Audit is a prerequisite for success of a business: an interview with Kerim Kozhakhmetov, the General Director of FinExpertiza Kazakhstan

4 June 2019

Audit is an independent review of reliability of financial statements. Some companies request audit services to prove their economic viability to shareholders, investors, foreign partners, while other firms would like to check their accountant to avoid possible tax consequences. What are the guarantees of audit quality and which skills and expertise an auditor must have - that was the topic of the interview between the General Director of FinExpertiza Kazakhstan Kerim Kozhakhmetov and Biznes-Mir ("business world") magazine.

- Kerim Karebayevich, you company is successfully operating on the Kazakhstan audit services market. Could you please tell in more detail who the auditor really is, what his/her obligations are, and what is the difference between an accountant and an auditor in terms of their job descriptions?

- The main difference between the auditor and the accountant is the level of professional qualification of the former. It can be said that the auditor is the accountant of the greatest expertise. The main task of the auditor is to determine whether the financial statements are reliable and comply with the legislation. To prove that the figures of an entity correspond to reality, the auditor should always be aware of all changes in legislation and bookkeeping. Audit is full of nuances. An auditor carries out audit and advisory services to improve bookkeeping, assists financial experts and accountants to avoid inconsistencies with the legislation. An auditor’s opinion is always based on legislation, it must include a reference to regulatory acts.

- Does it mean that audit assists tax inspectors to carry out in their work?

- No, audit is not related to tax authorities at all. The auditor’s report, which contains all information on the audit, including all misstatements identified during the audit, is strictly confidential and available only to the client. Tax authorities have no access to this information, but if your company has the auditor’s report, especially prepared by a firm with goodwill, it increases trust of tax authorities to your company.

- So, what is the point of audit after all?

- First of all, to increase effectiveness of work, and to avoid risks and various negative situations in the course of inspections carried out state authorities. In addition, to prove your economic viability to founders, investors and partners. I would recommend firms to carry out audit annually, at least to check the state of affairs. Audit is a prerequisite for success of a business.

- Is your company subdivided into various sectors, or, so to say, profiles? For example, if an auditor is involved in banking sector, is it the only area of his/her expertise? Or are your auditors universal experts and deal with various industries?

- We deal with all aspects of financial activities, tax, legislation and business activities. Our company is subdivided by sectors: tax audit, audit of bookkeeping and financial activities, audit of business activities and legal matters. But if the project is big enough, we establish a group of auditors specializing on tax, financial and business activities, and they work together.

- What was your personal way to this profession? What do you do in your work? What is the area of your specialization?

- Before 1995, I worked as a chief accountant. In 1995 I came to Kazakhstanaudit. This company still exists today. In 1998 I received the auditor’s certificate. In 2001 I set up an audit firm and started to work on my own. Since April 2018, I have been the General Director of FinExpertiza Kazakhstan. I was offered to take an executive position, as I obtained significant experience in financial accounting. FinExpertiza is an international company, and the office in Kazakhstan is a branch of FinExpertiza Network with the head office in Moscow. Also, FinExpertiza has representations in Armenia, Georgia, Turkey, Uzbekistan, Kyrgyzstan, on Cyprus and in some other countries.

The focus of my audit activities is bookkeeping. Since I graduated with a degree in accounting and worked as a chief accountant for a long time, I have very good knowledge of the specifics of this activity.

- What kind of clients do you have?

- We have various clients: big businesses, JSCs with their subsidiaries, as well as small and mid-sized enterprises.

We exercise professional approach to all our clients and do not set any priorities. We do not give any special attention to big companies and treat all clients with due respect.

By decision of the Board of Directors' Committee of Kazakhstan Stock Exchange (KASE) on financial statements and audit of issuers, following 4 October 2018, ТОО FinExpertiza Kazakhstan was included in the list of audit firms recognized by KASE on the second level.

This decision increased our clientele of big clients.

- What is the guarantee for external auditor’s reports?

- The guarantees are, first of all, image and goodwill, and experience of auditors. I would also point out that audit activity in the Republic of Kazakhstan is licensable, and every expert obtains accreditation. In terms of legislation, our activity is regulated by the Law on Auditing and other regulatory legal acts of the Republic of Kazakhstan. The second level in the system of regulation of audit is comprised of the International Standards on Auditing (ISА). And, of course, every company has its internal audit standards, which also foster the quality of audit.

- Can an auditor be a freelancer, who works independently, or for several companies? Or the auditor can work only for one company?

- The Law on Auditing prescribes that the auditor must work within a company. In addition, in an audit firm 100% of founders must be auditors - regardless of the number of founders. Founders must be from the audit environment. So, there are no independent artists in this profession.

- How to become an auditor?

- The main requirement to start as an auditor is to have higher economic education and the working experience in this area of at least three years. To obtain the auditor’s certificate, you have to pass qualification exams: on banking, accounting, civil law, tax legislation, insurance and pension legislation, and financial management.

- Thank you for this interesting conversation.

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