Audit opinion 2017 of the Constitutional Court

AUDITOR’S CONCLUSION

(INDEPENDENT AUDITOR’S REPORT)

ON ANNUAL FINANCIAL th REPORT ARRANGEMENTS

AND REPORTING DATA OF CREDIT UNION “NOW”

FOR THE FINANCIAL YEAR ENDED DECEMBER 31, 2017

m. Kyiv

2018р.

SECTION 1 “INDEPENDENT AUDITOR’S REPORT ON AUDIT OF FINANCIAL STATEMENTS”

Destination:

General meeting of members of the CREDIT UNION “ZaRaZ”,

other governing bodies of the ZaRaZ CREDIT UNION

and potential users of the annual financial statements,

National Commission for State Regulation

in the field of financial services markets of Ukraine

Thought with a caveat

We conducted an audit of the annual financial statements of the CREDIT UNION “ZaRaZ” (USREOU code: 37716197, location: 03039, Kyiv, Holosiivskyi district, V. Zabili Street, building 5) (hereinafter – the Credit Union), which includes the balance sheet (statement of financial position) as of 31.12.2017, statement of financial performance (statement of comprehensive income) for 2017, statement of cash flows (by direct method) for 2017, statement of equity for 2017 . and notes to the financial statements for 2017, which include a summary of important aspects of accounting policies.

In our opinion, with the exception of the possible impact referred to in the paragraph “Basis for qualified opinion”, the annual financial statements of CREDIT UNION “ZaRaZ” for the financial year ended 31.12.2017. reflects reliably, in all material respects the assets and liabilities of the balance sheet in the amount of UAH 29,619 thousand. and profit, as a final financial result, in the amount of UAH 164 thousand, and compiled in accordance with the Law of Ukraine “On Accounting and Financial Reporting in Ukraine” and International Financial Reporting Standards.

Basis for thought with caution

We conducted our audit in accordance with International Standards on Quality Control, Auditing, Review, Other Assurance and Related Services, 2015 edition (hereinafter – ISA), adopted as National Auditing Standards by the decision of the Audit Chamber of Ukraine №344 of 04.05. 2017, for application to tasks, the implementation of which will be carried out after 01.06.2017. and “Guidelines for audit reports submitted to the National Commission for State Regulation of Financial Services Markets, based on the results of the audit of annual reports and reporting data of financial institutions for 2017”, approved by Order №142 of 01.01.2018, with taking into account the requirements of the Law of Ukraine “On Financial Services and State Regulation of Financial Services Markets” №2664-III of 12.07.2001, Law of Ukraine “On Credit Unions” 902908-III of 20.12.2001, Law of Ukraine “On Accounting and Financial Reporting of Ukraine” №996-XIV of 16.07.1999. with changes and additions, “Procedure for preparation and submission of reports by credit unions and joint credit unions to the National Commission for State Regulation of Financial Services Markets”, approved by Order №177 of 25.12.2003. with changes and additions, Order №7 of 16.01.2004. State Commission for Regulation of Financial Services Markets “On Approval of the Regulations on Financial Standards and Quality Criteria for the Management System of Credit Unions and United Credit Unions”, “Guidelines for Auditing the Financial Statements of Credit Unions in Accordance with International Standards on Auditing”, approved by the decision of the Audit Chamber of Ukraine №260 / 6 dated 01.11.2012. and other regulations.

Our responsibilities under these standards are set out in the Auditor’s Responsibility for the Audit of Financial Statements section of our report. We are independent of the ZaRaZ CREDIT ASSOCIATION in accordance with the Code of Ethics for Professional Accountants of the International Accounting Standards for Accountants (RMSEC Code) and the ethical requirements applicable in Ukraine to our audit of financial statements, as well as other ethical responsibilities. in accordance with these requirements and the RMSEC Code.

The annual inventory of available assets and liabilities was conducted by CREDIT ASSOCIATION “ZaRaZ” without our participation, as this date preceded the appointment of an audit, resulting in a limitation in the scope of work of auditors. However, in the Credit Union, this procedure was performed by an inventory commission, which the auditors trust, in accordance with the requirements of International Standards on Auditing. We have performed procedures that justify the assumption that these assets and liabilities are available.

