New Rules for Audits by Governmental Agencies are in Effect

On 1 January 2017, the Law of Ukraine "On Amendments to the Law of Ukraine "On Fundamental Principles of State Supervision (Control) in the Sphere of Commercial Activity" regarding Liberalization of State Supervision (Control) of Commercial Activity" as of 3 November 2016 No. 1726-VIII came into effect. Upon these legislative changes, audits are scheduled and carried out pursuant to the following new rules:

In addition, companies have been granted the right to seek to discontinue a pending audit in the following cases:

1. The scope of the major legislative act setting the framework for audits by governmental agencies, the Law of Ukraine "On Fundamental Principles of State Supervision (Control) in the Sphere of Commercial Activity", has been extended to cover more agencies, including the State Fiscal Service (except for issues relating to the border customs control), agency for state architecture and construction control, agency for state supervision and control over compliance with labor and employment law.
2. An integrated automated system for state supervision will be introduced. Such a system should make public a rather broad range of information on audits, from annual audit schedules by all controlling agencies to results of each audit and actions taken regarding the identified non-compliances.
3. Quarterly audit schedules have been abolished. Thus, actions pertaining to state supervision shall now be scheduled solely on an annual basis. Annual audit schedules are not subject to further revision.
4. If, according to the information in the automated system, the same company is included in the schedules for audits by different controlling agencies, such a company shall be subject to a comprehensive audit.
5. The law now sets forth a single rule regarding the frequency of scheduled audits depending on the level of risk associated with company's business. Thus, scheduled audits shall be carried out at most once in two years in respect of companies performing high-risk activity, at most once in three years for companies performing medium-risk activity, and at most once in five years for companies performing low-risk activity.
6. The maximum duration of scheduled audits has been shortened from 15 to 10 business days. Overall duration of all scheduled audits performed by controlling agencies within one calendar year in respect of one company (comprehensive audit) may not exceed 30 business days.
7. The list of grounds for a company to refuse to allow an audit by a controlling agency has been broadened and streamlined. For instance, this list now provides for such a right if a controlling agency performs a repeated unscheduled audit based on the fact underlying the previous unscheduled audit.
   • if an audit fails to comply with the applicable maximum duration requirement;
   • if a controlling agency uses a non-unified form of audit report; and
   • if a controlling agency goes beyond the list of questions underlying the unscheduled audit.
8. A penalty imposed on a company for the first non-compliance may not exceed the minimum statutory penalty. If a company fails to pay a fine within 15 days, the amount of such a fine shall be collected within court procedures (unless the fine has been challenged).

For further information please contact Asters' partner Svitlana Chepurna
and senior associate Oksana Legka.