2007年-世界发展银行全球_The_Republic_of_Montenegro___Accounting_and_Auditing_28页_1mb

Summary of the Report on the Observance of Standards and Codes (ROSC) in Montenegro

Core Content

This report evaluates the current state of accounting and auditing practices in Montenegro, focusing on the alignment with international standards and the EU acquis communautaire. It highlights both the progress made and the challenges that remain in establishing a robust and credible financial reporting and audit framework.

Main Issues and Recommendations

Institutional and Regulatory Framework

• Statutory Basis: The 2003 Business Organization Law and 2005 Law on Accounting and Auditing form the legal foundation for financial reporting and auditing in Montenegro.
• Accounting Standards: The law mandates the use of IFRS for all legal entities, including SMEs, but this is not appropriate for smaller businesses due to the complexity and cost of IFRS.
• Audit Requirements: Statutory audits are required for certain entities, including joint stock companies and banks, but the framework is incomplete and lacks clarity.
• Regulatory Vacuum: The absence of a clearly defined regulatory body has created a vacuum, leading to uncertainty and inconsistent application of standards.

Financial Reporting Issues

• SMEs: Financial statements of SMEs are often not in compliance with IFRS, due to lack of capacity, limited resources, and no audit requirement.
• Real Sector Companies: Listed companies are required to prepare IFRS-based financial statements, but enforcement by the SEC is not systematic, and the SEC lacks powers to impose sanctions.
• Financial Sector: Banks generally produce high-quality financial statements due to supervision by the Central Bank and influence from foreign banks. However, insurance companies lack a similar level of oversight.
• Disclosure and Compliance: There is insufficient disclosure and reconciliation of financial information, with many SMEs not preparing cash flow statements or notes to the financial statements.
• Publication: Only 60% of companies submitted their 2005 financial statements to the Central Registry of the Commercial Court by October 2006, indicating weak enforcement and lack of incentives for compliance.

Audit Function

• Audit Effectiveness: The audit function is not fully effective; many audit reports are qualified, disclaimed, or modified, with approximately 80% of audit opinions in the sample being modified.
• Corporate Governance: The lack of audit committees and shareholder engagement undermines corporate governance and effective oversight.
• Independence Concerns: Audit firms are often state-owned, creating potential conflicts of interest and lack of independence.
• Quality Assurance: There is no formal quality assurance system in place, which is a critical gap, especially for public interest entities.

Capacity and Education

• Professional Qualifications: While the education system for accountants and auditors is of good quality, it requires further strengthening.
• Training and Development: There is a need for updated curricula, modern textbooks, and supervised practical training for accountants and auditors.
• Continuing Education: A system of continuing professional education (CPE) is necessary to maintain and improve the competence of statutory auditors.

Policy Recommendations

• Establish a National Steering Committee (NSC): A multidisciplinary NSC should be formed to oversee the implementation of the report’s recommendations and guide alignment with the acquis.
• Reconsider IFRS Scope: The application of IFRS should be re-evaluated to create a proportionate financial reporting framework that aligns with taxation accounting and considers SME-specific needs.
• Enhance Regulatory Framework: The regulatory framework for SMEs should be restructured to allow for more comprehensive exemptions and to ensure consistency with the acquis.
• Strengthen Institutional Capacity: The number of licensed auditors is insufficient to meet the needs of the business community, and capacity building should be prioritized alongside any expansion of IFRS requirements.
• Improve Enforcement: The SEC needs more authority and resources to enforce IFRS compliance and to penalize non-compliance effectively.
• Promote Electronic Publication: Financial statements should be made available electronically in line with EU directives to improve transparency and access.
• Ensure Independence: Regulations should be introduced to ensure the independence and objectivity of audit firms, including restrictions on state ownership and management influence.

Conclusion

Montenegro has made significant strides in developing its accounting and auditing framework, but much remains to be done to ensure it is aligned with international standards and the EU acquis. The report emphasizes the need for regulatory clarity, institutional capacity building, and stronger enforcement mechanisms to improve the quality and reliability of financial reporting and auditing practices.