Auditors are cut off income – Newspaper Kommersant No. 7 (7452) dated 01/17/2023

Auditors may lose a significant part of their income against the backdrop of the abolition of the use of international financial reporting standards (IFRS) for financial institutions. According to experts, this will primarily affect large companies.

“Kommersant” interviewed experts and participants in the audit market on the consequences of the adoption of the bill on the abolition of IFRS reporting for financial institutions. According to independent expert Andrey Barkhota, losses for auditors could amount to 0.7-1.2 billion rubles. in year. Director General of Univers-Audit Dmitry Limarenko believes that auditors will lose 0.5-1 billion rubles. income, since the audit of one small bank can be from 1 million rubles, and large financial organizations – many times more.

In addition, auditors may lose about 15% of the revenue from consulting services under IFRS, Anastasia Terekhina, partner of the audit and consulting company FBK, believes. According to RAEKS Analytics, the total income of the largest audit companies and groups from core services in 2021 amounted to 83.9 billion rubles.

Last week, the State Duma Committee on the Financial Market recommended the adoption in the first reading of a bill exempting non-credit financial institutions (NFIs) and banks from individual reporting under IFRS. Anatoly Aksakov, Chairman of the Financial Markets Committee, also explained to RBC that the initiative concerns “all banks.” In an interview with Kommersant, he added that it is necessary to move along the line of convergence of RAS and IFRS, since there is no need for two forms of reporting. However, the Central Bank claims that the bill will not affect banks.

Market participants are confident that the changes will hit large auditors, while small companies will become much more competitive. Mr. Limarenko specifies that the losses will affect the first 60 companies and especially the Russian practice of the Big Four, since they are the main auditors of financial institutions under IFRS. Small audit organizations do not have specialists in IFRS, but many in RAS, explains the interlocutor of Kommersant from among the auditors.

Meanwhile, the possibility of compensating auditors for losses from the abolition of IFRS raises questions. Anna Avakimyan, chief analyst at Regblok, believes that this can be partially done by increasing revenue from the provision of tax and management consulting services. Ms. Terekhina adds that the losses can be compensated for by other services, but it is still difficult to say which ones.

For banks, the relaxation will result in savings. From the explanatory note to the draft law, it follows that the preparation of financial statements in accordance with IFRS and in accordance with the requirements of the regulations of the Bank of Russia leads to “high and unreasonable costs for the preparation, audit and disclosure of duplicate statements.”

Kommersant’s interlocutor from the top 20 auditing company said that the Ministry of Finance and clients from the financial sector repeatedly addressed the issue of abandoning IFRS and were against these standards because of the high cost of compliance with them.

Nevertheless, experts warn that savings may result in a loss of competence and information content for the financial market. According to Sergey Nikiforov, General Director of FBK Povolzhye, the refusal to prepare financial statements in accordance with IFRS may result in the loss of some of the qualified personnel not only in audit, but also in the financial organizations themselves that provide such financial statements. The competencies of specialists involved in the preparation and audit of these reports have been formed over decades, he notes.

Anna Zdanevich, head of financial institutions services at DRT, believes that IFRS reporting is in demand not only by foreign investors, but also by domestic ones. Therefore, the expert believes, some banks will be interested in maintaining the current processes for the preparation and audit of financial statements in accordance with IFRS.

Julia Poslavskaya