Please note that on the date of the audit, the Credit Union did not receive all acts of reconciliation with its members. Thus, we cannot fully confirm receivables on settlements on loans granted to members of the Credit Union and accounts payable on settlements on deposits to deposit accounts. Given this restriction, the expression of opinion on the reliability of receivables and liabilities according to these calculations was based solely on the basis of accounting records. However, the effects of not being able to obtain sufficient appropriate audit evidence are not comprehensive for financial reporting.

An analysis of the available primary documents, descriptions and accounts suggests that such inconsistencies and deviations, which may be for the reasons specified in this paragraph, have a limited impact on the situation as a whole and do not affect the overall financial condition of CREDIT UNION “ZaRaZ” .

The auditor’s report has been modified accordingly. In our opinion, the financial statements of CREDIT ASSOCIATION “ZaRaZ” for the financial year ending on 31.12.2017 are prepared on the basis of accounting registers, the data in which are reflected on the basis of primary documents. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Key audit issues

We have identified that there are no key audit issues that need to be reported in our report.

Explanatory paragraph

We draw attention to Note 2 to the section “Operating environment, business continuity and continued operation” in these financial statements, which states that the activities of the Credit Union in 2017. carried out in an aggressive operating environment due to the negative situation in Ukraine, supported by the devaluation of the hryvnia. The future development of these factors, their consequences and impact on the functioning of the financial market are currently unknown. Given the sufficient level of capital of the Credit Union and its financial condition, as well as experience in the crisis of 2008-2009, the management of the Credit Union considers it reasonable to prepare these financial statements based on the assumption that the Credit Union is an organization capable of continuing operations.

Other questions

The management staff of the Credit Union is responsible for other information. Other information at the date of this auditor’s report consists of packages of documents for obtaining two licenses in 2017: for conducting business activities for the provision of financial services (except for professional activities in the securities market), namely the provision of loans, including on the terms of a financial loan in accordance with the Order № 982 of 06.04.2017 and to conduct business activities for the provision of financial services (except for professional activities in the securities market), namely the attraction of financial assets with the obligation to subsequently return them in accordance with Order № 1090 of 13.04.2017. Our opinion on the financial statements does not extend to other information and we do not draw conclusions with any level of confidence about this other information. In connection with our audit of the financial statements, it is our responsibility to review other information and to consider whether there is a material inconsistency between the other information and the financial statements or our knowledge of the audit, or whether this other information is such that contains significant distortion. If, on the basis of our work on other information obtained prior to the date of the auditor’s report, we conclude that there is a material misstatement and inconsistency of this other information, we are required to report this fact. We did not find any facts that would need to be included in the report,

Responsibility of management and those with the highest authority for financial reporting

Credit union management is responsible for the preparation and fair presentation of financial statements in accordance with IFRS and for the internal control system that management determines is necessary to ensure that the financial statements are free from material misstatement, whether due to fraud or error.

In preparing financial statements, management is responsible for assessing the entity’s ability to continue as a going concern, disclosing, where applicable, continuity issues and using business continuity assumptions as a basis for accounting, unless management either plans to liquidate the Credit Union or cease operations, or has no real alternative to this. Those with the highest authority are responsible for overseeing the Credit Union’s financial reporting process.

Auditor’s responsibility for the audit of financial statements

Our objectives are to obtain reasonable assurance that the financial statements as a whole are free from material misstatement due to fraud or error, and to issue an auditor’s report that contains our opinion. Reasonable assurance is a high level of assurance, but does not guarantee that an audit conducted in accordance with ISAs will always reveal a material misstatement, if any. Distortions may be the result of fraud or error; they are considered material if, individually or in combination, they are reasonably expected to influence the economic decisions of users made on the basis of these financial statements. When performing an audit in accordance with ISA requirements, we use professional judgment and professional skepticism throughout the audit engagement. In addition, we:

