When can accounting restoration be required?

• No accounting records maintained at all

—  Most common in small companies where accounting was handled by a single employee

• Accounting maintained with errors

—  This is often indicated by frequent requests from the tax authorities or the initiation of a field tax audit

• Low quality of accounting data identified during an audit
• Loss of accounting databases and documents due to force majeure (fire, flooding, theft, phishing, relocation, etc.)

Why is accounting restoration necessary?

▸ Errors from prior years can significantly affect current accounting and financial reporting
▸ Incorrect input data in financial and tax reporting leads to distorted information for owners/shareholders and may result in potential tax penalties

How does the restoration process work?

Stage 1: Defining the scope and period of work
Typically, restoration covers the statutory limitation period (three years), although a longer period may also be included if required. Restoration can be partial (e.g., a specific accounting area only) or comprehensive (all accounting areas).

Stage 2: Analysis
We analyze the accounting database and primary documents for availability and compliance with legal requirements. An inventory of fixed assets, materials, and other property is conducted. Mutual settlements with counterparties and tax authorities are performed.

Stage 3: Restoration
Primary documents are restored, and new accounting registers and database entries are created based on them. Amended financial statements and revised tax returns are prepared and submitted.
If required, outstanding tax liabilities and penalties are settled.

What do we review and correct during the restoration process?

General accounting:

• Review of accounting policies (including tax accounting policies)
• Document flow assessment for compliance with legal requirements
• Accuracy review of accounting across balance sheet sections: non-current and current assets, equity, short-term and long-term liabilities
• Verification of compliance with cash handling regulations
• Review of compliance with foreign currency control requirements

Taxes:

• Corporate income tax

— Verification of corporate income tax base calculation
— Analysis of income, expenses, and primary documents (including correctness of documentation) for compliance with income tax requirements

• VAT

— Verification of VAT tax base calculation and correct application of VAT rates
— Review of VAT deductions, separate accounting procedures, and fulfillment of tax agent obligations

• Other taxes

— Verification of completeness of calculations for other taxes (property tax, land tax, etc.)

Payroll:

• Verification of payroll calculations for compliance with labor law and the Company’s internal regulations
• Review of payroll-related taxes and social contributions (personal income tax, social contributions)

HR documentation:

• Verification of the availability of internal regulations governing labor relations and remuneration (e.g., Internal Labor Regulations, Remuneration Policy, Bonus Policy, and other internal acts related to compensation and reimbursement of employee expenses) and their compliance with current labor legislation
• Review of personnel documentation, including employment contracts and civil law contracts, staffing schedules, vacation schedules, and timesheets

What results will you achieve upon completion?

→ Reliable accounting and tax data reflecting the company’s actual financial position
→ Practical recommendations to minimize risks
→ Recommendations on improving internal regulations governing accounting and taxation, including guidance on whether certain provisions require revision or enhancement