AUDITING UNDER SURVEILLANCE

As is known, the policy of nationwide fight against corruption, which was declared by the head of state, has brought influence to bear on many spheres of public life.  And at the same time, it gave an additional and quite powerful impetus to the process of tackling many problems of economic development, in particular, in those sectors of the economy which are dominated by private businessmen.  The entrepreneurs have witnessed how many of their grievances relating to bureaucratic delays, monopolism and corruption in the government bodies were addressed.  And the creation of the integrated information register of the audits of private companies is to become perhaps one of the main links in the chain of reforms.

Electronic registration

So, from 1 May, a coordinating system, long-awaited by the businessmen, has been in operation in Azerbaijan, a network which is intended to restore order in the most ticklish areas of oversight of the operations of business organizations - the audits.  Much has been written and said about the problems in this field, both local and international organizations pointed at the flaws in the system, there were calls to coordinate somehow the numerous audits and inspections of private businesses by the overseeing bodies and stop interference - often unjustified - in the work of the private businesses.

The idea of creating a coordinating body which would provide transparency in this field was proposed back in 2008, within the framework of a project that was implemented with the support of the International Financial Corporation (IFC, a World Bank organization).  In addition to regulation of audits of private businesses, the project also includes two components which envisage improving the situation in the system of issuance of permits for different types of entrepreneurial activities and conducting educational work for businessmen.

To thoroughly study the state of affairs in the field of audits, a special opinion poll was conducted under the project.  It established that, despite the impressive reforms, which Azerbaijan has carried out to make the country more attractive for investors, there were problems which called for further efforts in this field.  The register of audits is one of these solutions.

The register was created pursuant to the Azerbaijani president's decrees dated 13 April 2010 and 15 February 2011, which provided that, in order to bring the audits into line with the modern standards and ensure transparency, the Justice Ministry was to phase in an integrated information register to collect information on continuity of audits in the sphere of private enterprise.  In addition, the statute was approved on the form and procedures of maintaining the register, which is available at www.yoxlama.gov.az.

To compile the integrated information database of the register and on the basis of mutual integration with the appropriate information system of the Tax Ministry, collection and permanent updating of the information about all the legal entities and individuals who are registered with the tax authorities as business entities has been organized.  In total, some 20 government bodies which are involved in inspections and audits in different sectors will participate in the work of the register.

All according to the plan

What makes the register useful for the businessmen?  For starters, it has to be said that, thanks to the fact that it was created, no audit or inspection will be considered legal from 1 May 2011 unless it is registered.  Furthermore, every inspection or audit that is not included in the register will be considered violation of the law for which the auditing body will be called to account.  Only the checks on border posts, at seaports and airports, and inspections conducted as part of the process of transfer of management of state-owned organizations, will be considered exceptions.

So, the IFC mission in Azerbaijan told R+, every businessman will be able to log into the web site with his login name and password and familiarize himself with the calendar of inspections and audits to be conducted at his or her company.  He will even be able to leave there his complaints or feedback about the already completed audits, which the appropriate bodies will read.

"For now, the web portal gets positive feedback, and opinion polls in different regions of the country testify to this.  The only thing that causes concern is the low level of awareness of the register among the businessmen, so measures are being taken to address this issue," IFC-Azerbaijan officer Abulfaz Manafov said.

As for the surprise effect, which at times comes in very handy when certain types of inspections are conducted (for example, visits to check the selling by expired products at retail outlets, identify sources of financial machinations and instances of tax evasion and so on), it will be retained to some extent.  But the number of unscheduled checks is also strictly limited - to about 20-30% of all the inspections and audits during the year.  "These will also be added to the register, but only after they are conducted, and there will be an appropriate record indicating the justification for conducting an unscheduled monitoring event," Konul Rasidova, another officer of IFC-Azerbaijan, noted.

She also said that the schedule of checks for the next year will be submitted by the supervisory bodies to the Justice Ministry before 1 November of the preceding year.  The document will include the entire list of the entities to be inspected during the year.

What's next?

As the saying goes, there is no limit to perfection.  And the system of maintaining a register, which was discussed above, although it has become a radically new positive step toward making it easier to do business in Azerbaijan, can be developed further.  For example, there are best international practices in the countries which operate similar systems not only to register audits, but also to set the risk levels for individual business entities.  This, for its part, makes it easier to decide which companies are to be audited.

In Azerbaijan, however, the decisions on conducting audits are taken in a routine manner, which sometimes omits business entities with greater risks for violations because the auditing body cannot inspect all the enterprises, so the analysis of the existent problems is highly important.  It would make it possible to rule out overlapping audits by different bodies, save the money which is spent on redundant inspections, and efficiently use work time allocated for these procedures.

Perhaps these factors will be taken into account in the draft Law On Regulation of Inspections and Audits in the Sphere of Business and Protection of the Interests of Entrepreneurs, which is currently being drafted by the cabinet.  At any rate, it will become yet another important step toward regulation of the auditing sector in Azerbaijan and therefore, will help create the best possible climate for the business in the country.