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Georgia is the small country located at the crossroads of Asia and Europe, which attracts both tourists and people of business. The interest of the latter in the Georgian jurisdiction is explained by the fact that Georgia created favorable conditions for making business, especially if a company deals with export of products to Europe or China. A proof of a beneficial investment climate of Georgia is the recent rating Doing Business 2020, where this country took the 7 place. Another important parameter for non-residents is the high level of confidentiality of business provided by the local jurisdiction, because the country does not participate in the system of automatic exchange of financial information CRS. Many businessmen who wish to open a company in Georgia are interested if an annual audit is necessary, as it is required in most other jurisdictions.

Why audit of companies is important in Georgia

Opening a company in Georgia is just the first step to success. In the beginning of their activity, non-residents will have problems with understanding the local legislation on their own, as well as tax reports and bookkeeping. Therefore, to avoid mistakes that may lead to penalties and sanctions on the part of regulatory bodies, we recommend entrusting this work to professionals who know the Georgian legislation and conditions of making business. The company Offshore Pro Group has a wide experience of working in Georgia. Our employees are native speakers of Georgian and know the local legislation very well; this way, our customers obtain only the best services provided by professionals in the sector.

It should be noted that audit for small companies is not mandatory in Georgia. But audit is necessary when you must:

• prepare documents for a bank with the purpose of loan formalization, letter of credit, or using other services;
• checking the effectiveness of company operation;
• identify sources of money loss and get the solution for elimination.

The bookkeeping and audit in Georgia is regulated by a namesake law dated 08.06.2016. Subject to this regulatory act, provision of audit services can only be made by companies that meet certain criteria. As of November 2019, 262 such companies were registered in the country. Only 13 audit companies have right for holding an audit of financial reports in subjects of public interest. 10 of them are the biggest in Georgia:

• PWC Georgia;
• EY;
• KPMG Georgia;
• Deloitte and Touche;
• BDO;
• GrantThornton;
• RSM Georgia;
• NEXIATA;
• PKF Georgia;
• Baker TILLY Georgi

These 10 companies in 2018 corresponded to approximately 70% of the total income of the audit industry.

If you need to obtain an effective instrument for working with cash flows — open a personal account for non-resident in Bank of Georgia remotely.

Services of bookkeeping support for a Georgian company

To organize an effective operation, you should also pay attention to a high-quality bookkeeping support of a company. Apart from audit Offshore Pro Group offers the following services, including:

• preparation of monthly, quarterly and annual reports for fiscal bodies, banks, and upon other requests;
• making payments related to economic activities, including tax payments, payments to pension fund and other mandatory payments;
• submission of reports to corresponding bodies;
• accrual and payment of salary;
• control over timely payment of taxes;
• filing declarations on VAT;
• organizing an accounting policy of a company in Georgia;
• daily consultations on financial and fiscal issues.

And other bookkeeping services necessary for full-scale operation of a company. The price of bookkeeping support depends on the level of load and the number of payments per month. If the number of transactions per month does not exceed 20, then the price of service is 500 EUR per month.

Offshore Pro Group also helps with selection of form of business according to client’s wishes and the Georgian legislation, provides advice on optimization of taxes, helps to prepare constitutive documents, open corporate and personal accounts in banks of Georgia and abroad, and provides other services regarding business assistance in Georgia.

High-quality services — opening a personal account in TBC Bank for non-residents.

Types of companies in Georgia

Subject to regulatory acts, all companies in Georgia can be divided into four categories:

A subject of economic activity belongs to one of the mentioned categories if its parameters correspond to at least two of three criteria at the end of the reporting period.

Except from the abovementioned companies in Georgia, there are also legal entities belonging to subjects of public interest:

• companies, which securities are listed at stock exchange;
• commercial banks;
• micro-financial organizations;
• insurance companies;
• non-state pension systems;
• investment funds;
• non-bank depositary companies (credit unions);
• other persons subject to the legislation.

The legislation of Georgia obliges companies of I category and subjects of public interest to do the bookkeeping reports subject to international standards of financial reporting. Companies of II and III categories file reports and do the bookkeeping according to IFRS for small and medium-sized entities. They are also given the opportunity to use reporting for companies of I category. Companies of IV category and non-commercial companies file reports according to the requirements of the Agency for Bookkeeping of Georgia.

The legislation obliges all subjects of economic activity to keep all financial reports, as in printed form, so as in electronic form during 6 years upon termination of the reporting period.

Art 6 of the Law of Georgia “On bookkeeping and audit” obliges companies of I and II category, and also subjects of public interest to perform annual audit of financial reports. The latter, together with the managerial reports, reports on state payments and the audit report, must be provided to the Service of Bookkeeping of Georgia not later than 1 October following the reporting year. All received and checked reports, including audit reports, are published within 1 month.

Register of auditors and auditor companies in Georgia

Performing auditor activity in Georgia is only permitted for companies and persons who had obtained a corresponding certificate, only after their registration in the register of auditors. Even having a status of a certified bookkeeper, an auditor may only perform audit after he was listed in the register. The register is available on the website of the Agency of Bookkeeping, Reporting and Audit. There are two separate lists in the register: auditors and auditor companies.

