FUNCTIONS OF AUDIT FIRMS AS SUBJECTS OF PRIMARY FINANCIAL MONITORING
Authors:   Methodological Accounting Council under the Ministry of Finance of Ukraine, Bogdanova Olga 
Published: May 2024

Introduction. Updated International Standard on Auditing (IAS) 250, dedicated to responding to non-compliance with laws and regulations (NOCLAR), which includes laws and regulations that relate actually or primarily directly to the client’s financial statements or business or employer organization, including, but not limited to: fraud, corruption and bribery; money laundering; financing of terrorism and proceeds of crime, etc. Problem Statement. Auditors play an important role in combating money laundering by using their methodological tools to analyze financial and non-financial information. However, the analysis of state financial monitoring data shows the low activity of auditors in detecting and reporting suspicious transactions. The purpose is a comparative analysis of the auditors’ functions as subjects of primary financial monitoring on the basis of international and national regulatory legal acts, substantiation of the need to carry out measures aimed at strengthening the regulation and supervision of subjects of auditing activity as subjects of such monitoring by the Ministry of Finance of Ukraine to increase reporting of suspicious financial transactions and improve the quality of reports based on suspicions. Results. A review of the regulatory and legal support for the regulation of auditing activities in relation to the prevention of income laundering, financing of terrorism and the proliferation of weapons of mass destruction was carried out. Changes in ISA 250 (revised) are aimed at increasing the involvement of audit firms in the detection and reporting of suspicious transactions and strengthening the reputation of the auditing profession, which will contribute to the fight against financial fraud, money laundering and corruption. Conclusions. Ukraine introduced updated legislation on combating money laundering and terrorist financing, and increased financial sanctions for its violations. Inadequate reporting of suspicious transactions by audit firms indicates deficiencies in regulation and oversight. In our opinion, it is appropriate for the Ministry of Finance of Ukraine, as a regulator in the field of primary financial monitoring: to bring by-laws into compliance with the updated Law of Ukraine “On Prevention and Counteraction of Legalization (Laundering) of Criminal Proceeds, Financing of Terrorism and Financing of the Proliferation of Weapons of Mass Destruction” regarding the organization and conduct of primary financial monitoring by subjects of auditing activity; conduct educational and methodological activities to increase the provision of objective reporting of suspicious transactions. However, these measures cannot fully solve the problems, since ISA 250, although it refers to the responsibility of the auditor for consideration of legislative and regulatory acts, in particular with regard to money laundering, terrorist financing, etc., but due to the inherent limitations of the audit, there is a risk of not detecting suspicious transactions due to certain reasons, assessment and elimination of which requires further research.