External audit is not a pleasant process for any company. It is time consuming and requires a lot of preparation of the documents.
The subject of external audit is usually the financial statement of the company. Audit is conducted with the aim of giving a public opinion on the reality and objectivity of financial statements, regarding their compliance with the legal framework.
In the broadest sense, audit is a process of examining the accuracy, completeness, credibility, legality and objectivity of certain phenomena and processes.
In the narrowest sense, the term audit is considered as an examination of the reality of the company’s financial statements, the legality of the company’s operations and the assessment of internal accounting controls, in accordance with international auditing standards.
Companies that are subject to audit
Pursuant to Article 6 of the Law on Accounting (“Official Gazette of the RS”, No. 62/2013), according to the financial statements economic entities are classified into: micro, small, medium and large. Article 21 of the Law on Audit prescribes in detail which economic entities have the obligation of external audit of financial statements.
Obligors of external audit of financial statements are:
- Micro and small legal entities and entrepreneurs who have generated operating income of EUR 4.400.000,00 in RSD equivalent in the business year.
- Large and medium-sized legal entities
- Public companies regardless of size
- Branches of foreign legal entities performing economic activity in Serbia, whose realized operating income exceeds EUR 4.400.000,00 in RSD equivalent
- Parent companies that prepare consolidated financial statements, regardless of size
- All public companies have a mandatory audit regardless of size, which is regulated by Article 43 of the Law on Public Enterprises,
- Public joint stock companies,
- Payment institutions and electronic money institutions,
- Political parties,
- Legal entities participating in public procurement tenders,
- Financial organizations: banks, insurance companies, financial leasing companies, voluntary pension funds, stock exchanges and broker-dealer companies, open-end and closed-end investment funds and investment fund management companies, factoring companies and other financial organizations.
What should be presented to the auditor?
During the audit, you are required to provide the audit firm with all necessary documentation, documents and reports, provide access to all programs and electronic records, including printed material and copies on electronic media, and provide information about the programs and all information necessary to perform the audit.
You are also required to provide the audit firm with access to and use of the audit facilities during business hours, as well as to provide appropriate equipment and staff.
After the audit, you are obliged to submit to the Agency the audit report, together with the regular or consolidated annual financial report, signed with a qualified electronic signature of the key audit partner and prepared in accordance with the law and international auditing standards.
The financial statements that were the subject of the audit must accompany the audited report.
You will work entirely in your own interest only by adhering to these principles. Transparency is the key in this process.
When it comes to auditing, your accountant is your best friend.
Deadlines for selection of an audit company
The Assembly, i.e. the body designated by the general act in your company shall elect the auditing company no later than 30 September of the financial year to which the audit relates.
The aforementioned deadline may be longer in the case of an audit of the consolidated financial statements.
For legal entities, the General Meeting (or the Body determined by the general act of the legal entity being audited) shall select the auditing company no later than three months before the end of the financial year to which the audit relates.
When it comes to auditing consolidated accounts, there is no set deadline for concluding the contract.