Last year the paperwork and problems with documentation for large companies became more complicated. According to the changes in the RA law on accounting and audit the large companies, the income of which exceeds one billion dram in 2009 must publish the annual reports after undergoing audit, and this should be published along with the audit conclusion.
This means that now on the mechanism of compulsory audit is applied. According to the state incomes committee 361 companies exceeded the limit of one billion drams profit in 2009. They had to undergo audit and publish their reports till July 1.
However, not all the companies managed to do the law requirement. As the web page of the ministry of finance writes, as a result of examinations they have found out that 48 large companies have not undergone audit and failed to publish their annual reports along with the audit conclusions. Such companies are the Mikmetal, City Petrol Service and Arsoil companies.
Yesterday we called several large companies to find out why they have not fulfilled the law requirement on compulsory audit. However, all these companies refused to give any information. We were told by the ministry of finance that not all these companies have refused to undergo audit. There are companies, which undergo audit for the first time and they are still in the process. The head of the RA finance and audit methodology department Razmik Melikyan says that he does not exclude the possibility that some of the companies even may not know about the requirement of this law (but hardly it may be true for large companies).
It is worth mentioning that the reason of the failure to undergo audit may be the fact that the punishment fee is very small. According to the law, if the reports are not published in time, for the first time the punishment fee is 50 thousand drams. For the second time, the punishment reaches 500 thousand drams, but it is not a big deal for the large companies.
Now let’s speak of the other side of the process, the audit companies. When the law on audit was adopted, people thought the incomes of companies would drastically grow. A part of the existing audit companies have registered only recently, which was a result of the above mentioned law. However, the audit companies, which are experienced, are not satisfied with the situation.
For example, the director of Grand Thornton Amio company Gagik Gyulbudaghyan said to the Mediamax that the expectations connected with this law amendment had not come true. He told us that even though since the adoption of this change of the law the number of their clients has increased, but it is not connected with this law. He also said that many of these 361 companies had been their clients before that too, thus this law did not increase the number of their clients significantly.
Mr. Gyulbudaghyan says that they don’t meet with every single client. They have a principle of “client acceptance” and the clients should comply with certain criteria so that the Grand Thornton agrees to audit the mentioned company. This means that the audit company and its conclusions are professional. The director of the mentioned company says that only few companies in the market are working properly and most of them are “selling” their stamps. We asked if there had been companies among these 361 companies that had been refused to be audited by the Grand Thornton Amio. He said that there had been companies like that.
According to Mr. Gyulbudaghyan, in order to increase the efficiency of the institute of audit the government should adopt a very short list of audit companies to be in charge of auditing the large companies. He said that for example the World Bank and other international institutions are using this experience.
However, not many people can share this opinion. There are audit companies that don’t agree with this opinion. The government is against this too. “I don’t agree with that opinion. First, it is very difficult to define standards and decide which companies can be involved in that list. Besides that, such short list would be a violation of the law as it will limit the opportunities of selection of companies. There are about 37 licensed companies, which have the same license and the same rights. Eventually it is about the market and the companies are the ones to make choice between the audit companies,” said Razmik Melikyan.
Based on this situation, we may assume that the competition between audit companies will become tense and more difficult next year. The problem is that starting from January of next year a law will be enforced, according to which the companies with actives exceeding the amount of one billion drams should undergo audit as well. According to preliminary calculations, about 500 companies will have to undergo audit as a result of this change of the law. This change may result in a “hunting” against these companies because it is not a cheap pleasure to order audit.