Self-regulatory Organization of Auditors Association “Sodruzhestvo"

SRO AAS, as the only self-regulatory organization of auditors, is responsible under the Federal Law on Auditing Activities No. 307-FZ of 2008 for conducting QA reviews of all its members (membership in SRO AAS is mandatory for all auditors and audit firms). In addition, auditors of public interest entities (PIEs) are subject to QA reviews by the Federal Treasury.

In 2014, the association translated the revised SMO 1, reviewed its requirements, and developed a QA program based on SMO 1 requirements. To operationalize its system, SRO AAS updated internal and external quality control documents, organized training for inspectors and members on the procedures and ISQC 1, and developed implementation guidance. In 2016, SRO AAS reported that, apart from the adoption of ISQC 1 and ISA 200, the QA review system fully complied with the requirements of SMO 1. Adoption of quality control standards and therefore full compliance with SMO 1 was further reported in 2020.

The QA review system of SRO AAS is regulated by the Rules of the organization and conduct of QA reviews and other regulations. The QA Commission, comprised of 16 members, approves the annual plan for QA reviews of its members, develops programs for conducting QA reviews and application materials on QA reviews, approves results of the QA reviews, and makes reports on the results of the QA reviews publicly available.

The association also contributes to the QA regulatory policy-making process through its participation in the Committees and Working Group of the Audit Council of the Ministry of Finance in accordance with its work plan and by providing comments on draft policies and regulations prepared by the Ministry.

Considering an overlap in inspection activities for audits of PIEs, a QA review Council was established under the Treasury with participation of SRO AAS, aimed at streamlining this activity. For example, the SRO AAS together with the Federal Treasury of the Russian Federation developed a common Classificator of the misconduct to create a consistent approach to misconduct identified during the QA reviews of the audit firms and individual auditors. These procedures are mandatory for application by both parties. SRO AAS has developed a work plan to address other issues as well.

In 2019, SRO AAS also developed regulations on monitoring compliance with anti-money laundering and financing of terrorism and reviews compliance during QA inspections.

Quality control standards, AML matters, implementation of ISA, among other areas, are included in SRO AAS CPD programming and other trainings, which the association conducts in accordance with its annual plan.

In addition, SRO AAS holds and participates in webinars, conferences, roundtables on QA-related matters and follows developments in international standard-setting applicable to the area such as the proposed International Quality Management Standards that have been approved by the IAASB. In April—May 2019, SRO AAS initiated discussion among the PAOs in the Eurasian region on the quality management standards during an international conference attended by IAASB representatives, and in June 2019 submitted its comments on the related IAASB exposure draft.

SRO AAS contribution to the development of a QA review system in the jurisdiction is commendable. The association has demonstrated that, within the scope of its authority, it is committed to meet the SMO 1 obligations and has established processes to review and improve the system on an ongoing basis. SRO AAS is encouraged to continue collaboration with the Treasury to develop a consistent approach to QA reviews, to ensure that the QA review system conducted by the Treasury incorporates best practices as formulated in SMO 1, and to this effect report on the extent of compliance of the Treasury’s system with SMO 1 in the next round of updates. SRO AAS’s leadership in the region in raising awareness about the new quality management standards are notable. Development of a plan to support its membership with the implementation of the new quality management standards before they become effective is recommended.

Current Status: Review & Improve

As a self-regulatory organization, SRO AAS is involved in the implementation of the initial professional development (IPD) and continuing professional development (CPD) requirements for auditors, which are established by law, with universities, regulators, and other PAOs. The requirements, according to SRO AAS, are generally consistent with IESs; however, the extent of alignment remains to be established.

SRO AAS’s mandate under the law includes monitoring its members’ compliance with the CPD requirements (120 hours for three consecutive calendar years). CPD programming is offered by accredited training centers. As of 2020, 47 educational organizations across Russia are included in the register of educational providers maintained by SRO AAS.

In its 2020 Action Plan, SRO AAS outlined several initiatives aimed at bringing educational requirements for auditors closer to those of the IESs and at collaborating with regulators and other stakeholders involved in the process of professional development of auditors.

Members of the Committee for Professional Education of the association participated in the development of a new qualification exam that was launched in March 2020 by the Unified Certification Commission (UCC). The resulting new syllabus and exam structure, according to SRO AAS, incorporate subject areas and competencies of the IESs.

SRO AAS is also involved in the development of a quality control system for the training of auditors as well as in the development of CPD programming. SRO AAS provides its recommendations to the Audit Council, which issues a list of priority topics for CPD on an annual basis.

SRO AAS reports that it works with higher education providers to ensure that their programs are in line with IES 1 and updates its own programming to ensure compliance with the IES and international developments. However, it is not clear when the programs were last updated.

The association reports that it cooperates with other PAOs nationally, regionally, and internationally. Memorandums of understanding were signed by SRO AAS with PAOs, including ACCA and ICAEW, to promote and develop the audit profession in Russia through joint work and cooperation.

