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Legal environment

Legal environment. Establishment of the Institute : 9 September, 1993 Legal form: Institute, governed by the provisions of the Institute’s By- laws (Official Gazette of the R of S lovenia No. 70/01) Slovenian Audit Act

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Legal environment

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  1. Legal environment • Establishment of the Institute: 9 September, 1993 • Legal form:Institute, governed by the provisions of the Institute’s By- laws (Official Gazette of the R of Slovenia No. 70/01) • Slovenian Audit Act • (Official Gazette of the RS No. 11/01) -harmonised with the EU legislation - http://www.si-revizija.si/o_siru/dokumenti/zakon_o_revidiranju-an.doc Marjan Odar, Slovenian Institute of Auditors

  2. Tasks and powers • The Institute carries out tasks and implements powers in the domain of • auditing and • other professional domains related to auditing • Professional domains related to auditing: • accounting • business finance • internal audit • information systems audit • tax analysis and consulting • valuation of business, real estate, machines and equipment Marjan Odar, Slovenian Institute of Auditors

  3. Audit services may be provided by • a company with a registered office in the Republic of Slovenia which has obtained the licence of the Institute for the provision of such services - audit company • a certified auditor providing auditservices on an individual basis as occupation who has obtained the licence of the Institute for the provision of such services - solo-practitioner • the professional title is protected by law as long as it ensures adequate quality Marjan Odar, Slovenian Institute of Auditors

  4. Senior Advisers (3) Legal Adviser AUDIT SECTION Administrators (2) Director AUDIT COUNCIL COUNCIL OF EXPERTS ACCOUNTING SECTION TAX ADVISORY SECTION SECTION FOR INFORMATION SYSTEMS AUDIT BUSINESS FINANCE SECTION SECTION FOR VALUATION SECTION FOR INTERNAL AUDIT STRUCTURE OF THE ORGANISATION BOARD Marjan Odar, Slovenian Institute of Auditors

  5. The main governing bodies • Board • Director • Audit Council • Council of Experts Marjan Odar, Slovenian Institute of Auditors

  6. Board of the Institute – the main tasks • adopts articles of association and other general acts • adopts working and development programs of the Institute and monitors their implementation • determins business plans and approves annual reports of the Institute • determines policies for price formation of audit services; • determines rates and prices for the services performed by the Institute Marjan Odar, Slovenian Institute of Auditors

  7. 13 members of the Board are appointed (for a 4-year term): • 4 by the founder (Association of the Accountants, Treasurers and Auditors of Slovenia) • 6 by registered members of the Institute • 2 by the minister of finance • 1 by the employees of the Institute Marjan Odar, Slovenian Institute of Auditors

  8. Director of the Institute (appointed for a 4-year term by the Board of the Institute) should • hold the professional title of a certified auditor • have the qualities and experience required for the management of the Institute • be a national of the Republic of Slovenia • have a certificate of no previous convictions Marjan Odar, Slovenian Institute of Auditors

  9. 9 members of theAudit Council are appointed (for a 4-year term) • 5 of them, who should hold the licence of a certified auditor, are appointed by certified auditors • 3 representatives of the interested public, who should have appropriate professional knowledge and experience in the field of accountancy and finance, are appointed by the minister of finance (two of them on proposal of the Chamber of Commerce and Industry of Slovenia) • director of the Institute is a member in his capacity Marjan Odar, Slovenian Institute of Auditors

  10. 11 members of theCouncil of Experts are appointed (for a 4-year term) • 9 by the registered members of the Institute • certified auditors, auditors, certified valuators, internal auditors, management accountants, business finance experts, information systems auditors, tax consultants • 2 by university institutions from among the university professors Marjan Odar, Slovenian Institute of Auditors

  11. Professional work of the Institute • organised in sections /committees/ • audit section (covered by the Audit Council) • other sections (covered by the Council of Experts) • accounting section • business finance section • tax advisory section • section for valuation (real estate, plant and machinery, business) • section for information systems auditing • internal audit section Marjan Odar, Slovenian Institute of Auditors

