Tuesday, November 26 2019 12:56

ArmInfo. The institute of mandatory audit is introduced in Armenia. Amendments to the Laws "On Accounting", "On Auditing Activities" and the package of related  documents were approved at the sitting of the Parliamentary  Commission on Financial-Credit and Budgetary Issues of the RA  National Assembly on November 26 in the second and final reading.   The package will be submitted to the plenary session of Parliament.

Presenting the project, RA Deputy Minister of Finance Arman Poghosyan  emphasized that the bills are part of reforms in the field of  corporate financial reporting. Their adoption will lead to increased  transparency, the formation of trust between business entities.

It is envisaged that the requirement for mandatory audit will be  extended to large and medium-sized companies, whose performance  results of the previous three years will comply with the provisions  of the law.

In particular, we are talking about companies with assets of over 2  billion drams, an annual profit of over 4 billion drams and the  number of employees over 100 people.

The deputy minister noted that these requirements comply with the  directive of the European Union, according to which a mandatory audit  is carried out in companies with more than 50 employees. In Armenia,  this indicator is increased to 100 and higher. Thus, Arman Poghosyan  continued, out of 1,200 business entities falling under these  indicators, a mandatory audit will be applied to 600.  The package  also introduces requirements for audit companies, which by their  status should be commercial, but not open joint stock companies. Each  company must have at least three auditors, two of which must be  independent, but in order to avoid a conflict of interest, do not  represent these companies. Moreover, preference will be given to  those companies in which 50 or more percent of the shares belong to  the auditors themselves, who have the appropriate qualifications, in  other words, all those who are registered in the register, which  involves replacing the institution of licensing of auditors.

The regulator will be involved in the regulation of the created  regulator represented by the Public Control Council, which will  operate autonomously, but within the structure of the Ministry of  Finance. The Council will consist of 7 independent members, which  will be proposed by the Ministry of Finance, the Ministry of Economy,  the Central Bank and the State Revenue Committee.  The Council will  implement policies in the field of accounting and auditing, control  the quality of activities.

Companies that undertake to publish their statements will be able to  do this on the sites of officially registered media. Thus, as the  deputy minister noted, business entities will have the choice to  publish reports either on the official website of azdarar.am or on  the website of companies, and in the absence thereof, on the websites  of officially registered media. The accountants of these companies  will have to undergo at least 40 hour retraining courses and receive  the appropriate certificates.  n turn, the Deputy Chairman of the  Central Bank of the Republic of Armenia Nerses Yeritsyan pointed out  the importance of applying international standards in the preparation  of accountants, which would help attract new investments. In this  context, he considered it necessary to introduce a "positive state  obligation" related to translations of international documents and  their provision to business entities. The deputy chairman of the  Central Bank also pointed out the importance of a gradual, smooth  transition to the new system, and not by breaking everything old.  It  should be noted that the practice of mandatory audit and publication  of financial reports was first applied in Armenia at the initiative  of former Prime Minister Tigran Sargsyan in 2009. However, then, with  the change of government, which was headed by Hovik Abrahamyan in  2014, under the pressure of big business, this measure was canceled.  In an interview with ArmInfo correspondent, the current Minister of  Economy Tigran Khachatryan, referring to this topic, said that  earlier this measure was purely formal in nature, since the vast  majority of reports did not correspond to the real state of affairs  at enterprises that are actively using double-entry bookkeeping. Most  likely, this measure was aimed at supporting the market of audit  services, in which the representative offices of the international  audit "Quartet" are also actively working.

According to the publication of audited financial reports (ArmInfo Investment Company) in 2010  began to prepare new analytical bulletins .  With the government abandoning the mandatory audit, the number of  "transparent" companies dropped sharply, falling from 110-120 to  20-30. Some JSCs and exclusively enterprises with foreign capital  continue to publish their balances, according to the requirements of  the "parent companies".