2002年-世界发展银行全球_Croatia___Accounting_and_Auditing_15页_483kb

Summary of the Report on the Observance of Standards and Codes (ROSC) - Croatia

Core Content

This report evaluates the accounting and auditing standards and practices in Croatia, focusing on their alignment with International Accounting Standards (IAS) and International Standards of Auditing (ISA). It was conducted as part of a Bank-Fund initiative and is based on a self-assessment by Croatian authorities, reviewed by Bank staff through a due diligence process.

Main Points

I. Introduction

• The assessment was part of the Reports on the Observance of Standards and Codes (ROSC) initiative.
• The focus was on the strengths and weaknesses of the institutional framework affecting corporate financial reporting.
• IAS and ISA were used as benchmarks to evaluate Croatia's standards.

II. Institutional Framework

A. Statutory Framework

• The Accounting Act (1992) requires all companies to prepare IAS financial statements.
• It incorporates formats from EU Directives but does not include valuation rules or consolidated accounts requirements.
• The Audit Law mandates audits in accordance with ISA and requires certified auditors to be licensed by the Ministry of Finance (MOF).
• The MOF recognizes the Croatian Association of Auditors (HUR) as the sole professional association for auditors.
• The current Audit Law limits auditor liability to DM 50,000, but the draft new law proposes unlimited liability and mandatory insurance.

B. The Profession

• Approximately 1,000 auditors hold licenses from HUR, with 90% actively practicing.
• There are 300 audit firms licensed by the MOF, including local and international firms.
• HUR requires auditors to follow the IFAC Code of Ethics but does not monitor compliance.

C. Professional Education and Training

• To obtain an audit license, auditors must have a University degree in economics and pass HUR's certified auditor examination.
• The Institute of Chartered Accountants in England and Wales assisted in developing the examination.
• Concerns exist about the reduced depth of education and exams over time, though the new draft law allows for non-economics degree holders.

D. Setting Accounting and Auditing Standards

• There is no standards gap in accounting, as IAS are translated and published in the Official Gazette.
• The Croatian Accounting Standards Board is authorized to handle IAS implementation issues.
• There is no standards gap in auditing, as ISA are required and HUR is responsible for their translation and publication.

E. Compliance with Standards

• No enforcement or monitoring of IAS compliance exists beyond the audit process.
• No enforcement or monitoring of ISA compliance, with the draft new law proposing MOF oversight.
• CROSEC has limited powers to enforce IAS compliance with Privatization Investment Funds (PIFs), but not with listed companies.

III. Accounting Standards as Designed and as Practiced

• 20 companies submitted financial statements for review, with 3 not complying with IAS.
• Deficiencies include:
  • Missing statements of changes in equity
  • Lack of segment disclosures
  • Misclassification of extraordinary items
  • Confusing property valuations
  • Limited disclosures on fair value
  • Inconsistencies in deferred tax asset recognition
• Some companies manipulate financial statements to minimize tax liabilities, leading to non-compliance with IAS.
• Auditors sometimes issue unqualified opinions despite material non-compliance with IAS.
• Implementation challenges include a lack of IAS expertise among corporate accountants and the absence of standardized guidelines.

IV. Auditing Standards as Designed and as Practiced

• Many audit firms strive to comply with ISA, but there are significant variations in audit quality.
• Management attitudes and misunderstandings of audit roles affect audit quality.
• Issues identified include:
  • Lack of audit working papers
  • Uncertainty about auditor responsibility for fraud reporting
  • Misunderstanding of materiality
  • Insufficient audit evidence for related parties, fair values, and asset impairments
  • Going concern uncertainties
• Translation and signing practices of audit reports are not standardized.
• Small audit firms often lack adequate planning, quality control, and supervision.

V. Perception on the Quality of Financing Reporting

• Little demand from capital market users for financial information from Croatian companies.
• Banks base lending decisions on more than just financial statements.
• Low trading volumes and limited capital market activity result in minimal pressure for improved financial reporting.

VI. Policy Recommendations

• A Country Action Plan (CAP) is to be developed and implemented based on the findings.
• The CAP will be coordinated by the National Steering Committee (NSC) and supported by international partners.
• Key recommendations include:
  • Establishing a Croatian Financial Reporting Council to oversee standards.
  • Improving audit quality control and supervision.
  • Enhancing professional education and training for auditors.
  • Addressing liability and insurance requirements for auditors.
  • Clarifying the roles and responsibilities of auditors and bank supervisors.
  • Providing standardized implementation guidelines for IAS.

Key Information

• Croatia adopted IAS in 1992 and ISA through the Audit Law.
• SMEs face a greater compliance burden with IAS compared to other EU countries.
• CROSEC and HUR lack authority to enforce IAS or ISA compliance.
• The draft new Audit Law aims to improve auditor accountability and quality but is not yet enacted.
• Audit quality is influenced by both institutional and managerial factors.