Legal environment
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Transcript of Legal environment
Marjan Odar, Slovenian Institute of Auditors
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Legal environmentLegal environment
Establishment of the InstituteEstablishment of the Institute: : 9 9 September, 1993September, 1993Legal form:Legal form: Institute, governed by the provisions of the Institute’s Institute, governed by the provisions of the Institute’s
By- laws (Official Gazette By- laws (Official Gazette of the of the RR of of SSlovenia No.lovenia No. 70/01) 70/01)
Slovenian Audit ActSlovenian Audit Act (Official Gazette (Official Gazette of the of the RS RS No. No. 11/01) -harmonised with 11/01) -harmonised with
the EU legislation - the EU legislation -
http://http://www.si-revizija.si/www.si-revizija.si/o_siru/dokumenti/o_siru/dokumenti/zakon_o_revidiranju-an.doczakon_o_revidiranju-an.doc
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Tasks and powersTasks and powers The Institute carries out tasks The Institute carries out tasks
and implements powers in the domain ofand implements powers in the domain of auditing andauditing and other professional domains related to auditingother professional domains related to auditing
Professional domains related to auditing: Professional domains related to auditing: accountingaccounting business financebusiness finance internal auditinternal audit information systems auditinformation systems audit tax tax analysisanalysis and consulting and consulting valuation of valuation of business, real estate, machines and equipment business, real estate, machines and equipment
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Audit services may be Audit services may be provided byprovided by
a company with a company with a a registered office in the Republic registered office in the Republic of Slovenia which has obtained the licence of the of Slovenia which has obtained the licence of the Institute Institute for the provision of for the provision of such services - audit such services - audit companycompany
a certified auditor providing audita certified auditor providing audit services on services on an an individual basis as occupation who has obtained individual basis as occupation who has obtained the licence of the Institute the licence of the Institute for the provision of for the provision of such services - solo-practitionersuch services - solo-practitioner
the professional title is protected by law as long as the professional title is protected by law as long as it ensures adequate qualityit ensures adequate quality
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BOARD
STRUCTURE OF THE ORGANISATIONSTRUCTURE OF THE ORGANISATION
Senior Advisers (3) Legal Adviser
Administrators (2)
DirectorDirector
AUDIT COUNCILAUDIT COUNCIL
AUDIT SECTIONAUDIT SECTION
COUNCIL OF EXPERTSCOUNCIL OF EXPERTS
TAX ADVISORY TAX ADVISORY SECTIONSECTION
BUSINESS BUSINESS FINANCE FINANCE SECTIONSECTION
ACCOUNTING ACCOUNTING SECTIONSECTION
SECTION FOR SECTION FOR VALUATIONVALUATION
SECTION FORSECTION FORINFORMATION SYSTEMSINFORMATION SYSTEMS
AUDIT AUDIT
SECTION SECTION FOR INTERNALFOR INTERNAL
AUDIT AUDIT
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The main governing bodiesThe main governing bodies
Board
Director
Audit Council
Council of Experts
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Board of the InstituteBoard of the Institute – – the the main tasksmain tasks
adopts articles of association and other general actsadopts working and development programs of the
Institute and monitors their implementationdetermins business plans and approves annual
reports of the Institutedetermines policies for price formation of audit
services;determines rates and prices for the services
performed by the Institute
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13 members of the Board are 13 members of the Board are appointed (for a appointed (for a 4-year 4-year term):term):
4 by the founder (Association of the Accountants, Treasurers and Auditors of Slovenia)
6 by registered members of the Institute2 by the minister of finance1 by the employees of the Institute
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Director of the Institute Director of the Institute (appointed for a 4(appointed for a 4--yearyear termterm by the Board of the by the Board of the Institute) Institute) should should
hold the professional title of hold the professional title of a a certified auditorcertified auditor have the qualities and experience required for the have the qualities and experience required for the
management of the Institutemanagement of the Institute be a national of the Republic of Sloveniabe a national of the Republic of Slovenia have a certificate of no previous convictions have a certificate of no previous convictions
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9 members of the9 members of the Audit Council are Audit Council are appointed (for a appointed (for a 4-4-year year term)term) 55 of them of them, who , who shouldshould hold the licence of a certified hold the licence of a certified
auditor, auditor, are appointed are appointed by certified auditorsby certified auditors 3 representatives of the interested public, who 3 representatives of the interested public, who shouldshould
have appropriate professional knowledge and experience have appropriate professional knowledge and experience inin the field of accountancy and finance, the field of accountancy and finance, are appointed are appointed by by the minister of finance (two of them on proposal of the the minister of finance (two of them on proposal of the Chamber of Commerce and Industry of Slovenia)Chamber of Commerce and Industry of Slovenia)
