is a risk that much of the financial information is not as accurate as expected. But this does not happen as a result of misstatement, but rather because of the difficulties associated with the identification of transactions or with the choice of methods for presenting them in the financial (accounting) statements.
AT RSUiO the truthfulness of information in financial statements is ensured by the use of accounting methods and valuation procedures approved by the Russian Ministry of Finance. Significant Accounting Practices accountant must disclose in Explanatory note , which is part of the organization's annual financial statements.
The veracity of the reporting data also implies the absence of significant errors and deviations in the financial statements. In accordance with the Law "On Accounting", the financial statements must include audit report confirming its authenticity and veracity. Thus, the state protects the interests of information users.
Predominance of essence over form. According to IFRS, information should not only contain the legal form of transactions or other facts of economic activity, but rather reflect them. economic essence. For example, under a contract rent an entity may transfer an asset to another party in such a way that the documents imply the transfer legal law property of this organization. However, agreements may exist to ensure that the entity retains the right to enjoy the economic benefits of the asset. However, in this case, the sales report will not represent a true transaction.
The RSMS also proclaims the principle of priority of content over form. However, in practice this principle is sometimes not followed, since most accounting actions are based on primary document which must meet the specified requirements.
Specialists of the Ministry of Justice of Russia believe that, in accordance with the Civil Code of the Russian Federation, only the value of its own property can be attributed to the assets of any organization. That's the way tax authorities the provision of paragraph 2 of Art. 8 of the Law “On Accounting”: “Property that is the property of an organization is accounted for separately from the property of other legal entities owned by this organization. On this basis, there is a requirement to take into account leased property on off-balance accounts, despite the fact that, in terms of its economic content, the lessee may well take it into account in the balance sheet as property equal to its own.
Neutrality (objectivity). To be reliable, information contained in financial statements must be neutral. Financial statements will not be neutral if they affect the user's decision making.
However, in practice, when preparing reports, Russian organizations do not always comply with the requirement of neutrality, because management subjectively identifies priority user groups.
prudence. Prudence, according to IFRS, ¾ is the caution in making judgments that are necessary when making calculations under conditions of uncertainty. According to this principle, assets or income should not be overstated, and liabilities or expenses should not be underestimated. Compliance with the principle of discretion does not allow, for example, to create hidden reserves and excessive inventories, knowingly underestimate assets or income, or overstate liabilities, or expenses . In this case, the financial statements will not be neutral and, therefore, will lose reliability.
With regard to the application of the principle of prudence in RSUiO, PBU 1/98 establishes that accounting policy should ensure greater readiness to account for losses (expenses) and liabilities than possible income and assets, preventing the creation hidden reserves, i.e. the concept of due diligence in PBU 1/98 is set out in almost the same wording as it is presented in IFRS.
Although the current methodological instructions of the Russian Ministry of Finance on accounting provide for the accrual of valuation reserves for securities , inventories, doubtful debts , in practice such reserves Russian organizations are extremely rare.
An important step towards the implementation of the principle of prudence is the Regulation on accounting and financial reporting in Russian Federation.According to this document, provisions for doubtful debts are created based on the results inventory accounts receivable , while before its adoption, the provision for doubtful debts was recommended to be accrued only at the end of the reporting year. Currently, all organizations are required to show debt on received loans and loans including those due at the end reporting period percent.
completeness. Financial information is often incomplete economic activity organizations. This is not due to bias, but due to difficulties either in identifying the transactions and other events that need to be measured; or with the development and application of measurement and presentation techniques that reflect the essence of these facts. In some cases, the measurement of financial effect may be so uncertain that the entity does not normally present it in the financial statements. For example, although most organizations generate goodwill (firm value) internally over time, it is usually difficult to recognize or measure its validity.
Comparability. According to IFRS, the information contained in the financial statements of an entity must be comparable over time and comparable with information from other entities. This allows you to trace certain trends in its financial position and performance. Therefore, the measurement and reflection of all business transactions should be carried out consistently in accordance with the chosen accounting policy. This principle does not mean uniformity at all. However, to ensure comparability of data, it is necessary to know the accounting policy, its changes and the consequences of these changes during the current period and a number of previous years.
Article 6 of the Law "On Accounting" provides for the stability of accounting policies, the consistency of data processing methods, and also establishes the procedure for changing accounting policies in cases where this is important for the understanding of reporting information by users.
It is known that abroad, in the accounting practice of various organizations in one country, for example, the United States, the calendar boundaries of the reporting year may not coincide. This is mainly due to the seasonal nature of the activities of enterprises in various industries, agriculture, education and services. The Law "On Accounting" establishes uniform calendar boundaries for the reporting year for all organizations operating in Russia. quarterly reporting for Russian companies is intermediate and is compiled on an accrual basis from the beginning of the reporting year. However, the absence in Russian practice of a standard on the preparation of financial statements under conditions hyperinflation limits its comparability over time.
Timeliness. Under IFRS, this quality of financial information limits its relevance and reliability. If the information is not received in a timely manner, it may no longer be relevant. For example, if reporting is delayed until all aspects are clarified, the information may be extremely reliable, but of little use to users who should have made decisions earlier. In achieving a balance between relevance and reliability, the needs of users who make economic decisions should be at the forefront.
According to Russian legislation, reporting information is submitted within the time frame in which it does not lose value for the user. The Law on Accounting states that annual reports are submitted within 90 days, and quarterly ¾ within 30 days after the end of the reporting period. These timing requirements are more stringent than those established in other countries, they help to ensure the relevance of reporting information.