  12. The sections are • represented by the registered members of the Institute • managed by the committees of 5 members (elected by registered members of each section) The Institute receives no external subsidies • its main source of income is fees for audit companies, various ordinary training programs, conferences, seminars • budget - apox. 1. Mio. € Marjan Odar, Slovenian Institute of Auditors

  13. Powers of supervision - Quality Assurance • supervision of audit companies • with the purpose to establish whether an audit company observes audit rules in the course of auditing • audit rules: ISAs, Code of Professional Ethics of External Auditors, Basic Audit Principles, Guidelines for Audit Companies, audit practice statements and recommendations of the Audit Council • supervision of certified auditors • supervision of certified valuators Marjan Odar, Slovenian Institute of Auditors

  14. Professional Standards • According to the Audit Act the Institute is authorised to adopt and publish the following professional standards: • accounting standards • auditing standards • business and finance standards • internal audit standards • information systems audit standards • standards in the field of business, real estate, machine and equipment valuation Marjan Odar, Slovenian Institute of Auditors

  15. Already adopted and published • accounting standards • internal audit standards • business-finance standards • audit rules • business-finance principles Marjan Odar, Slovenian Institute of Auditors

  16. Important responsibility in the accounting field • According to the Companies’ Act the Institute is authorised to set and prepare Slovenian Accounting Standards, which are to be approved by the Ministry of Finance and • Ministry of Economy • New SAS were put into force on 1 January, 2006 Marjan Odar, Slovenian Institute of Auditors

  17. Enforcement of professional standards • accounting standards • enforced by the Companies’ Act and other special acts (referring to banks, insurance companies, mutual funds, etc.) • auditing standards • ISAs and other audit rules are enforced by the Audit Act • other standards • enforced by professional rules Marjan Odar, Slovenian Institute of Auditors

  18. Training programs • Language: Slovene • Minimum formal education requirement: B. Sc. • Certification requirements and training programs are offered by the Institute • BASIC TRAINING for all training programs (except for certified real estate valuator and certified machine and equipment valuator): 76 hours • accounting 18 hours • auditing 8 hours • business finance 15 hours • corporate and tax law 20 hours • mathematical and statistical methods 10 hours • business communication 5 hours Marjan Odar, Slovenian Institute of Auditors

  19. VERIFIED INTERNAL AUDITOR • basic training 76 hours • special subjects • auditing 41 hours • accounting and taxation 21 hours • business finance 15 hours • VERIFIED MANAGEMENT ACCOUNTANT • basic training 76 hours • special subjects • accounting and taxation 62 hours • business finance 15 hours • VERIFIED BUSINESS FINANCE EXPERT • basic training 76 hours • special subjects • business finance 52 hours • accounting and taxation 25 hours Marjan Odar, Slovenian Institute of Auditors

  20. VERIFIED TAX CONSULTANT • basic training 76 hours • special subjects • tax procedures and tax audit 47 hours • accounting and taxation 25 hours • business finance 15 hours • VERIFIED INFORMATION SYSTEMS AUDITOR • basic training 76 hours • special subjects • information systems auditing 40 hours • information science 37 hours Marjan Odar, Slovenian Institute of Auditors

  21. CERTIFIED BUSINESS VALUATOR • basic training 76 hours • special subjects • business valuation 52 hours • accounting and taxation 26 hours • business finance 15 hours • CERTIFIED REAL ESTATE VALUATOR • subjects • real estate valuation 132 hours • accounting and taxation 15 hours • business finance 15 hours • CERTIFIED MACHINE AND EQUIPMENT VALUATOR • subjects • valuation of machines and equipment 132 hours • accounting and taxation 20 hours • business finance 15 hours Marjan Odar, Slovenian Institute of Auditors

  22. Conditions of admission (prescribed by the Audit Act) • certified auditor • university degree • five years’ working experience • of which minimum three years in auditing after the date of obtaining the licence to carry out the tasks of an auditor • examination of professional competence to carry out tasks of a certified auditor • certificate of no previsous convictions • command of the Slovene language Marjan Odar, Slovenian Institute of Auditors

