Protecting Yourself from Reporting Problems

Chief Accountants often have to maneuver through the top managers’ desire to improve financial indicators in reporting and legal compliance. Expert Veronika Arakelova spotlights when they are threatened with being held liable.

Who is Liable

Apart from the Chief Accountant, the General Director is liable for dealing with financial documents and reporting within the company. This distinction is regulated by Federal Law 402-FZ “On Accountancy”.

Сl. 2 specifies that the liability for keeping accounting statements initially lies on the entity. Additionally, the law does not require the signature of the Chief Accountant to be put on current forms, accounting statements and tax returns. This means that there is no direct indication in the law that the Chief Accountant is responsible for generation of statements.

However, Cl. 7 indicates the obligation of the General Director to receive a written instruction from the Chief Accountant in case of disputes and disagreements. Сl. 3, Art. 13 mentions that the head of the company must impose the duty to keep accounting statements on the Chief Accountant or another person in charge.

What Changed in 2019

Since 9 June, the accountant is exempt from an administrative fine if distortions in accounting statements and reports were made due to the fault of other employees (for example, source documents were not reflected in accounting as they were not provided in time; or documents were reflected with distorted data compiled by other employees. Now, the person responsible is specified individually in each case.

Prior to the introduction of this provision, the Chief Accountant was considered to be guilty automatically. The courts rested upon the fact that it is the Chief Accountant who was responsible for proper accounting and timely reporting. The head was found guilty only if the entity had no Chief Accountant at all, because the General Director is responsible for the general arrangement of accounting.

The amount of the fine for violation is determined by the court in each case. Punishment depends on the nature of the administrative offense, personal traits of the perpetrator, their property status and circumstances that mitigate or aggravate the liability.

Penalties for late tax reporting are paid by the company itself. The accountant is not financially liable unless the intent to break the reporting deadlines is proved. Otherwise, the accountant may be imposed a penalty as an individual: they will have to pay a fine. But most often companies still release unscrupulous accountants from losses incurred.

How to Protect Yourself

Knowledge of the law and high qualification are the main means of protection for the specialist. Practically, professionals rarely encounter errors during the registration of statements in accounting registers or cases with incorrectly uploaded documents.

However, do not forget that the accountant is able to do the following:

• Explain their liability and make sure that their employment contract and job description describe their duties and areas of responsibility in the most detail.

• Do not register suspicious documentation. A refusal to register source documentation may lead to a conflict situation with the management. It is important to try to justify the refusal and to prepare evidence of your non-involvement in the data distortion in the financial statements (for example, to request missing documents or a confirmation letter from stakeholders that it is impossible to make the necessary changes for registration when source documentation is submitted).

• Keep all correspondence with your management. If it is impossible to obtain a letter confirming the accountant’s innocence, the proceedings will most likely be held in court. In this case, you can protect yourself by writing down all instructions of the management on the registration of transactions within accounting and tax reporting. All these proofs will be subjected to examination for reliability. Verbal agreements cannot be confirmed, so it is risky to appeal to them. Therefore, it is important to timely send requests for documents and receive written confirmation when registering those that cause doubts.