Compulsory audit of financial statements
Compulsory audit of financial statements – audit of annual and consolidated financial reporting of economic entity for the goal of providing independent auditor’s report regarding its compliance with established criteria and rules of keeping accounting in accordance with a determined particular basis.The main task of compulsory audit is to provide assurance in the accuracy and completeness of financial reporting in the part of representing of actual structure of assets and liabilities. The list of entities which are subject to compulsory auditing is envisaged by the current legislation of Ukraine. Such economic entities are normally the companies of state public interest.
International Standard on Assurance Engagement ISAE 3402 (ISAE 3402/ SSAE 16) “Assurance Reports on Controls at a Service Organization” - аssurance engagements are aimed at increasing the level of confidence of potential users in the results of evaluation or measurement of the subject matter according to certain criteria. Internal control system can be considered effective if it warns about unreliable information in due time as well as identified unreliable information. Properly organized controls and developed control measures enable not only to identify weaknesses in the company’s activity but also take the corrective actions. Internal control includes not only accounting but the whole financial and economic activity of organization departments and the enterprise in whole (operative accounting, industrial management, finished products storage, its storing and sales, etc.).
ISAE 3402 (ISAE 3402/ SSAE 16) requires the auditors to perform audit procedures to obtain reasonable assurance about whether, in all material aspects, the control measures are properly designed and effectively operate in the client’s company.
The result of audit procedures is to provide an Independent Auditor’s Assurance Report on the description of control measures, their structure and operating effectiveness in the client.
The conceptual basis for financial reporting is the National accounting standards, International Financial Reporting Standards, accounting principles of USA (US GAAP).