• we identify and assess the risks of material misstatement of the financial statements as a result of fraud or error, develop and perform audit procedures in response to those risks, and obtain audit evidence that is sufficient and reasonable to use them as a basis for our opinion. The risk of not detecting significant misstatement due to fraud is higher than for misstatement due to error, as fraud may include conspiracy, forgery, willful misconduct, misstatement or neglect of internal control measures;
• gain an understanding of internal control measures related to the audit to develop audit procedures that would be appropriate to the circumstances, rather than to express an opinion on the effectiveness of the internal control system;
• assess the acceptability of the applied accounting policies and the validity of accounting estimates and relevant disclosures made by management;
• we conclude that management uses the going concern assumption as a basis for accounting and, based on the audit evidence obtained, concludes whether there is significant uncertainty about events or conditions that would cast significant doubt on the company’s ability to continue as a going concern. If we conclude that there is such material uncertainty, we should draw attention in our auditor’s report to the relevant disclosures in the financial statements or, if such disclosures are inappropriate, modify our opinion. Our conclusions are based on audit evidence obtained before the date of our auditor’s report. However, future events or conditions may cause the company to cease operations on an ongoing basis.
• We evaluate the overall presentation, structure and content of the financial statements, including disclosures, and whether the financial statements show the transactions and events underlying their preparation, so as to achieve a reliable presentation.

We disclose to those with the highest authority information about the planned scope and timing of the audit and significant audit results, including any significant deficiencies in internal control measures identified by us during the audit.

We also provide those with the highest authority with a statement that we have complied with the relevant ethical requirements for independence, and inform them of any relationship and other matters that could reasonably be considered to affect our independence and, where applicable. , on appropriate precautions.

SECTION 2. REPORT ON THE REQUIREMENTS OF OTHER LEGISLATIVE AND REGULATORY ACTS

Annual reporting data submitted to the National Commission

which carries out state regulation in the field of financial services markets of Ukraine

We checked the annual reporting data of CREDIT UNION “ZaRaZ” (USREOU code: 37716197, location: 03039, Kyiv, Holosiivskyi district, V. Zabili str., Building 5), which include the following forms: credit union for 2017 (Appendix 1), Reporting data on the financial activities of the credit union for 2017. (Appendix 2), Reporting data on the composition of assets and liabilities of the credit union for 2017. (Appendix 3), Reporting data on income and expenses of the credit union for 2017. (Appendix 4), Reporting data on the calculation of the required amount of the provision for losses from unpaid loans of the credit union for 2017. (Appendix 5), Reporting data on credit activities of the credit union for 2017. (Appendix 6), Reporting data on borrowed funds from legal entities for 2017. (Annex 7), Reporting data on the activities of separate divisions of the credit union for 2017. (Appendix 8), Reporting data on credit unions’ transactions with contributions (deposits) of credit union members to deposit accounts ”for 2017. (Annex 9).

Audit of annual reporting data of the CREDIT UNION “ZaRaZ”, for the year ended 31.12.2017 carried out by PRIVATE ENTERPRISE “AUDIT FIRM” AUDIT-OPTIM “, which was conducted in accordance with the” International Standards for Quality Control, Audit, Review, Other Assurance and Related Services “, 2015 edition, adopted as the National Audit Standards of Ukraine 344 dated 04.05.2017, for application to the tasks that will be performed after 01.06.2017, in particular to ISA 700 “Formation of opinion and preparation of financial statements”, ISA 705 “Modifications of opinion in the report of the independent auditor , ISA 706 “Explanatory paragraphs and paragraphs of other issues in the Independent Auditor’s Report,” ISA 710 “Comparative Information – corresponding figures and comparative financial statements” ISA 720, “The Auditor’s Responsibility for Other Information in Documents Containing Audited Financial Statements,” ISA 250, “Consideration of Legislation and Regulations in Auditing Financial Statements,” and so on. Those standards require that the auditor comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the financial statements are free from material misstatement.

