2002年-世界发展银行全球_Bulgaria___Accounting_and_Auditing_15页_465kb

Summary of the REPORT ON THE OBSERVANCE OF STANDARDS AND CODES (ROSC) – Bulgaria

Core Content

This report evaluates the current state of accounting and auditing practices in Bulgaria, focusing on the transition from national standards to International Accounting Standards (IAS) and International Standards on Auditing (ISA). It outlines the legal and institutional framework, the challenges in implementation, and the perceived quality of financial reporting, culminating in policy recommendations to improve compliance and transparency.

Main Points

I. Introduction

• The report is part of a joint initiative by the World Bank and IMF on Reports on the Observance of Standards and Codes (ROSC).
• The focus is on assessing the strengths and weaknesses of the accounting and auditing environment in Bulgaria.
• IAS and ISA are used as benchmarks for evaluating compliance and practice.
• Bulgaria has undergone significant legal and institutional reforms since the late 1980s to align with EU standards and attract investors.

II. Institutional Framework

A. Statutory Framework

• Accountancy Law 1991 (as amended): Requires companies to prepare financial statements in accordance with NAS, which are based on IAS but differ in several aspects.
• Accountancy Law 2001: Mandates IAS compliance for all private sector enterprises starting in 2003.
• Independent Financial Audit Law 2001: Requires audits in accordance with ISA from 2003.
• LPOS 2002: Enhances disclosure requirements for public offerings, including audited financial statements for the past three years.
• Banking and Insurance Acts: Require accreditation of auditors for financial institutions, but the process is not formalized.

B. The Profession

• The Institute of Certified Public Accountants in Bulgaria (ICPAB) has 570 members, most of whom are engaged in audit work.
• ICPAB is responsible for regulating the profession, including organizing exams, training, and maintaining ethical standards.
• The profession is self-regulated, and the ICPAB is expected to develop a code of ethics based on the IFAC Code of Ethics.
• Auditors are required to have professional indemnity insurance, with a minimum of 10,000 Bulgarian leva (US$5,200).

C. Professional Education and Training

• A registered auditor must have higher education, practical experience, and pass the ICPAB examination.
• Continuing professional education (CPE) is required, with a minimum of 40 hours per year.
• There are concerns about the subjectivity of oral exams, lack of mentoring, and limited IAS training material in Bulgarian.
• Auditors who registered before 2001 are grandfathered if they complete 60 hours of IAS and ISA training by 2003.

D. Setting Accounting and Auditing Standards

• IAS Compliance: Mandatory under the Accountancy Law 2001, with no standards gap expected by 2005.
• ISA Compliance: Mandatory under the Independent Financial Audit Law 2001, with no standards gap expected by 2003.
• Translation Efforts: A committee under the Ministry of Finance has been working on translating IAS and ISA into Bulgarian, with translations expected by April 2003.

E. Enforcing Accounting and Auditing Standards

• The State Securities and Exchange Commission (SSEC) reviews financial statements of listed companies for compliance, but has limited resources and no reported legal cases.
• The Bulgarian National Bank reviews banks' financial statements, but relies on auditors for compliance checks.
• The ICPAB has introduced quality assurance programs and external reviews, but enforcement remains weak.

Key Issues in Practice

III. Accounting Standards as Designed and as Practiced

• IAS financial statements of five banks were reviewed and found to be generally of high quality, though some practical difficulties exist:
  • Loan loss provisions: Calculated based on regulatory requirements rather than IAS.
  • Fair value determination: Challenging due to lack of expertise.
  • Hyperinflation adjustments: Not widely applied.
• Widespread practices that may hinder transparency:
  • Understating net income due to differences between NAS and tax requirements.
  • Misuse of transfer pricing to shift earnings away from minority shareholders.
  • Lack of comparability across years and asset impairment issues.

IV. Auditing Standards as Designed and as Practiced

• Many audit firms aim to comply with ISA, but understanding of audit purpose is limited among shareholders and management.
• Quality control reviews by ICPAB are still in early stages and have not yet had a significant impact.
• Translation of ISA is complete, but guidelines for implementation are lacking.
• Local firms have increasing access to international audit literature.

Perception on the Quality of Financial Reporting

• Investors and rating agencies differentiate between large banks (audited by international firms) and other Bulgarian companies.
• Consolidated financial statements of larger banks are generally available and of adequate quality.
• Concerns about financial reporting quality include:
  • Related-party transactions
  • Hidden revenues
  • Transfer pricing
  • Lack of comparability
  • Asset impairment issues

Policy Recommendations

• Develop a detailed Country Action Plan based on the new legislative framework.
• Enhance professional education and training for auditors and accountants.
• Establish an adequate oversight mechanism for the audit profession.
• Improve enforcement of compliance with IAS and ISA.
• Strengthen quality control reviews and ensure their effectiveness.
• Develop guidelines for implementing IAS and ISA in practice.
• Promote greater awareness and understanding of IAS and ISA among investors, directors, and management.
• Encourage collaboration between the banking sector and auditors to improve audit quality and credit risk assessments.