The Audit Oversight Board draws attention to the need for audit entities for compliance with the requirements of Article 36 of the Law of Ukraine “On audit of financial statements and auditing (hereinafter – the Law).
According to the Part 1 of Article 36 of the Law the audit entity that provides statutory audit services to the public interest entity shall inform the supervisory body, which according to the legislation supervises such an entity the following information:
1) violation of the legislation in the framework of the supervisory body competence;
2) substantial threat or doubts about the possibility of the entity to continue its activity on a continuous basis;
3) refusal from the expression of the opinion or provision of negative or modified opinion.
In addition, in accordance with the fifth paragraph of Part 1 of Article 36 of the Law the audit entity shall inform about any information regarding the issues specified in paragraphs 1-3 of this part, which he learns in the process of performance of the statutory audit engagement of the legal entity that has close links to the public interest entity, the statutory audit of the financial statements of which it also conducts.
Part 2 of Article 36 of the Law provides that the National Bank of Ukraine, the National Securities and Stock Market Commission and National Commission on State Regulation of Financial Services Markets as supervisory bodies shall implement a mechanism of interaction with audit entities that carry out the statutory audit of financial statements of public interest entities, supervision of which is carried out by the above-mentioned supervisory authorities.
At the same time, there are cases of non-compliance by certain audit entities with the above provisions of Article 36 of the Law, in terms of the obligation to inform the body which supervises such an entity about violation of the legislation in the framework of the supervisory body competence, in particular, the National Securities and Stock Market Commission; substantial threat or doubts about the possibility of the entity to continue its activity on a continuous basis; refusal from the expression of the opinion or provision of negative or modified opinion.
In order to ensure compliance with this rule, the National Securities and Stock Market Commission adopted Decision No. 694 of November 14, 2019 «On submission of information to the National Securities and Stock Market Commission by an audit entity providing services of statutory audit of financial statements of public interest entities supervised by the National Securities and Stock Market Commission».
The said decision approved the relevant forms of submission of information to the National Securities and Stock Market Commission and also establishes that the audit entity shall submit to the National Securities and Stock Market Commission information in accordance with the forms approved by this decision in electronic form.
The procedure for informing the National Bank of Ukraine about cases provided for in Article 36 of the Law is determined by the Regulations on the Procedure of Submission the Audit Report to the National Bank of Ukraine based on the Results of Annual Audit of Financial Statements of a Bank, Banking Group and Audit of Financial Statements of a Member of a Banking Group, approved by Resolution of the Board of the National Bank of Ukraine No. 90 dated August 2018 (as amended).
Please note that non-compliance with the requirements of the said article will indicate that the audit entity has committed professional misconduct, under Part 5 of Article 42 of the Law in terms of breach of obligations, defined by the Law, as a result, application of penalties provided for in Part 6 of Article 42 of the Law may be applied to the audit entity.
In order to avoid negative consequences, we emphasize the need for compliance with the requirements of Article 36 of the Law by audit entities that provide statutory audit services to public interest entities in accordance with the procedure established by the National Bank of Ukraine and the National Securities and Stock Market Commission.