This section of the audit report was prepared by us in accordance with the “Procedure for preparation and submission of reports by credit unions and joint credit unions to the National Commission for State Regulation of Financial Services Markets”, approved by Order №177 of 25.12.2003. with changes and additions taking into account the requirements of the Law of Ukraine “On Financial Services and State Regulation of Financial Services Markets” №2664-III of 12.07.2001, the Law of Ukraine “On Credit Unions” №2908-III of 20.12.2001, the Law of Ukraine ” On Accounting and Financial Reporting of Ukraine “№996-XIV dated 16.07.1999. with changes and additions, Order №4261 from 14.11.2017 State Commission for Regulation of Financial Services Markets “On approval of changes to the procedure for preparation and submission of reports by credit unions and joint credit unions to the National Commission for State Regulation of Financial Services Markets”, Order №7 of 16.01.2004. State Commission for Regulation of Financial Services Markets “On Approval of the Regulations on Financial Standards and Quality Criteria for the Management System of Credit Unions and United Credit Unions”, “Guidelines for Auditing Financial Statements of Credit Unions in Accordance with International Standards on Auditing”, approved by the Audit of the Chamber of Ukraine №260 / 6 dated 01.11.2012 and other regulations. carrying out state regulation in the field of financial services markets “, Order №7 of 16.01.2004. State Commission for Regulation of Financial Services Markets “On Approval of the Regulations on Financial Standards and Quality Criteria for the Management System of Credit Unions and United Credit Unions”, “Guidelines for Auditing Financial Statements of Credit Unions in Accordance with International Standards on Auditing”, approved by the Audit of the Chamber of Ukraine №260 / 6 dated 01.11.2012 and other regulations. carrying out state regulation in the field of financial services markets “, Order №7 of 16.01.2004. State Commission for Regulation of Financial Services Markets “On Approval of the Regulations on Financial Standards and Quality Criteria for the Management System of Credit Unions and United Credit Unions”, “Guidelines for Auditing Financial Statements of Credit Unions in Accordance with International Standards on Auditing”, approved by the Audit of the Chamber of Ukraine №260 / 6 dated 01.11.2012 and other regulations. “Guidelines for auditing the financial statements of credit unions in accordance with International Standards on Auditing”, approved by the decision of the Audit Chamber of Ukraine №260 / 6 from 01.11.2012. and other regulations. “Guidelines for auditing the financial statements of credit unions in accordance with International Standards on Auditing”, approved by the decision of the Audit Chamber of Ukraine №260 / 6 from 01.11.2012. and other regulations.

During the audit, we covered all important aspects of the activities of the ZaRaZ CREDIT ASSOCIATION in relation to its annual reporting data for the financial year ended December 31, 2017.

We tested the indicators of the reporting data in order to obtain sufficient evidence that they do not contain significant errors, have sufficient justification of the primary documents and accounting data of the Credit Union.

In carrying out the task, we performed audit procedures to identify significant inconsistencies between the audited financial statements and the annual reports provided to the National Commission for State Regulation of Financial Services Markets disclosed by the Credit Union in accordance with ISA 720. “The auditor’s responsibility for other information in documents that contain audited financial statements.”

As a result of the audit procedures, we did not receive audit evidence that the financial statements were materially misrepresented in connection with the information disclosed by the Credit Union and submitted to the National Commission for State Regulation of Financial Services Markets.

Disclosure of information provided in the financial statements of the Credit Union

             During the audit, the auditors examined the accounting system of CREDIT UNION “ZaRaZ” in accordance with the “Regulations on accounting policies and organization of accounting.” Accounting of business transactions is carried out by the method of double entry in accordance with the Chart of Accounts for accounting of assets, capital, liabilities and business transactions of enterprises and organizations, approved by the order of the Ministry of Finance of Ukraine №291 from 30.11.1999. with changes and additions.

The account of the CREDIT UNION “ZaRaZ” is automated, is conducted on the computer with use of the special software on management of activity of credit union “All in one” CUPROGRAM “according to the agreement from 06.06.2011.

Based on our tests and audit evidence, it can be noted that accounting is conducted by CREDIT UNION “ZaRaZ” in general in accordance with the requirements of the Law of Ukraine “On Accounting and Financial Reporting in Ukraine” №996-XIV from 16.07.1999. with changes and additions, International Accounting Standards, International Financial Reporting Standards, other regulations on accounting and financial reporting in Ukraine, Accounting Policy and Internal Regulations of the Credit Union.

Accounting ensures the regular collection and proper processing of information required for the preparation of financial statements. The data of primary documents correspond to the data of analytical and synthetic accounting of the credit union, which are reflected in the submitted financial statements as of 31.12.2017.

The accounting system in the Credit Union corresponds to its size, structure, type of activity, provides regular collection and proper processing of information for the preparation of financial statements. Indicators of financial reporting forms generally correspond to accounting data and data of individual forms of reporting correspond to each other.

Assets of the Credit Union as of December 31, 2017 amount to UAH 29,619 thousand. Information by type of assets generally meets the requirements of International Accounting Standards and International Financial Reporting Standards.

Liabilities of the Credit Union as of 31.12.2017 amount to 23763 thousand UAH. Information by type of liability generally meets the requirements of International Accounting Standards and International Financial Reporting Standards.