Balance between benefits and costs. According to IFRS, the ratio between benefits and costs ¾ is rather a fundamental limitation, rather than a qualitative characteristic. The benefits derived from information must exceed the costs of obtaining it. The costs are not necessarily borne by the users who receive the benefits. In addition, it is not only the users for whom the information has been produced that may benefit.
Balance between quality characteristics. In practice, a balance or compromise between the qualitative characteristics of reporting is often necessary. The goal in this case is ¾ to achieve the optimal ratio between the characteristics of financial statements for a reliable reflection of the financial condition of the enterprise. In Russian practice, due to the limited professional judgment, the balance between qualitative characteristics is not observed.
Reliable and objective presentation. Financial statements are often said to give a true and fair view of an organization's financial position, changes in it, and the results of its operations. If, in the preparation of financial statements, qualitative basic characteristics and accounting standards, then such reporting fairly and objectively reflects financial condition enterprises.
The Law "On Accounting" allows deviating from accounting rules in cases where they do not allow to accurately reflect the property status and financial results of the enterprise. The facts of non-application of accounting rules must be indicated in the Explanatory Note to the annual financial statements. Only in this case they are not recognized as a violation of the legislation of the Russian Federation on accounting.
The definitions of underlying assumptions and requirements for information disclosed in financial statements are practically the same in IFRS and FSMS.
The auditor needs to obtain sufficient appropriate audit evidence that comparable financial (accounting) statements comply with the applicable principles and requirements for the preparation of financial (accounting) statements. The auditor determines:
a) whether the accounting policy of the previous period in relation to comparable statements is consistent with the accounting policies of the current period, whether appropriate adjustments have been made to reflect the effects of changes in accounting policies, and whether changes in accounting policies have been properly disclosed in the financial (accounting) statements;
b) whether the comparable data presented in the current financial (accounting) statements for the previous period are consistent with the indicators and other information presented in the financial (accounting) statements for the previous period, or appropriate adjustments were made and (or) the information was properly disclosed.
If, during the audit for the current period, the auditor becomes aware of a possible material misstatement of the indicators for the previous period, then he performs additional audit procedures.
If the auditor, for whom the audit engagement is the initial audit, finds that the figures for the previous period, which were not audited, are materially misstated, he requires the management of the audited entity to review them. If the entity's management is called to revise the relevant figures, the auditor should modify the auditor's report as appropriate.
Currently, there is an increase in the number of companies that prefer to involve specialized organizations in their accounting. Many sellers of these services and offers for accounting and accounting support for the activities of the client company have appeared on the market. Accounting outsourcing includes, among other things, the management tax accounting, as well as the preparation of accounting and tax reporting.
A specialized organization may establish and implement such general approaches and specific procedures that will affect accounting systems and internal control audited entity. These approaches and procedures are physically and functionally separate from the entity being audited. If the services provided by a specialized entity are limited to recording and processing business transactions, and the audited entity retains the right to authorize business transactions and prepare reports, it can be expected that the audited entity independently implements sufficiently effective approaches and procedures within its organization. If the specialized entity conducts the transactions and prepares the accounts of the entity itself, that entity may rely on the practices and procedures of the specialized entity. In the course of studying the entity and those providing services to it, the auditor should determine the significance of the activity of the specialized organization for the entity and the audit. To this end, the auditor needs (if appropriate) to consider:
the nature of the services provided by the specialized organization;
terms of the contract and features of the relationship between the audited entity and a specialized organization;
the level of interaction between the internal control system of the audited entity and the accounting and control systems of the specialized organization;
means of internal control of the audited entity related to the activities of a specialized organization (means of control over the processing of business transactions by a specialized organization and analysis by the audited entity of the risks associated with the use of services of a specialized organization, and ways to minimize such risks);
the capabilities of the specialized organization and its financial stability, including the consequences for the audited entity in the event of its possible insolvency or termination of activities;
information about a specialized organization;
information about the means of control used by the specialized organization used in computer data processing systems.
If the auditor concludes that the activities of the specialized entity are important to the auditee and are of interest to study during the audit, then the auditor obtains a sufficient understanding of the activities of the entity or the services provided to it, including the system of internal control, in order to assess the risk the appearance of material misstatements in financial (accounting) statements and planning the necessary audit procedures, taking into account this risk. The auditor assesses the risk of material misstatement of the financial (accounting) statements in general, as well as specific prerequisites for the preparation of financial (accounting) statements for balances on accounting accounts, groups of similar transactions and cases of information disclosure.
When assessing the risk of controls in relation to the prerequisites for the preparation of financial (accounting) statements, the impact of the internal controls of a specialized organization should be taken into account.
Involvement of a specialized organization in accounting does not release the audited entity from responsibility for accounting. the federal law No. 129-FZ of November 21, 1996 “On Accounting” does not provide for the possibility of transferring responsibility to a specialized organization (outsourcer) even if it maintains full accounting records and prepares accounting and tax reporting.
The auditor must understand that, in accordance with the Law on audit activity he must maintain the confidentiality of the information received and provide the results of his work in the form of written information addressed to the management of the entity being audited, and not to a specialized organization. Only if there are appropriate direct instructions from the management of the audited entity, the conclusions and recommendations based on the results of the audit can be provided and discussed with a specialized organization, and only in this case the audit secrecy will not be violated.