SRO AAS remains committed to fulfilling its obligations under SMO 2 within the scope of its responsibility. Staff reiterate its previous recommendation that the association lead the process of bringing national requirements in line with IESs. To this effect it is recommended that SRO AAS conduct a comprehensive review of the existing educational requirements for professional accountants in the Russian Federation against those of IESs. For areas of less than full compliance, specific actions to close the gaps, if any, with a defined timeframe need to be developed in collaboration with other stakeholders. It is recommended that the review be conducted against the HYPERLINK "https://www.iaesb.org/publications/revisions-ies-2-3-4-and-8-1" revised IES that address learning and development for information and communications technologies (ICT) and professional skepticism. Translating the standards, reviewing the requirements now and preparing a plan to incorporate them into national requirements will help ensure that the educational programming for auditors is IES-complaint when the standards become effective in January 2021. The IES Checklist and the Accountancy Education E-Tool developed by IFAC may be used to conduct an assessment and to consider available implementation support materials.

Current Status: Execute

SRO AAS is not directly involved in the official adoption of ISA, which are required for application by the Federal Law on Auditing Activities No. 307-FZ of 2008 law, following an endorsement process by the Government of the Russian Federation.

Nevertheless, the association has been actively involved in the process leading up to the adoption of auditing standards and has promoted and supported adoption of ISA over the years. In the past, it contributed to the adoption of the Federal Auditing Standards through its representation on the Audit Council of the Ministry of Finance and its representatives are currently involved in the activities of the ISA Working Group of the Ministry of Finance tasked with the endorsement of ISA.

With mandatory application of ISA finally becoming effective in 2017, SRO AAS continues to provide implementation support to its members through its Committee on ISAs that was established in 2015 to prepare its members for ISAs adoption and implementation.

SRO AAS indicates that ISA are included in its continuing professional development programs; however, it is not clear when the programs were last updated and what version of ISA has been incorporated in the education materials.

The association develops practical implementation guidance for auditors as well as a complete set of auditor's working documents such as sample audit reports and audit contract form and templates, among other materials. In 2018, SRO AAS translated and published on its website the Guide to Using International Standards on Auditing in the Audits of Small- and Medium-Sized Entities, 4th Edition.

Webinars, trainings, conferences, and roundtables on specific audit matters are continuously offered to the members with wide participation of professional accountancy organizations of auditors and accountants of the Eurasian region such as April 2019 conference on application of ISA, which was attended by the IAASB. Information on the developments around auditing in the Russian Federation, Eurasian region, and globally is disseminated on SRO AAS website in a timely manner.

Since 2019, SRO AAS has initiated and led discussions on the proposed and new ISAs to ensure the voice of the Russian-speaking profession is taken into consideration in international standard-setting. In 2020, SRO AAS translated ED on Proposed International Standard on Auditing 600 (Revised) and facilitated discussion, and subsequent submission of comments to the IAASB, at the regional level.

SRO AAS contribution to the adoption of ISA in the Russian Federation and uniting the voice of the profession in the region are notable. The association has demonstrated that, within the scope of its authority, it is committed to meet the SMO 3 obligations and has established processes to review and improve the system on an ongoing basis. Recognizing that translation of ISA is not within the direct responsibilities of SRO AAS, the association is nevertheless encouraged to offer its support to the regulators with developing ongoing processes that will ensure timely adoption of new and revised ISAs as they become effective. The association is also encouraged to ensure that its programming is continuously updated to include new and revised standards.  

Current Status: Review & Improve

As a self-regulatory organization (SRO) of auditors, SRO AAS is responsible for the adoption of the Professional Code of Ethics and the Rules of Independence issued by the Ministry of Finance for its members. The latest pronouncements were issued in 2019 and in May 2019 the Board of SRO AAS adopted the Code and the Rules for application by its members. In the past, the association also participated in the development of the previous versions of the Professional Code of Ethics

The 2019 Code is based on the 2018 International Code issued by the IESBA, although no direct references to the international pronouncements are made. To determine the extent of alignment of national requirements for auditors with those of the soon to be released 2020 International Code of Ethics, in 2020 SRO AAS created a Task Force, uniting translators, representatives of the SRO AAS, profession, and other interested parties. An action plan was developed to establish ongoing processes to incorporate the new and revised pronouncements of IESBA into national requirements.

In 2016, SRO AAS formed the Committee on Professional Ethics and Auditor Independence, which is acting in accordance with its annual plans. Representatives of the association participated in an IESBA webinar in 2019 as well as in a number of conferences. A webinar on the new code was also conducted in 2019 for members of SRO AAS and auditors in the Eurasian region countries.

The association reported in its 2020 Action Plan that it updates its continuing professional education course offerings to include up-to-date ethics-related matters. As a priority for 2021, SRO AAS is developing procedures to incorporate requirements of the International Code of Ethics for Professional Accountants released in October 2020 related to the promotion of the role and mindset expected of all professional accountants into national ethical requirements.