Equity as of 31.12.2017 is 5856 thousand UAH. Disclosure of equity information in all material respects meets the requirements of International Accounting Standards and International Financial Reporting Standards.

Financial statements are prepared in a timely manner and submitted to the relevant regulatory authorities. No changes in the accounting methodology and deviations from the adopted accounting policy during the period under review were detected.

Based on our tests and audit evidence, it can be noted that the Credit Union’s accounting is generally conducted in accordance with the requirements of the Law of Ukraine “On Accounting and Financial Reporting in Ukraine” №996-XIV of 16.07.1999. with changes and additions, other regulations on the organization of accounting.

Disclosure of information by type of assets

The assets of the Credit Union are initially valued and reflected in the accounting on the date of inclusion of the asset in the assets of the Credit Union. The assets of the Credit Union are recognized provided that they meet the recognition criteria. An asset is recognized when it is probable that future economic benefits associated with the asset will flow to the Group and the cost of the item can be measured reliably. Initial recognition, initial measurement, subsequent measurement of the Credit Union’s assets and termination of their recognition are determined by the relevant IFRS.

Non-current assets

Intangible assets

As of 31.12.2017 the initial cost of intangible assets is 10 thousand UAH, the accumulated amortization -2 thousand UAH, the residual value of 8 thousand UAH.

Fixed assets

As of 31.12.2017 the initial cost of fixed assets is 1166 thousand UAH, depreciation -230 thousand UAH, the residual value of 936 thousand UAH.

Receivables

Part of the loan portfolio of the Credit Union is reflected in long-term receivables in the amount of UAH 165 thousand. according to the actual maturity later than 31.12.2018

Current assets

Receivables

Accounts receivable as of 31.12.2017 for products, goods, services is 429 thousand UAH.

Other current receivables of the credit union as of 31.12.2017 is 24124 thousand UAH, which consists of the balance of the principal amount on loans 25388 thousand UAH, the balance of accrued but unpaid interest on loans 1578 thousand UAH, the amount of arrears of state duty and other court costs 154 thousand UAH, the amount debt for the sold real estate 758 thousand UAH. (excluding the provision for covering expenses from non-performing loans in the amount of UAH 1,147 thousand, the provision for covering losses at accrued interest on all accrued but unpaid interest as of 31.12.2017 and the debt on extended loans in the amount of UAH 2,606 thousand. UAH).

Money and their equivalents

Non-cash and cash payments are made by the Credit Union in compliance with applicable law. As of 31.12.2017 money and their equivalents amount to 1085 thousand UAH, including cash 56 thousand UAH.

Auditors were not present during the asset inventory.

In our opinion, the audit (with all planned and necessary audit procedures), except for the issues set out in the paragraph “Basis for qualified opinion”, provides a reasonable basis for forming an audit opinion on the reliability of the assets in the financial statements of the Credit Union.

Disclosure of liabilities and collateral

Long-term liabilities

Long-term liabilities of CREDIT UNION “ZaRaZ” as of the reporting date amount to UAH 7440 thousand, namely: contributions (deposits) to deposit accounts of credit union members at the actual maturity later than 31.12.2018. in the amount of 7053 thousand UAH. and accrued, but not paid, interest as of 31.12.2017. in the amount of 387 thousand UAH.

Current liabilities and collateral

Current accounts payable according to calculations with the budget 289 thousand UAH, according to calculations on wages 7 thousand UAH.

Other current liabilities as of the reporting date amount to UAH 16,003 thousand. (including optional (voluntary) share contributions UAH 13,809 thousand, current liabilities on contributions (deposits) to deposit accounts at amortized cost UAH 513 thousand, settlements with credit union members on accrued fees (%) for additional share contributions 1681 thousand UAH).

A credit union creates a provision for vacation pay in future periods, as required by IAS 37, Collateral, Contingent Liabilities and Contingent Assets. Current provisions amount to UAH 24,000.

We were not present during the inventory of liabilities.

In our opinion, the audit performed (with all planned and necessary audit procedures performed), except for the issues listed in the paragraph “Basis for qualified opinion”, provides a reasonable basis for forming an audit opinion on the reliability of the obligations and collateral in the financial reporting of the Credit Union.

Disclosure of equity information

Equity is the total value of the Credit Union’s assets owned by it and used by the union to form assets. Such assets are formed at the expense of the own capital invested in them and are net assets of the Credit Union.

