First financial statement audit in Ukraine: what the auditor will ask for and how to prepare

A company facing its first audit is usually less worried about the audit itself than about the unknown: what will be requested, how long it will take and whether the accounting team will grind to a halt. In practice, an auditor’s requests are fairly predictable. Prepared in advance, the audit takes weeks rather than months and costs less, because the auditor spends less time waiting for documents.

Below is what we see most often on first-year audits of Ukrainian LLCs, and the order in which to prepare.

How a first audit differs from later ones

On a first audit, the auditor checks not only the reporting year but also the balances at its start. ISA 510 requires the auditor to obtain evidence that opening balances are free from material misstatement and that accounting policies were applied consistently. If the prior year was not audited, the auditor reviews prior-period documents: stock count sheets, reconciliation statements, provision calculations.

Hence the first tip: do not discard or archive prior-year documents until the audit is finished. This is where the longest delays on a first audit come from.

What will be requested in week one

• trial balance for the year and at the start of the year, with breakdowns by counterparty;
• the financial statements you file or plan to file;
• the accounting policy and the orders that changed it;
• charter, register extract and shareholder decisions for the year;
• bank statements for all accounts, including foreign currency accounts and accounts closed during the year;
• a list of contracts with key customers and suppliers, loan agreements and leases;
• year-end stock count sheets;
• the corporate income tax calculation and tax returns.

If all of this sits in one folder on day one, the auditor goes straight to testing instead of chasing documents.

Stock count: the most common first-audit problem

The auditor has to attend the physical inventory count if inventory is material (ISA 501). If the auditor is engaged after 31 December and the count took place without them, a new count at the current date is needed, with movements rolled back to year end. That takes longer and costs more.

What to do: agree on the auditor before year end and invite them to the annual count. Even if the engagement letter is not signed yet, fix the date in advance.

External confirmations

The auditor does not rely only on your records of receivables, payables and bank balances. Requests go directly to counterparties and banks (ISA 505), and replies must come back to the auditor, not to you. Banks take anything from a few days to a few weeks to respond, so send the requests as early as possible.

Your part: current contacts in the accounting teams of key counterparties and year-end reconciliation statements. If reconciliations have not been signed for years, start with the largest balances.

Subsequent events

The auditor checks what happened between 31 December and the date of the audit report: large product returns, lawsuits, bad-debt write-offs, claims received. Some events require adjusting the statements, others only disclosure in the notes. Keep correspondence with lawyers and a list of court cases, the auditor will ask for it.

Management representation letter

At the end of the audit, the director signs a letter confirming that all information has been provided and that all known litigation, related parties and subsequent events have been disclosed. This is a standard step under ISA 580, and without it the auditor cannot issue the report. Read it carefully and do not sign statements you disagree with, discuss them instead.

A six-week preparation plan

1. Week 1. Agree the timetable, document list and stock count date with the auditor. Appoint one person in the company to handle the auditor’s requests.
2. Week 2. Collect constitutional documents, shareholder decisions, the accounting policy and the contract list.
3. Week 3. Close reconciliations with key counterparties and send confirmation requests to banks (if the auditor asks you to, they will provide the form).
4. Week 4. Carry out or prepare the count of inventory and fixed assets, and find the documents supporting prior-year opening balances.
5. Week 5. Close the year in the books: accrue vacation and doubtful-debt provisions, check depreciation, exchange differences and income tax.
6. Week 6. Prepare draft financial statements and notes and hand them over together with the trial balance.

What saves the most time

Set up a shared folder with the same sections as the auditor’s request list and add documents as they are ready. The auditor sees progress, does not repeat requests, and the accounting team does not have to look for the same document a third time.

One more thing: an audit finding is not a verdict. If the auditor finds an error before the report is issued, it can be corrected in the statements. It is much worse when the same error is found later by the tax authority or a bank.

Frequently asked questions

How we help

We audit the financial statements of Ukrainian LLCs and send the document list in advance, so the audit does not stop day-to-day accounting. See when a statutory audit is required and what drives the audit fee. If your statements need to be brought to IFRS, see IFRS audit. Contact us via the contacts page.

Prepared by the MK Audit team