Small Companies' Release from Audit

A special committee in the State Duma has recommended a bill that would free companies from mandatory audits if their proceeds are less than 400 million rubles.

Market experts think this would not make small companies any less transparent since current legislation requires all companies with proceeds of 50 million rubles or more undergo audit, and the latter only contributes to the problem of fictitious audit reports.


Current legislation provides that the following are subject to a mandatory audit:
- joint stock companies,
-  banks,
-  insurance companies,
-  commodity or stock markets,
-  investment funds,
- state non-budgetary funds,
- some other types of legal entities.

Additionally, a company is a subject to mandatory audit

- if a company’s sales volume (goods, work, or services) during the prior financial year exceeds 50 million rubles,

- or the sum of assets on the balance sheet exceeds 20 million rubles.

The abovesaid amendments would increase these thresholds by eight times – to 400 million rubles and 160 million rubles respectively – thereby release many smaller companies from obligatory audits.

Auditors say that a real audit of a small business costs about 1.5 million rubles, while a fictitious audit report costs only 30-100 thousand rubles.

If the bill is passed it could hurt auditors. The audit market was one of the victims of the financial crisis – proceeds in 2009 consisted of 25.2 billion rubles, as opposed to 30.9 billion rubles in 2008, according to auditors.

Audit companies could lose up to 70% of their clients and about 10-20% of sales income. Experts believe the hardest hit wouldexperience small audit companies.