According to the Charter, the capital of the ZaRaZ CREDIT UNION consists of share, reserve and additional capital, as well as the balance of retained earnings of the Credit Union and may not be less than 10 percent of the amount of its total liabilities.

The share capital of the Credit Union is formed at the expense of obligatory share contributions of the members of the ZaRaZ CREDIT UNION. The amount of the mandatory share contribution as of 31.12.2017 is 1 thousand UAH, which is reflected on line 1400 of the form №1 financial statements “Balance Sheet” (“Statement of financial position”).

The reserve capital is  intended to compensate for possible losses of the Credit Union, which cannot be covered by the current year’s revenues, to ensure the solvency of the credit union and to protect the savings of its members. The reserve capital of the ZaRaZ CREDIT UNION is formed at the expense of entrance fees of Credit Union members, part of the Credit Union’s income until it reaches at least 15 percent of the amount of assets weighted at the risk of the Credit Union, membership fees in reserve capital. The amount of reserve capital as of 31.12.2017 is 3690 thousand UAH, which is reflected on line 1415 of the form №1 financial statements “Balance Sheet” (“Statement of financial position”).

Retained earnings of the Credit Union as of 31.12.2017 is 406 thousand UAH, which is reflected on line 1420 of the form №1 financial statements “Balance Sheet” (“Statement of financial position”).

In our opinion, the conducted audit (with the implementation of all planned and necessary audit procedures) provides a reasonable basis for forming an audit opinion on the reliability of the reflection of equity in the financial statements of the Credit Union.

Disclosure of net profit (loss)

Other operating income of the Credit Union for 2017 are equal to 14337 thousand UAH. Other financial income 21 thousand UAH. Other income 413 thousand UAH

Administrative expenses 687 thousand UAH Other operating expenses UAH 8,635 thousand Financial expenses 5249 thousand UAH

Expenses (income) from income tax 36 thousand UAH.

Net profit of the credit union for 2017 is 164 thousand UAH.

Calculation of the value of net assets

We have obtained and verified information regarding the value of the net assets of the ZaRaZ CREDIT UNION.

The value of the net assets of the Credit Union means the amount determined by deducting from the amount of assets accepted for calculation, the amount of its liabilities accepted for calculation:

– assets UAH 29,619 thousand.

– liabilities UAH 23,763 thousand.

– estimated value of net assets 5855 thousand UAH.

– share capital of UAH 1 thousand.

The value of net assets at the end of the reporting period exceeds the amount of share capital, which does not contradict the requirements of the law.

Regarding compliance by the Credit Union

provisions of laws and regulations

In order to form a professional judgment and express an opinion on the Credit Union’s compliance with the provisions of laws and regulations, we conducted appropriate audit procedures and obtained sufficient evidence on the following issues, including:

1. The Credit Union of Natskomfinposlug shall notify all changes of data specified in the documents attached to the application for a license within 30 calendar days from the date of such changes – these requirements are met.
2. Provision of information by the Credit Union to the client (consumer) in accordance with Article 12 of the Law on Financial Services, as well as posting information specified in Part 1 of Article 12 of this law on its own website (web page) and ensuring its relevance – these requirements are met .
3. Disclosure by the Credit Union of information in accordance with Part 4, Part 5 of Article 12 ^{1 of the} Law on Financial Services, in particular by posting it on its own website (web page) – these requirements are met.
4. Placement by the Credit Union of internal rules for the provision of financial services on its own website (web page) no later than the next business day after the date of their entry into force, indicating such a date – these requirements are met.
5. Compliance of Article 10 of the Law on Financial Services with the Credit Union on decision-making in case of conflict of interest – these requirements are met.
6. Compliance of the premises where the Credit Union provides customer (consumer) services, accessibility for people with disabilities and other low-mobility groups in accordance with state building codes, regulations and standards, which is documented by a specialist in technical inspection of buildings and structures, who has a qualification certificate – these requirements are met.
7. Placement by the Credit Union of information on the conditions of accessibility of premises for persons with disabilities and other low-mobility groups in a place accessible for visual perception by the client (consumer) – these requirements are met.
8. The Credit Union shall enter information on all its separate divisions into the USR of legal entities, natural persons-entrepreneurs and public formations and into the State Register of Financial Institutions in accordance with the requirements established by Section XVII of Regulation №41 – these requirements are met.
9. Provision by the Credit Union of storage of funds and documents and availability of necessary security equipment (including safes for storage of funds, security alarm and / or appropriate security), and compliance with legislation on cash settlements established by NBU Resolution №637 and Resolution №210 – these requirements are met .
10. Observance by the Credit Union of restrictions on combining the types of economic activity established by clause 37 of the License Terms №913, p.2 of Regulation № 1515 – these requirements are met.
11. The credit union includes in the agreements on the provision of financial services a mandatory reference to the internal rules of the provision of financial services – these requirements are met.

