Key features of an annual financial statement audit

Published 24 August 2023. Some rules have changed since; ask us for the current position.

An audit of financial statements is an independent examination carried out to express an opinion on whether the financial statements have been prepared in accordance with the applicable requirements. Its outcome is a formal auditor's report.

How an audit is carried out

An audit of the annual financial statements is done step by step. Auditors usually name several stages, the main ones being:

• preparation;
• analysis of the information obtained;
• organising the evidence;
• drafting the auditor's report;
• advice to management.

The preparation stage involves a close study of information about the organisation, drawing up a work plan and requesting specific business documents. At this stage the company signs an engagement agreement with the auditor and the practical arrangements are discussed.

Analysis and organising the evidence

Once the organisational matters are settled, the auditor moves on to testing and analysing the documents. This has to be done with full professional care, since that is the only way to reach reliable audit results. Besides reviewing documents, the auditor compares the information in different records and other sources. If the evidence is not sufficient, the auditor may request additional documents, interview the company's staff and so on.

When the evidence has been organised, the auditor forms a conclusion on how reliable the financial statements are and whether they comply with Ukrainian law.

Preparing the auditor's report

An audit of the annual financial statements always ends with a formal auditor's report, which is handed to the head of the organisation.

The report can be used to obtain a loan or to take part in an investment project.

Profit tax payers that are required to publish their annual financial statements together with an auditor's report must file those statements with the tax authority no later than 10 June of the year following the reporting year (clause 46.2 of Article 46 of the Tax Code of Ukraine, Податковий кодекс України).

Final stage

Where needed, the auditor can walk management through the audit process so that every shortcoming is clearly understood. The auditor will also give recommendations on improving how the team works and other matters.