A business full of certainty

Audit is the process and system of assessing the compliance of management activities with certain criteria, norms and standards. According to the law on audit service, it applies to all enterprises, organizations and departments operating in the territory of the Republic of Azerbaijan, regardless of the form of ownership and organizational-legal structure.

There are different types of auditing (tax, accounting, finance, investment, human resources, etc.). An audit may be mandatory or voluntary.

• Mandatory audit – is carried out for economic entities that have to publish their financial statements according to the law, as well as in the cases directly stipulated by the legislation.
• Voluntary audit – is carried out on the initiative of the economic entity.

Tax Audit:

Tax Audit is a verification of compliance of financial documents with tax legislation. The auditor monitors all accounting reports, tax calculation and payment, prepares and conducts other necessary reports, and provides risk assessment and consultation on taxation issues. The main purpose here is to protect enterprises from potential fines and other sanctions for violations of legislation in this area, as well as to detect overpaid taxes.

Tax audits are mostly needed by large companies and enterprises with a wide branch network. In medium and small businesses, tax audits are generally used to optimize payments.

Timely tax audit is crucial. Thus, regularization of reports before mandatory tax audit can save companies from a number of problems. Also, a tax audit should be carried out during the change of the chief accountant or other specialists responsible for the preparation of documents and payments.

Services provided for tax audit:

• Audit of calculation of various tax budgets;
• Audit of individual sections of tax accounting;
• Audit of all tax returns;
• Analyses and conclusions.

What is established during a tax audit:

1. a) Compliance of the company’s tax report with regulations, and rules for conducting and compiling tax reports;
2. b) Financial impact of the deficiencies found in the tax report and ways to eliminate them;
3. c) The need to change the tax reporting method applied by the company;
4. d) Verification of the legality of tax sanctions applied  by the tax authorities.
5. Accounting Audit

The main purpose of an accounting audit is to check the accurate and honest accounting of companies.

When conducting an audit of an accounting or financial statement, auditors should pay special attention to the fulfillment of the requirements of the Law of the Republic of Azerbaijan on Accounting, regarding the organization of accounting.

A brief description of  these requirements are below:

1. a) Accounting of the enterprise’s assets, liabilities and all operations and in accordance with the accounting standards developed on the basis of the Law, the chart of accounts of accounting and other regulatory documents, in mutual communication in the accounting accounts using the double entry method to be carried out;
2. b) During the accounting period, separate economic transactions must be correctly reflected in the accounting, and the accounting standards prepared in accordance with the law and the accounting system adopted depending on the economic conditions during the sale of the property, the requirements of other normative documents must be followed, the changes in the accounting policy compared to the previous period must be explained in the accounting report;
3. c) The results of the inversion of existing property, liabilities, capital, settlements and other costs in the reporting period (month, quarter, year) must be fully and correctly reflected in the accounting. Correct, chronological registration of all economic transactions in accounting registers should be ensured;
4. d) Income and expenses should be correctly attributed to the reporting period. In accounting, the allocation of current expenses to production (circulation expenses) and capital investments should be honestly determined. Their equality and correctness should be determined by checking the data of the analytical accounting accounts on the first day of each month;
5. e) The main task of accounting is to implement operational management and management by finance, banks, tax authorities, investors, creditors, state authorities and other interested organizations and persons, for the preparation of financial (accounting) accounts to be submitted, as well as the enterprise is to form the necessary information about economic processes, financial and economic activity in a complete and correct manner to prevent negative situations in financial and economic activity in a timely manner, to reveal intra-economic resources and to mobilize them.
6. f) The head of the enterprise is responsible for the organization of accounting in the enterprise. The head of the enterprise creates the necessary conditions for proper accounting, ensures the fulfillment of the requirements in the timely and proper preparation and submission of the accounting documents and information prepared by the employees of all departments related to accounting, and complies with the requirements of the regulatory documents on accounting.
7. Financial audit

The purpose of the financial audit is to increase the degree of certainty of the intended financial statements. Assurance is provided through an opinion that the preparation of the financial statements of the auditor, in terms of all material aspects, in accordance with the relevant financial reporting principles or the principles of fair presentation of financial statements gives a true and fair view of the financial statements in accordance with the applicable financial reporting principles in all material respects.

3. Investment audit

Each transaction is considered an object of accounting. Investments are also considered an economic object and are recorded in the synthetic account called “Long-term financial investments” in the accounting chart of those enterprises.

When the auditor conducts inspection-expertise work, he must assess the timely and correct accounting of the movement of relevant financial resources for investments. The auditor shall give his opinion on the securities obtained by the enterprises (organizations), their storage, movement and realization process.

Investments have an indirect objective character, that is, as a result of investment, appropriate income and profit should be obtained. The income (profit) obtained as a result of investment and their expenditure should be in the auditor’s research object.

According to the tax legislation, taxes and payments must be made from the incomes (profits) obtained as a result of investments. Assessing the level of implementation of these taxes and payments is considered one of the main tasks of the audit examination-expertise. Accounting of investment transactions and their accurate reflection in the relevant financial reports is considered one of the important areas in audit-examination work.

During the audit inspection-expertise, it is necessary to assess the correct analytical accounting of the investment in the fields, and its reflection in the reports.

4. Personnel (Human resources) audit – is checking whether the documents of the enterprise (related to human resources) are in accordance with the norms of the legislation and other legal acts, identifying and eliminating the mistakes made and preventing the negative consequences that those mistakes may cause.