Peer Review Report Auditor in Russia Moscow –Free Word Template Download with AI

Independent Assessment of Quality Control Systems

This Peer Review Report presents the findings of an independent evaluation conducted on the quality control systems of "Moscow Capital Assurance LLC" (hereinafter referred to as the "Auditor"). The review was performed in accordance with the requirements of the Federal Law of the Russian Federation No. 307-FZ "On Audit Activity" and the relevant Federal Standards of Audit (FSA). The primary objective of this review is to assess whether the Auditor maintains a robust system of quality control that ensures compliance with professional standards and legal requirements within the jurisdiction of Russia, specifically operating out of Moscow.

The review team examined the firm's policies and procedures regarding leadership responsibilities, ethical requirements, acceptance and continuance of client relationships, human resources, engagement performance, and monitoring. The overall conclusion of this Peer Review Report is that the Auditor's quality control system is designed appropriately and is operating effectively, with minor recommendations for improvement regarding documentation of specific risk assessments.

The scope of this Peer Review Report covered the period from January 1, 2023, to September 30, 2023. The review methodology included interviews with key personnel in Moscow, inspection of quality control manuals, and a detailed sampling of audit files. Specifically, the review team selected five audit engagements of varying complexity to test the application of quality control policies. These engagements included audits of financial statements for entities operating in the manufacturing and financial services sectors within the Moscow region.

The evaluation was conducted against the criteria set forth in Federal Standard of Audit (FSA) 1001 "Quality Control for Firms that Perform Audits and Reviews of Financial Statements, and Other Assurance and Related Services Engagements." The review team ensured that the assessment reflected the specific regulatory environment of Russia, including recent amendments to audit legislation.

The Auditor demonstrates a strong "tone at the top" regarding the importance of quality in audit engagements. The Managing Partner in Moscow has established clear policies emphasizing that quality is paramount over commercial considerations. The review team observed that the leadership actively promotes a culture where professional skepticism is encouraged.

However, the Peer Review Report notes that while leadership responsibilities are well-defined, the communication of quality objectives to junior staff could be more frequent. It is recommended that the Auditor implement quarterly town-hall meetings in the Moscow office to reinforce quality standards and discuss recent regulatory updates from the Ministry of Finance of the Russian Federation.

Compliance with ethical requirements is a critical component of this Peer Review Report. The Auditor has implemented effective policies to ensure compliance with the Code of Professional Ethics for Auditors in the Russian Federation. The firm maintains a comprehensive independence monitoring system.

The review team examined the firm's conflict of interest checks and found them to be rigorous. All partners and staff in the Moscow office are required to submit annual independence declarations. The Auditor also maintains a register of financial interests and relationships with audit clients. No breaches of independence were identified during the review period. The firm's approach to ethical dilemmas is well-documented, and staff have access to an ethics hotline for confidential reporting.

The Auditor has established clear procedures for the acceptance and continuance of client relationships and specific engagements. These procedures are designed to ensure that the firm only undertakes engagements where it can perform the work competently and in compliance with ethical requirements.

The Peer Review Report highlights that the firm conducts thorough due diligence on prospective clients, including checks against sanctions lists and assessments of management integrity. This is particularly relevant given the current economic climate in Russia. The review team found that the documentation for client acceptance was complete for the sampled engagements. The firm also performs annual reviews of existing client relationships to determine if continuance is appropriate.

The Auditor recognizes that having sufficient staff with the necessary competencies and capabilities is essential for performing audit engagements in accordance with professional standards. The firm's human resource policies cover recruitment, performance evaluation, and professional development.

The review team noted that the firm invests significantly in the training of its staff in Moscow. There is a structured training program that covers technical audit skills, updates on Russian Accounting Standards (RAS) and International Financial Reporting Standards (IFRS), and soft skills. The Peer Review Report commends the firm for its mentorship program, which pairs junior auditors with experienced seniors. However, it is recommended that the firm enhance its training on IT audit skills to keep pace with the increasing digitalization of clients' systems.

The core of this Peer Review Report focuses on the performance of audit engagements. The Auditor has established policies and procedures to provide reasonable assurance that engagements are performed in accordance with professional standards and applicable legal and regulatory requirements.

The review team examined the audit files for the sampled engagements and found that the work was generally well-planned, supervised, and documented. The firm utilizes a standardized audit methodology that aligns with FSA requirements. The documentation of risk assessments, audit evidence, and conclusions was adequate. The Peer Review Report notes that the firm's engagement quality control reviews (EQCR) are performed effectively for high-risk engagements. The EQCR reviewers are independent of the engagement team and possess the necessary expertise.

One area for improvement identified in this Peer Review Report is the consistency of documentation regarding the evaluation of management's use of the going concern assumption. While the work was performed, the documentation in some files lacked sufficient detail to support the conclusions reached. The Auditor is advised to provide additional guidance to engagement teams on documenting this specific area.

The Auditor has a monitoring process designed to provide reasonable assurance that its policies and procedures are relevant, adequate, and operating effectively. The firm conducts an annual internal inspection of a sample of completed engagements.

The Peer Review Report found that the firm's monitoring process is robust. Deficiencies identified during internal inspections are communicated to the relevant engagement partners, and remedial actions are taken. The firm also tracks trends in deficiencies to identify systemic issues. The review team recommends that the firm consider expanding the scope of its monitoring to include a review of non-audit services provided to audit clients to ensure that independence is not compromised.

Based on the procedures performed and evidence obtained, the Peer Review Report concludes that "Moscow Capital Assurance LLC" has a system of quality control that is designed appropriately and is operating effectively. The Auditor complies with the requirements of Federal Law No. 307-FZ and the relevant Federal Standards of Audit.

The following recommendations are made to further enhance the quality control system:

• Enhance communication of quality objectives to junior staff through regular meetings.
• Improve documentation of the evaluation of the going concern assumption in audit files.
• Expand training on IT audit skills to address the increasing complexity of clients' IT environments.
• Consider including non-audit services in the scope of the monitoring process.

The Auditor is required to respond to these recommendations within 30 days and implement the necessary changes within the next quality control cycle.