SRO AAS is committed to fulfilling its obligations under SMO 4 within the scope of its responsibility. SRA AAS activities aimed at identifying the extent of alignment of the national Code with the International Code of Ethics and the development of an action plan to establish ongoing processes to incorporate the new and revised pronouncements of IESBA into national requirements are commendable. SRO AAS is encouraged to ensure that most up-to-date ethical requirements are incorporated into its educational programming and to enhance dissemination of information on international developments in the area. It should also consider enhancing its activities to support implementation of the Code. Such activities may include holding seminars and focused trainings, establishing a hotline for confidential questions, and disseminating information on the developments in the area through different communications means, among other activities. If deemed pertinent, SRO AAS may also consider participating in the international standard-setting by providing comments to the IESBA Exposure Drafts and other public consultations.

Current Status: Execute

SRO AAS, with no direct authority for setting public sector accounting standards and with its membership comprised of auditors and audit firms, reports that in general it supports the adoption of IPSAS in the Russian Federation and monitors developments in the public sector accounting both nationally and internationally. When opportunities arise, SRO AAS states it is committed to raising awareness of the standards, participating in conferences, trainings, and seminars on IPSAS and to monitoring the developments on an ongoing basis. In September 2019, for examples, the association participated in the regional seminar "International Public Sector Accounting Standards" in Almaty, Kazakhstan. No further activities have been reported.

SRO AAS remains generally committed to fulfilling its obligations under SMO 5. The association is encouraged to further  consider opportunities in the area of public sector accounting and, if deemed feasible, develop a plan with a defined timeline and specific activities in the area. During ongoing engagements with the staff, SRO AAS is also encouraged to report on the progress made on the issuance of national public sector accounting standards based on IPSAS and the related association’s activities.

Current Status: Execute

In line with the requirements of the Federal Law on Auditing Activities No. 307-FZ of 2009, SRO AAS is responsible for the development of an investigative and disciplinary (I&D) system to address violations by its members of applicable laws, auditing standards, and the Russian Professional Code of Ethics and Rules of Independence.

As required by the Law on Self-Regulatory Organizations, SRO AAS established the Disciplinary Committee in 2010, comprised of eight members appointed for a period of three years, that operates in accordance with the Regulation on the Disciplinary Commission of the SRO AAS, last amended in 2017.

The association reports that its I&D system is operated in accordance with the Procedures for Applying Disciplinary Measures to Members of the SRO AAS, last amended 2020. The SRO AAS regularly publishes a report on the result of disciplinary proceedings.

Since the establishment of the system, several reviews have been conducted, the latest one in 2017. The reviews included revising the regulations, policies, and procedures to address new ethical and legislative requirements; developing administrative and complaints procedures that comply with SMO 6; and restructuring the Disciplinary Committee to ensure that members of the Committee have appropriate legal education and work experience to carry out their duties effectively. It also raised awareness of all updates to the I&D system, incorporated changes in initial and continuous professional development programs course materials and began publishing results of all disciplinary proceedings. In 2016, SRO AAS reported that it is almost fully complies with the requirements of SMO 6, with further improvements needed in the administrative processes. In 2020, SRO AAS conducted another self-assessment of its system against the requirements of SMO 6 and reported full compliance.

The association has demonstrated that, within the scope of its authority, it is committed to meet the SMO 6 obligations and has established processes to review and improve the system on an ongoing basis. SRO AAS is encouraged to raise awareness about best practices in investigation and discipline of professional accountants, including those formulated in SMO 6, of other stakeholders in the jurisdiction in order to promote compliance at the jurisdiction level, and facilitate collaboration on the establishment of a unified system.

Current Status: Review & Improve

As of 2020, IFRSs as issued by the IASB, translated into Russian, and endorsed by the Ministry of Finance in consultation with the Central Bank of the Russian Federation are required for the preparation of consolidated accounts of public interest entities. Other companies must apply the Russian Accounting Standards (RAS), which differ from IFRSs, set by the Ministry of Finance.

SRO AAS, with no direct authority for setting private sector accounting standards and being an organization uniting auditors, reports that it supports adoption and implementation of IFRS where possible. It does this by monitoring changes to IFRS and preparing comments on Exposure Drafts and other pronouncements issued by the IASB; raising awareness of new and revised changes by distributing information on the standards; and collaborating with other stakeholders to facilitate effective implementation through its participation in conferences and working groups. The association also indicated plans to acquire and share knowledge of IFRS and incorporate standard-related topics into its various initial and continuous professional development programs as well as certification examination programs.

The association has demonstrated that, within the scope of its authority, it is committed to meet the SMO 7 obligations with opportunities for continued advancements. Recognizing that translation and endorsement of IFRS is not within the direct responsibilities of SRO AAS, the association is nevertheless encouraged to raise awareness of and offer its support to the regulators with developing ongoing processes that will ensure timely adoption of new and revised IFRSs as they become effective. The association is also encouraged to ensure that its programming is continuously updated to include new and revised standards.  

Current Status: Review & Improve