On 28 August 2013, the Azerbaijani President approved the "Law on Regulation of Audits of Enterprises and Protection of Entrepreneurs' Interests" (hereinafter the "Law"). The Law sets the goals and principles of audits of enterprises in Azerbaijan, the rules for conducting audits, the rights and obligations of auditing authorities and their officials, and requirements for the protection of entrepreneurs' rights and interests. The Law applies to various types of audits, including on-site audits, inspections, and monitoring. However, except for a few articles, the Law does not apply to tax audits and visits and checks of state-owned monopolist service providers (e.g. utilities companies). The Law will come into effect on 1 March 2014.
The Law provides for planned/ordinary and unplanned/extraordinary audits. A planned/ordinary audit is held by a competent auditing authority based on its annual plan and on dates set in that plan. Several auditing authorities may hold a joint audit. An unplanned/extraordinary audit can only be held in certain cases.
For the purposes of planned/ordinary audits, entrepreneurs are divided into high, medium and low risk groups. Except for control over the safety of food products, the frequency of planned/ordinary audits is as follows:
- high risk group - maximum once a year;
- medium risk group - maximum once every two years;
- low risk group - maximum once every three years.
The allocation of a specific enterprise to a risk group will be based on, inter alia, such criteria as scale and duration of operations, the nature of products, works and services, and the results of previous audits.
To holdan audit the head or any other authorized official of a competent auditingauthority must issue a resolution. At least five business days before thestart of a planned/ordinary audit, the auditing authority must send theenterprise concerned a copy of the resolution and an explanation of the rightsand obligations of the auditing authority and the enterprise itself. For an unplanned/extraordinary audit, the resolution must be presented to a concerned enterprise at the moment the audit starts.
The term of an audit will depend on the size of an enterprise. A planned/ordinary audit may last a maximum of ten business days for large enterprises and a maximum of five business days for medium and small enterprises. An unplanned/extraordinary audit may last a maximum of five business days for large enterprises and three business days for medium and small enterprises.
Under the Law, in certain cases a competent auditing authority can take provisional measures restricting the operation of an audited enterprise. These measures may include suspension of works or services, suspension or prohibition of sales or production, recalling products.
Currently each competent auditing authority applies its own audit rules and procedures. Once the Law comes into effect, competent auditing authorities will be required to apply the same rules and procedures.