  23. auditor • university degree • two years’ working experience • in the field of auditing or internal audit • examination of professional competence to carry out tasks of an auditor • certificate of no previsous convictions • command of the Slovene language • certified valuator • university degree • five years’ working experience in the field requiring knowledge necessary for carrying out tasks of a valuator • examination of professional competence to carry out tasks of a certified valuator • certificate of no previsous convictions • command of the Slovene language Marjan Odar, Slovenian Institute of Auditors

  24. Conditions of admission (for other titles, not prescribed by the Audit Act) • internal auditor, management accountant, business finance expert, information systems auditor, tax consultant • professional qualifications obtained in graduate school • appropriate working experience • examination of professional competence to carry out tasksof a certain profession • certificate of no previsous convictions • command of the Slovene language • fulfilment of requirements set by the code of ethics for the profession in question Marjan Odar, Slovenian Institute of Auditors

  25. Continuing training requirements • 30 hours of training per year (for all titles) Marjan Odar, Slovenian Institute of Auditors

  26. Audit profession - Legal Basis • Auditing Act • International Standards on Auditing • Basic Auditing Principles • Other auditing rules, adopted by the Slovenian Institute of Auditors Marjan Odar, Slovenian Institute of Auditors

  27. Marjan Odar, Slovenian Institute of Auditors

  28. Auditing Council • decides about the issue and withdrawal of licences for auditing firms and certified auditors (auditors); • supervises the auditing; • adopts the auditing rules; • lays down the criteria for obtaining the certificate of a certified auditor and auditor; • performs other professional tasks related to the development of the auditing profession. Marjan Odar, Slovenian Institute of Auditors

  29. Quality control • Auditing firms • Certified auditors • Auditors • The quality control is performed: • by monitoring, collecting and verifying the reports, • by reviewing the operations of the entities under control. Marjan Odar, Slovenian Institute of Auditors

  30. Monitoring • Carried out by experts: • authorised by the Director of the Institute; • employed at the Institute. • 4 certified auditors and 1 lawyer • 42 auditing firms • app. 150 active certified auditors (out of 189) Marjan Odar, Slovenian Institute of Auditors

  31. Quality control • auditing firm; • within the auditing firm: • each certified auditor (statutory auditor) - directly; • auditors - indirectly (through the review of the files); • minimum three years’ cycle for auditing firms with listed companies; • minimum five years’ cycle for other auditing firms; • all the documents of the firm must be available. Marjan Odar, Slovenian Institute of Auditors

  32. Disciplinary sanctions for certified auditors and auditors • withdrawal of the licence; • public warning. Marjan Odar, Slovenian Institute of Auditors

  33. Withdrawal of the licence • the licence was obtained by stating false data; • the person has been convicted of a commercial or property crime; • he/she holds investments in the client; • he/she is connected with the client in another manner that could give rise to a doubt as to the independence and objectivity of auditing; • he/she violates the auditing rules, which results in a deficient and misleading audit report; • he/she violates the duty to preserve the secrecy of confidential data; • he/she repeatedly violates other provisions of auditing rules. Marjan Odar, Slovenian Institute of Auditors

  34. Conditional withdrawal of the licence • The Institute may provide that the withdrawal will not be implemented if within the time limit set by the Institute of no less that six months and not exceeding two years, the certified auditor or the auditor refrains from committing another violation giving rise to the withdrawal of the licence or a public warning. Marjan Odar, Slovenian Institute of Auditors

  35. Public warning • violation of the auditing rules; • no grounds for withdrawal or conditional withdrawal of the licence. Marjan Odar, Slovenian Institute of Auditors

  36. Disciplinary sanctions for auditing firms • order for elimination of violation; • imposition of additional measures; • withdrawal of the licence. Marjan Odar, Slovenian Institute of Auditors

  37. Order for elimination of violation • The auditing firm • violates the prohibition connected with the investments; • carries out the activities prohibited under the Auditing Act; • is organised as a joint-stock company but it has not issued registered shares; • violates the duty of reporting and notification; • violates other auditing rules. Marjan Odar, Slovenian Institute of Auditors

