about audit
Important specific facts about Audit, frequently discussed with clients.

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QUALITY IN THE AUDIT PROFESSION

  The Romanian Chamber of Financial Auditors (CAFR) performs controls over the Audit practices in order to ensure the professional standards and the quality of the Audit service.

  Based on the controls, the professional quality is measured and graded with degrees between A and D.
T&T AUDIT has obtained the degree A.


IT AUDIT

  Companies, especially international subsidiaries, operate with advances IT solutions covering both the financial-accounting functino, as well as controlling, budgets, costing, inernational consolidation reporting, and mostly technical operational modules, with each industry's particularity.
The audit profession must keep pace with the IT evolution.

  A measure of competence in Audit represents the ability to operate with data retrieved from such systems.
Internationally, there are Computer-Assisted Audit Techniques (CAAT) dealing with data import, processing, selection, analysis in structure and dynamics, correlations, investigating massive database with millions of records.

  The IT Audit is also a solution which avoids overloading the audited company; the auditor is able instead to extract its own data and the efficiency of its work is increased.
T&T AUDIT is meeting the current level of such professional requirements.


FOREIGN REPORTING

  The subsidiaries of international Groups are preparing reporting packages for Group consolidation.
Such packages are prepared in general according to the International Financial Reporting Standards (IFRS), but they are different in each company according to the country, industry, Group policy.

  For an accountant, the preparation of such a package is a professional challenge. Beyond the necessary Romanian accounting competences, the packages require efforts related to managing the differences between accounting systems, accounting policies, currencies and languages.
T&T AUDIT has the necessary experience in preparing, auditing, assisting, conceiving, implementing such packages.

  Another requirement met by T&T AUDIT is to report to Group Consolidator Auditors in English (Planning Memorandum, Completion Memorandum, Management Letter, Highlights Memorandum, Audit Report).


CONDITIONS FOR MANDATORY AUDIT

  Internationally (and this applies also to Romanian subsidiaries) companies are audited for stock exchange listing, but often it is just a Group policy enforced by shareholders.

  According to the Romanian laws, the conditions for mandatory audit are defined in the article 5 of the Finance Ministry Order 3055/2009 which enforces in Romania the European Directives.

  This law defines two main buckets of criteria which lead to mandatory audit:

(1) Size criteria (defined in the article 3 of the same law): if at the year-end, two out of the following three conditions are met:
      bullet Total assets exceed 3'650'000 EUR
      bullet Turnover exceeds 7'300'000 EUR
      bullet Average number of employees during the year exceeds 50

(2) Public interest companies (defined by the Ordinance 907/2005)
      bullet Credit institutions
      bullet Insurance and reinsurance companies
      bullet Entities regulated and supervised by the National Commission for Equities
      bullet Companies whose equities are listed on the Stock Exchange
      bullet National companies
      bullet Legal entities belonging to and consolidated by Groups which apply the IFRS
      bullet Legal entities other than the above ones, with grants or loans guaranteed by the State.

  Subsequently, by the Ordinance 28/2006, the conversion of leasing companies into Nonbank Financial Institutions raised also the condition for mandatory audit of their financial statements (art. 18(2)).


MINIMUM AUDIT PROCEDURES

  According to the professional regulations issued by the professional body's Decision 44/2005 (Romanian Chamber of Financial Auditors, CAFR), an Audit engagement must involve minimum mandatory Audit procedures over an year, defined by the Decision. The completion of these minimum procedures is quantified by CAFR at a normal level of 240 working hours, and the level may decrease to 180 hours for simple entities.

  In establishing the cost of an Audit mission, the starting point is the minimum working volume as defined above, and additional volume is calculated according to the particularites of the Audited company: significant inventories, complex reporting packages, several working points/units, initial audit which must cover the prior year also, complex costing systems, volume of activity, etc.

  In 2009, CAFR statistics show that the average rate in the profession is 29 EUR/hour.


PACKAGE OF SERVICES

  The Audit profession is governed by ethical regulations which enforce the independence of auditors.
Within the limits of these restrictions, T&T AUDIT provides tax consulting services and assistance to preparing financial statements for Romanian and international purposes.

  Besides Audit services, based on the professional certifications and according to the client needs, T&T AUDIT provides professional services such as: accounting, business valuation and property valuation, training, consulting for mergers, set-up of internal procedures and budgeting, and missions "agreed-upon-procedures" specifically tailored to meet the client's needs.


STATUTORY CONSOLIDATION

  The Romanian laws are enforcing, through the laws OMFP1752/2005 and Accounting Law 82/1991 republished, that Romanian parent companies are preparing and submitting consolidated financial statements starting with the financial year 2007, with reporting deadline at end of August. The law is in accordance with the VII-th European Directive on consolidated accounts.

The consolidated financial statements are due if the companies together are exceeding two out of the following limits:

bullet Total assets over 17.520.000 EUR
bullet Turnover exceeding 35.040.000 EUR
bullet Employees more than 250.

These financial statements must be audited.


INTERNAL AUDIT

  In spite of similarity in words, the internal audit is very different to the external (financial) audit.

RELEVANT COMPARISON

Internal audit

External (financial) audit

Scope

Internal processes within the organization

          Financial statements

Areas of interest

Operational

Financial - accounting

Focus

Economy, efficiency (optimize inputs), effectiveness (optimize outputs), risks, compliance with law, internal control, rules and procedures

Fair statement of economic reality in the financial statements and notes

Progress in time

Permanent

Yearly

To whom it is reported

To management

To shareholders

Transparency

Internal, confidential document

Audit Opinion - public document

Analysis of risks and internal control

It is a purpose itself, to check efficiency, effectiveness, identification of incompliances and informing the management for measures and optimization

It is performed for documentation and understanding the organization and identification of risks with the purpose of planning the audit; may generate confidential reports to management

Relationship with each other

Colaborate with the external auditors and supplies information

Use the information from internal auditors; assess the quality of internal control

Fraud

 

 

One of the objectives of internal audit is prevention, deterring, identification of fraud and establishing systems of control against fraud

Elements of fraud may enter in the auditors' attention during their activity but identification and reporting fraud does not represent the financial auditors focus

Laws

 

 

 

 

Companies' Law 31/1990 amended states that companies who meet the criteria for external (financial) audit must organize an internal audit function too.
There is also a Decision of Auditors' Chamber  88/2007 regulating the internal audit

Explained above (conditions for mandatory audit)



  Examples of internal audit procedures:

bullet Check the authorization of payments, purchases, discounts
bullet Check the system of obtaining several offers for the investments
bullet Check of quality assurance systems
bullet Examination of incidents and errors
bullet Monitoring projects - i.e. a software implementation
bullet Analysis on indices - i.e. scrap rate
bullet Centralizing operative reports - i.e. concusions after an inventory count
bullet Anti-fraud procedures - i.e. check the transactions with cash and transactions with related parties