AUDIT OF BUSINESS ENTITIES (GENERAL PROCEDURE)
In Kazakhstan, audit is one of the tools of government control and supervision over business entities. The audit procedure is regulated by the Kazakhstan Entrepreneurial Code of 29 October 2015 (the “Entrepreneurial Code”).
An audit implies any of the following measures on the part of an auditor (a government officer):
1) visiting the subject of audit;
2) requesting any information related to the subject of audit, save for any information requests made in the course of preventive monitoring and oversight procedures; or
3) calling the subject of monitoring and oversight to provide information on their compliance with the Entrepreneurial Code.
There are two types of audit:
1) an audit performed in accordance with a special procedure based on the level of risk and assigned by the control and supervision authorities subject to risk assessment; and
2) an unscheduled audit assigned on the basis of certain facts and events triggering such unscheduled audit.
Government monitoring and oversight is a complicated and ramified system that breaks up all audited subjects into certain categories. When SZP renders comprehensive legal support through a public audit procedure, such support includes, among other services, the categorization of a client within the system.
The Presidential Decree of 26 December 2019 prohibits applying the aforementioned special auditing procedure and preventive monitoring and oversight, including visitation of the subject of such monitoring and oversight, to small businesses, including microbusinesses, within three years from 1 January 2020 until 1 January 2023.
The monitoring and oversight authority must notify an audited entity (either the CEO of the entity or their nominee) in writing at least thirty calendar days prior to the commencement of a special audit procedure specifying the commencement date and the subject matter of such audit.
An audit shall be performed subject to a notice containing the following information:
1) reference number and date of the notice;
2) name of the government agency;
3) surname, first name and middle name (if specified in ID) and position of the person(s) authorised to perform the audit;
4) information about the specialists, counsels and experts engaged in the audit; and
5) name of the subject of monitoring and oversight or the surname, first name and middle name (if specified in ID) of the audited individual, their address, identification number, and the list of facilities subject to monitoring and oversight. When authorities audit a branch and/or representative office of a legal entity, the notice must specify its name and address;
6) subject matter of the audit;
7) timing of the audit;
8) legal reasons for the audit, including the regulatory legal acts the compliance with which has to be audited;
9) audited period;
10) rights and obligations of the subject of monitoring and oversight provided by the Entrepreneurial Code;
11) signature of the person authorized to sign such notice and seal of the government authority; and
12) signature of an authorised recipient acknowledging the receipt or refusing to accept the notice of audit/monitoring and oversight.
All notices of audit, except for unscheduled audits for security and safety compliance performed by the state labour inspectorate in case of threat to human life and health and cross-audits performed by state revenue authorities in pursuance of the Kazakhstan Code On Taxes and Other Obligatory Payments to the Budget (Tax Code) of 25 December 2017, must be registered with the competent authorities responsible for legal statistics and special records.
When visiting a subject of monitoring and oversight for the purpose of an audit or preventive monitoring and oversight, the responsible officers of the monitoring and oversight authority must present the following documents to the subject:
· notice of audit or preventive monitoring and oversight implying visitation of the subject of monitoring and oversight bearing a note of registration with the competent authorities responsible for legal statistics and special records;
· service certificate;
· permit of competent authorities to visit sensitive facilities, if necessary; and
· medical admission required for certain facilities and issued in the manner prescribed by healthcare authorities.
An audit or preventive monitoring and oversight implying visitation of the subject of such monitoring and oversight is deemed to be commenced on the date of delivery of the respective notice to the subject of monitoring and oversight after the subject reviews the checklist setting out the issues subject to the audit or preventive monitoring and oversight implying visitation of the subject.
The duration of an audit depends on the type of audit and audited subject and varies between 5 and 15 business days (with possible extension)
The officers of the monitoring and oversight authorities performing an audit may not:
1) check the compliance with those requirements which are not specified in the checklists of the control and supervision authorities and which do not fall within the competence of the government authorities on behalf of which such officers are acting;
2) request documents, information, sample products or samples of environment and production facilities inspections which are not subject to inspection or covered by the scope of inspection;
3) take samples of products or samples of environment and production facilities inspections for examination, testing or measurement purposes without sampling protocols duly executed in a statutory form and/or in quantities exceeding the thresholds determined by national standards, regulations on sampling and methodology of research, testing and measurement, technical regulations or other previously effective regulatory technical instruments, regulations and methodology of research, testing and measurement;
4) disclose and/or disseminate information received as a result of such audit or preventive monitoring or oversight implying visitation of the subject of monitoring and oversight which constitutes a trade secret or another legally protected secret, unless otherwise provided for by Kazakhstan law;
5) extend the pre-determined period of such audit or preventive monitoring or oversight implying visitation of the subject of monitoring and oversight;
6) perform an audit or preventive monitoring or oversight implying visitation of the subject of monitoring and oversight who has already undergone such audit or preventive monitoring or oversight implying visitation conducted by their superior/inferior authority or another government agency with regard to the same matter and in relation to the same period, unless otherwise provided for by the Code; or
7) undertake in the course of such audit or preventive monitoring or oversight implying visitation any costly activities at the expense of the subject of monitoring and oversight.
It is prohibited to withdraw or seize any primary accounting or other documents.
Based on audit findings, an officer of the monitoring and oversight authorities must issue a report on audit findings and an order to rectify all detected violations, if any.
When the chief executive officer of an audited entity or an individual, or nominees thereof, have remarks and/or objections to audit findings, they must express and deliver such remarks and/or objections in a written form which is attached to the report on audit findings with the respective note on it.
Each of the report on audit findings and the respective order must be executed in three counterparts.
An audit is deemed to be completed on the date when the respective report on audit findings is delivered to the subject of monitoring and oversight which cannot be later than the audit completion date specified in the notice of audit.
When the auditing or monitoring authorities infringe the rights and legitimate interests of an audited person the latter may appeal against the actions/omissions of such monitoring and oversight authorities and/or officers thereof in the superior government authorities or a court as provided by Kazakhstan law.