  38. Imposition of additional measures • Seriously violation of auditing rules. • Measures: • the improvement of procedures of internal supervision of auditing; • the improvement of procedures of internal supervision concerning the flow of confidential data; • the change of internal structure of the auditing firm; • other measures required for implementation of the auditing rules. Marjan Odar, Slovenian Institute of Auditors

  39. Withdrawal of the licence • the licence was obtained by stating false data; • additional measure was imposed on the auditing firm, and the competent body (old or newly appointed) failed to eliminate the violations and/or to take additional measures. Marjan Odar, Slovenian Institute of Auditors

  40. Publishing of the final sanctions • The summarised decision is to be published in the professional journal of the Institute (Revizor - The Auditor). Marjan Odar, Slovenian Institute of Auditors

  41. Disciplinary sanctions in the years 2003 - 2005 • Certified auditors: • 19 public warnings: • 12 final, • 7 not final (4 cases at the court); • 1 withdrawal (final). • Auditing firms: • 7 orders for elimination of the violation. Marjan Odar, Slovenian Institute of Auditors

  42. The Auditing Profession - history • The period 1996 - 2001 • the first Slovenian Auditing Act • the Institute is responsible for the monitoring of statutory audits • special rules accepted by the Council of Experts • peer review system • 43 auditing firms • 100 statutory auditors - practitioners Marjan Odar, Slovenian Institute of Auditors

  43. The period 2002 - 2004 • the second Slovenian Auditing Act • the quality control procedure is prescribed in details by the act • monitoring system • the experts of the Institute • one lawyer • four certified auditors • 42 auditing firms • 130 statutory auditors - practitioners Marjan Odar, Slovenian Institute of Auditors

  44. 8.th Directive independent from the review persons subject to the public oversight governed by knowledgeable non-practitioners independent and transparent nomination procedure ultimate responsibility for the approval and registration the adoption of auditing rules continuous education, quality assurance and investigative and disciplinary systems Auditing Act monitoring system, carried out by the Institute’s experts Auditing Council governed by knowledgeable non-practitioners by coincidence the election (5) and the appointment (3) ultimate responsibility for the issue and withdrawal of licences the adoption of auditing rules the external quality control the establishment of the educational criteria Quality assurance Marjan Odar, Slovenian Institute of Auditors

  45. 8.th Directive funding must be secured and free from the influence by statutory auditors and auditing firms Institute’s rates the quality control (monitoring system and Auditing Council) is funded by the supervision fee defined in the Institute’s rates; the sum of the fees to be paid for an individual year should not exceed the actual costs of supervision for that year Marjan Odar, Slovenian Institute of Auditors

  46. 8.th Directive adequate resources Actual situation According to the present activity of the Institute’s monitoring system and of the Auditing Council the resources (human resources and funding) are adequate. Marjan Odar, Slovenian Institute of Auditors

  47. 8.th Directive Persons who carry out quality assurance appropriate professional education relevant experience in statutory audit and financial reporting specific training on quality assurance reviews Actual situation The experts of the Institute one lawyer and four certified auditors with the licence specific training on quality assurance review the lawyer and one certified auditor - a certificate to conduct the procedures based on the General Administrative Procedure Act Marjan Odar, Slovenian Institute of Auditors

  48. 8.th Directive The selection of the reviewers under an objective procedure designed to ensure that there are no conflicts of interest between the reviewers and the reviewed person Actual situation The whole monitoring team is working at the Institute no inherent conflicts of interest Marjan Odar, Slovenian Institute of Auditors

  49. 8.th Directive The scope of the quality assurance review must include an assessment of the compliance with auditing rules the quantity and quality of resources spent the audit fees charged the internal control system of the auditing firm Actual situation The quality assurance review of the auditing firm includes an assessment of the documentation and report of at least one client of each engagement partner in the auditing firm the quantity and quality of resources spent the audit fees charged the internal quality control system of the auditing firm Marjan Odar, Slovenian Institute of Auditors

  50. 8.th Directive Report the main conclusions of the quality assurance review Actual situation Report in accordance with the General Administrative Procedure Act must contain a detailed description of the auditing rules’ violations Marjan Odar, Slovenian Institute of Auditors

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