12. The credit union complies with the internal provisions, the list and requirements for which are defined in List № 116 – these requirements are met.

13. The credit union has accounting and registration systems (software and special technical equipment) that meet the requirements set by Requirements №4122, and provide for the accounting of transactions for the provision of financial services to consumers and reporting to Natskomfinposlug – these requirements are met.

14. A credit union conducts business activities for the provision of financial services in terms of attracting financial assets from individuals with the obligation to return them only after obtaining the appropriate license – these requirements are met.

15. A credit union complies with the requirements of paragraph 41 of the License Terms №913, which stipulates that a financial institution (except for the insurer) is not entitled to enter into contracts for the provision of financial services (except insurance contracts and financial leasing contracts), the obligations of which are defined as monetary foreign currency equivalent – these requirements are met.

16. A credit union fulfills its financial services agreements and during the conclusion, execution and termination of such agreements complies with the requirements set forth in Book Five of the CCU, Article 6 of the Law on Financial Services, Part 7 of Article 10 of the Law on Unions – these requirements are met .

17. When admitting members to its union, a credit union adheres to the sign of membership determined by its charter in accordance with Articles 6 and 7 of the Law on Unions – these requirements are met.

18. A credit union shall convene a general meeting within the terms stipulated by the charter of the credit union, but not less than once a year, in compliance with the requirements of Article 14 of the Law on Unions – these requirements are met.

19. The credit union adheres to the rules for attracting contributions (deposits) of credit union members to deposit accounts, defined by Order Роз821 – these requirements are met.

20. A credit union discloses information on the sources of borrowed funds other than contributions (deposits) of credit union members to deposit accounts, including those attracted from legal entities (name, USREOU code, amounts, terms and conditions of borrowing (interest rate)) – these requirements are met.

21. The credit union complies with the requirements of the legislation on the formation of the provision for doubtful debts and the provision for losses from unpaid loans, which is a provision formed in accordance with International Financial Reporting Standards due to impairment (impairment) of assets due to credit risk – these requirements complied with.
22. The credit union discloses information on active operations not related to its financial activities – these requirements are met.

OTHER SUPPORTING INFORMATION

Disclosure of information on compliance with financial standards and quality criteria of the credit union management system

In order to ensure the stable operation of the Credit Union, its timely compliance with its obligations to its members, as well as to prevent possible capital losses due to risks inherent in the activities of credit unions, “Regulations on financial standards and quality criteria of credit unions management system” by the order of the State Commission for Regulation of Financial Services Markets of Ukraine №7 of 16.01.2004, established standards for capital, solvency, asset quality, profitability, risk those operations, liquidity, and quality management criteria.

Based on the reporting data of the CREDIT UNION “ZaRaZ”, the financial standards (current group of standards 2) are calculated and their compliance with the normative value as of 31.12.2017 is determined:

Standards contained in the “Regulations on financial standards and quality criteria for the management system of credit unions and joint credit unions”, approved by the order of the State Commission for Regulation of Financial Services Markets of Ukraine №7 from 16.01.2004. with changes and additions, as of 31.12.2017 the credit union complied, except for the standard of the formed reserve capital.

Risk assessment and management systems

In assessing risks, the Credit Union complies with the requirements of the National Commission for State Regulation of Financial Services Markets of Ukraine. The risk assessment system is based on accounting data and property valuation. Risk management is performed by the Chairman of the Board of the Credit Union and the person responsible for financial monitoring. The management of the Credit Union has sources of information on market risks and decides the directions of active operations.

Interest rate risk

A credit union does not have significant interest rate risk due to the fact that most financial instruments are short-term.

Liquidity risk

Liquidity risk arises in the overall financing of the Credit Union and in the management of positions. It includes both the risk of not being able to finance the assets in a timely manner and at the appropriate rates, and the risk of not being able to liquidate the asset at an affordable price and in a timely manner.