It contains the following information on auditor – natural person:

• full name, legal address, location and registration number;
• address, Internet page, registration number, and name of auditory company – employer;
• data on registration on other country as auditor;
• professional organization in which he participates;
• results of monitoring of quality control;
• profit from business in the last 3 years;
• amounts of insurance of professional responsibility and insurance company.

The register provides the following information on a company-auditor:

• form of business, name, address, website, contacts and registration number;
• full name and registration number of auditor/certified bookkeeper hired by auditor company or member/partner or member of managerial body or otherwise, related to him, as well as number of employees engaged in auditor company;
• results of monitoring of quality control;
• shares of partners/shareholders in capital of auditor company;
• services of audit provided to subjects of public interest (if available);
• profit from business in the last 3 years;
• amount of insurance sum subject to insurance agreement of professional responsibility and name of insurance company.

All the abovementioned information on a legal entity the Agency of Bookkeeping obtains from the National Agency of the State Register. It should be noted that the data on imposed sanctions on auditors are also kept in the register for 5 years.

Requirements to auditors in Georgia

Companies and natural persons, as well as branches of foreign companies, obtain the right to perform audit only after registration in the corresponding Register. Being filed in the register is possible through an application, which is submitted to the Agency of Bookkeeping. The Agency must within 10 days check the correspondence of an applicant to all the defined criteria.

Requirements to natural persons:

• be a certified accountant – certified by a license issued by a professional organization of accountants or auditors;
• working experience not less than 3 years, certified in written by an inspection auditor;
• have no criminal charges pending under cases for financing of terrorism and/or legalization of illegal profit, as well as other economic, serious or especially serious crimes;
• be a participant of a professional organization;
• no breaches of the Code of Ethics of Professional Accountants (Code IESBA).

Requirements to a legal entity:

• to perform audit actions through at least one partner in deals;
• more than 50% can be owned by an auditor/company registered in countries-members of OECD, EU;
• most of members of a managerial body – auditors. If a supreme managerial body includes only 2 auditors, at least one of them must be an auditor;
• available insurance of professional responsibility.

An auditor or a company must notify the Agency of Bookkeeping on any changes that arise during activity, within 5 days upon implementation.

Audit of companies in Georgia

Audit of companies in Georgia is made according to International Standards on Auditing (ISA). Audit of reports for each period must be made by companies of I and II category and subjects of public interest. Also, audit can be performed by an imitative of an applicant (companies of other categories).

Audit is made on the basis of an agreement concluded between a customer and an auditor. All the reports in electronic and printed form that are used for audit must be kept during 6 years.

Responsibilities of an auditor:

• follow rules of ethic and code IESBA: be independent – partners and shareholders of an auditor company may not interfere in audit services, so that to avoid threat of dependency and non-objectivity of a trade partner, it is prohibited to receive or transfer significant material and non-material gifts, benefits; it is prohibited to perform audit of a related subject;
• perform insurance of professional activity – all auditors working in Georgia must conclude agreements of insurance of professional responsibility for amount not less than 100 000 lari;
• keep the information confidential during provision of their services;
• provide quality of services subject to International Standards of Quality Control (ISQC) accepted by the International Auditing and Assurance Standards Board (IAASB) – results of monitoring of quality control system are publicly available. They are published in the register within 5 working days from the taking of the corresponding decision by the Agency of Bookkeeping of Georgia.

Responsibility for breach of the Georgian legislation

Control over auditors and companies in Georgia is imposed on the Agency of Bookkeeping, Reporting and Audit of the Ministry of Finances. For breach of the legislation, this department applies the following sanctions to auditors:

• written warning;
• public warning shown in the register;
• penalty;
• withdrawal of registration;
• ban on provision of professional services for a period not more than 3 years.

For breach of laws on money laundering and terrorism financing, a written warning or a penalty in amount of 5000 lari is applied to auditors. Furthermore, depending on severity of a breach the Agency of Bookkeeping may impose a ban on provision of professional services for a period up to 3 years. For breach of ethic rules, requirements to system of quality control, a penalty may be imposed from 500 до 5 000 lari and/or removal from the register.

For breach of rules of registration an auditor is deprived of registration and is prohibited to perform professional activity, and is charged with a penalty in amount up to 1 000 lari.

For breach of rules of insurance auditors are given a written warning; besides, the Agency may take a decision on withdrawal of registration.

Penalties for breach of audit rules for Georgian companies:

• IV category – 500 lari;
• III category – 1 000 lari;
• II category – 5 000 lari;
• I category – 10 000 lari.

Instead of a penalty, the Agency may use a written warning. Meanwhile, if a company in Georgia fails to meet the requirements of the Agency within 1 month, the amount of penalty doubles.

For absence of audit in companies of II and I category, the state department notifies the breaching company on applying of sanctions not later than 10 working days prior to taking decision on a penalty, and sets up an additional period for provision of financial reporting with an audit statement. 1 to 6 months are given for elimination of a breach. Whether a company fails to provide financial reports during the said period, it will pay then a double penalty.

By addressing the company Offshore Pro Group you may obtain high-quality audit and bookkeeping services, including:

• making audit of a Georgian company;
• preparation of financial reports under standards IFRS;
• complete bookkeeping support of a company.

If you have questions regarding audit of a company in Georgia, or if you need to register a company in Georgia, open bank accounts (corporate or personal), feel free to contact us at: info@offshore-pro.info.