Auditor VS Management company: when which instrument to choose

Let us recall that in addition to the general meeting of its members, the board of directors and the director, the structure of the company’s management bodies can include the Auditor, whose importance for the founder of a medium-sized business has been undeservedly forgotten. But it is precisely the Inspector who can become the eyes and ears of the owner, controlling the activities of a team of hired top managers.

Often, the owner of a business, and even more often the owner of several businesses, thinks – it would be good not to take part in the current operational activities, entrusting routine processes to hired top management. At the same moment, stories of abuse arise: violation of cash discipline, preparation of inaccurate reporting … and just business “behind the fence”, parasitizing on the resources of the main enterprise.

How can an owner control a business in which he is not at the helm? And this is not about splitting up or tax optimization, but about the usual desire of a business founder to notice the wrong tilt in his life in time.

In this regard, the “Management Company” has become a widespread phenomenon in the groups of companies. It can perform a variety of functions, but most often it allows you to centralize the financial, accounting, personnel and legal services of the holding.

However, the Management Company (MC) does not always fully solve the problem of control.

Firstly, if the management company is involved under a service agreement, then formally the hired director of the company can refuse these services, and the findings of the management company will remain only recommendations for him. The transfer of the functions of the CEO to the Criminal Code is not suitable, since the director should bear full responsibility for the current work.

Secondly, the consolidation in one management company of different services serving different businesses of the same owner may lead to their unnecessary merging. We are talking about both the limits of bank lending and the emerging suspicions of the tax authorities. Let us repeat that there may be no ground for this, but suspicions will arise of their own accord.

The presence of a single Management Company became a sign of artificial crushing. This requires increased attention when implementing such a tool.

At the same time, there is a solution to control the business in the interests of the owner. And this is the Auditor!

An auditor or Audit Commission (RK) is provided for almost every organizational and legal form. However, many are condescending to such a tool, considering it unnecessary and meaningless. As a result, the auditor in the company often remains only on paper, and if there is an opportunity, then he is not elected at all.

Who is an auditor and what are his powers?
The auditor or the audit commission is elected by the general meeting of the members of the Company, therefore it is not subordinate to the director of the company.

An auditor or an audit commission is created solely to exercise control over the executive management bodies.

For this, the auditor has significant powers:

carry out control and verification activities, including inventory, check the procedure for maintaining accounting and tax reporting, etc.

request any documents of the organization or have easy access to them;

request clarifications verbally or in writing from the director, members of the board of directors or the board of directors, as well as from any other employees of the organization (in a joint-stock company and a cooperative, this authority can be provided for in the charter or internal documents).

The laws do not contain direct instructions on the possibility of giving mandatory instructions on the procedure for keeping records, adjusting the financial side of the company’s activities, etc. That’s what he controls. Responding to identified violations will be the responsibility of the business owner.

The powers of the Auditor can also be expanded through the powers of the governing bodies, or rather, their responsibilities. For example, to oblige the director of the company to correct all violations discovered by the auditor.

Who can be an auditor?
The laws only prohibit certain categories of persons from being an auditor or being a member of audit commissions. These positions cannot be held by:

the sole executive body (director, chairman of the cooperative, etc.);

members of the executive bodies of the organization (board);

members of the supervisory bodies of the organization (board of directors).

There are no other restrictions on the candidate for the role of auditor. It can be one of the participants who is not part of the governing bodies, or a representative of another of his companies.
Thus, instead of the manager, the owner can use a “revision” company, which will allow him to constantly keep his finger on the pulse of the business.

In order for the selected persons to receive the powers of an auditor / audit commission, a decision of the general meeting of participants of the organization (OSU) is sufficient.

Moreover, by the decision of the GMS on the appointment of an auditor, he can be remunerated.

However, only companies on DOS can account for the costs of paying remuneration to the Auditor or members of the Audit Commission as “costs of managing an organization or its individual divisions, as well as costs of purchasing services for managing an organization.