Funds are raised through the use of various instruments, including an increase in accumulated capital, the formation of a reserve fund, thereby reducing dependence on a single source of funding, which usually reduces the cost of funds. Liquidity risk is moderate.

Internal audit

The Credit Union established an internal audit service, which operates in accordance with the requirements of the Law of Ukraine “On Financial Services and State Regulation of Financial Services Markets” №2664-III of 12.07.2001, “Procedure for Internal Audit (Control) in Financial Institutions”, approved by the Order National Commission for State Regulation of Financial Services Markets №1772 dated 05.06.2014.

Having considered the state of internal control in the credit union, we consider it necessary to note the following:

• The system of internal control is aimed at preventing, detecting and correcting significant errors, ensuring the protection and preservation of assets, completeness and accuracy of accounting records and includes administrative and accounting controls.
• Accounting control ensures the preservation of the credit union’s assets, reliability of reporting and includes previous, primary (current) and subsequent control.
• The management of the credit union fully understands the prospects for the development of internal audit and its significance and importance.

Assessing the above, we concluded that the adequacy of internal control procedures in the credit union. There are grounds to consider the current system of internal control in the Credit Union as satisfactory.

The auditor identifies and assesses the risks of material misstatement

financial statements due to fraud

When performing risk assessment procedures and related activities to gain an understanding of the entity and its environment, including its internal control, as required by ISA 315 “Identifying and Assessing Risks of Material Distortion through Understanding the Entity and Its Environment “, We have performed the procedures necessary to obtain the information used in identifying the risks of material misstatement due to fraud in accordance with ISA 240″ Auditor’s Responsibility osuyetsya fraud, the audit of financial statements. ”

We have made inquiries to management and other members of the Credit Union who we believe may have information that is likely to help identify the risks of material misstatement as a result of fraud or error. We performed analytical procedures, including essentially using detailed data, observations and others. We have an understanding of external factors, the entity’s operations, its ownership and corporate governance structure, the structure and method of financing, accounting policies, objectives and strategies and related business risks, evaluations and reviews of financial results.

We have not received any evidence that the Credit Union’s financial statements may be materially misstated as a result of fraud.

Information about related parties

In accordance with the requirements of IAS 24 Related Party Disclosures and IAS 550 Related Parties, we have requested management to provide a list of related parties and, if any, the nature of transactions with them.

According to IFRS, related parties are: enterprises that are under the control or significant influence of others; enterprises or individuals that directly or indirectly exercise control over the Credit Union or significantly influence its activities, as well as close family members of such an individual.

In the process of performing audit procedures to audit the financial statements of the Credit Union, the information on the list of related parties, violations and deviations are not established.

Information about events after the balance sheet date that are not reflected in the financial statements, but may have a significant impact

on the financial condition of the Credit Union

In the process of auditing the financial statements, we have not identified any events after the balance sheet date that are not reflected in the financial statements, but may have a material impact on the financial condition of the Credit Union.

Continuity of economic activity of the Credit Union

The assumption of business continuity of a credit union is considered by auditors in accordance with ISA 570 “Continuity” as one that will continue in the near future without the intention or need to liquidate or terminate it. This is based on the judgment of the auditors, as well as on the accounting data of the Credit Union and the interviews (inquiries provided) to management on this issue.

We have not identified any events or conditions and related business risks that may call into question the entity’s ability to continue as a going concern.

SECTION 3 “OTHER ELEMENTS”

1. Basic information about the credit union

1. Basic information about the audit firm and the terms of the contract

Auditor PP “AF” Audit-Optim “_______________ Grigor ‘ George N.

Certificate of auditor of series A № 005504 issued on July 22, 2003. Audit Chamber of Ukraine, the certificate was extended by the Decision of the UBA of Ukraine №271 / 2 dated 30.05.2013. until July 22, 2018.

Director of the PA AF Audit-Optim _______________ Trushkevich T.M.

Certificate of auditor of series A № 001147 issued on April 28, 1994 by the Audit Chamber of Ukraine, the validity of the certificate was extended by the Decision of the UBA of Ukraine № 265/2 of February 28, 2013. until April 28, 2018.

Ukraine, Kyiv, Chervonopraporna Street, b.34, building 4

 “16” February 2018