The Russian Duma has passed a second reading of a federal law set to abolish compulsory audits for SMEs with total assets of RUB60 million ($1.9million), up from RUB20million or sales of less then RUB400million, up from RUB20million.
The passing of the law is in its final stages and the proposed changes are said to come
into force in January 2011. In the latest International Accounting Bulletin Russia survey firms said they are already struggling with fierce competition, cases of poor audit quality and a slowly recovering market. Reduced number of mandatory audits is expected to affect firms as audit fees have been in sharp decline in the past 18 months.
Jukis Consulting Group partner Alenichev Viacheslav said the law will mostly hit small practices in rural areas that specialize in audits for small and medium size companies.
He said that currently the Auditing Chamber Russia has about 8,000 members and
once the new law comes into force and the small audit firms are out of the market the
number of members is set to decrees by about 60 percent. “About 50 percent of companies registered with the Auditing Chamber Russia at the moment will have to leave the market or consolidate among each other” Viacheslav added.
As the change in law will have destructive consequences for small audit companies the
mid-tier firms are not expected to face great challenges once the law is passed