director of the Institute is a member in his capacitydirector of the Institute is a member in his capacity
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11 members of the11 members of the Council of Experts Council of Experts are appointed (for aare appointed (for a 4-year 4-year termterm)
9 by the registered members of the Institute9 by the registered members of the Institute certified auditors, auditors, certified valuators, internal certified auditors, auditors, certified valuators, internal
auditors, management accountants, business finance experts, auditors, management accountants, business finance experts, information systems auditors, tax consultantsinformation systems auditors, tax consultants
2 by university institutions from among the university 2 by university institutions from among the university professorsprofessors
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Professional Professional work of the Institutework of the Institute
organised in sections /committees/organised in sections /committees/ audit section (covered by the Audit Council)audit section (covered by the Audit Council) other sections (covered by the Council of Experts)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
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The sections areThe 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 its main source of income isis fees for audit fees for audit companies companies, various , various ordinary ordinary training training programs, conferences, seminarsprograms, conferences, seminars
budget - apox. 1. Mio. €budget - apox. 1. Mio. €
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Powers of supervision - Quality AssurancePowers of supervision - Quality Assurance
supervision supervision of of audit companiesaudit companies with the purpose with the purpose to establish whether anto establish whether an audit audit
company observes audit rules in the course of auditingcompany observes audit rules in the course of auditing audit rules: ISAs, Code of Professional Ethics of audit rules: ISAs, Code of Professional Ethics of
External Auditors, Basic Audit Principles, Guidelines External Auditors, Basic Audit Principles, Guidelines for Audit Companies, audit practice statements and for Audit Companies, audit practice statements and recommendations of the Audit Councilrecommendations of the Audit Council
supervision of certified auditorssupervision of certified valuators
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Professional StandardsAccording to the Audit Act the Institute is authorised to According to the Audit Act the Institute is authorised to
adopt and publish the following professional standardsadopt and publish the following professional standards:: accounting standardsaccounting standards auditing standardsauditing standards business and finance standardsbusiness and finance standards internal audit standardsinternal audit standards information systems audit standardsinformation systems audit standards standards in the field of business, real estatestandards in the field of business, real estate,, machine and machine and
equipment valuationequipment valuation
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Already adopted and published
accounting standardsinternal audit standardsbusiness-finance standardsaudit rules business-finance principles
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Important responsibility in the Important responsibility in the accounting fieldaccounting field
According to the According to the Companies’ Companies’ ActAct the Institute is authorised the Institute is authorised to to set and set and prepare Slovenian prepare Slovenian Accounting Standards, which Accounting Standards, which are to be approved by the are to be approved by the Ministry of Finance andMinistry of Finance and
Ministry of EconomyMinistry of EconomyNew SAS New SAS were put into force were put into force
on 1 on 1 January, 2006January, 2006
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Enforcement of professional Enforcement of professional standardsstandards
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
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Training programs Language: SloveneLanguage: Slovene Minimum formal education requirement: Minimum formal education requirement: B. Sc.B. Sc. Certification requirements and Certification requirements and trainingtraining programs are programs are offered by offered by
the Institutethe Institute BASIC BASIC TRAININGTRAINING for all for all training training programs (except for certified programs (except for certified
real estate valuator and certified machine and equipment real estate valuator and certified machine and equipment valuator): 76 hoursvaluator): 76 hours
• accountingaccounting 18 hours18 hours• auditingauditing 8 hours 8 hours• business financebusiness finance 15 hours15 hours• corporate and tax lawcorporate and tax law 20 hours20 hours• mathematical and statistical methodsmathematical and statistical methods 10 hours10 hours• business communicationbusiness communication 5 hours 5 hours
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VERIFIED INTERNAL AUDITORVERIFIED INTERNAL AUDITOR basic basic trainingtraining 76 hours76 hours special subjectsspecial subjects
• auditingauditing 41 hours41 hours• accounting and taxationaccounting and taxation 21 hours21 hours• business financebusiness finance 15 hours15 hours
VERIFIED MANAGEMENT ACCOUNTANTVERIFIED MANAGEMENT ACCOUNTANT basic basic trainingtraining 76 hours76 hours special subjectsspecial subjects
• accounting and taxationaccounting and taxation 62 hours62 hours• business financebusiness finance 15 hours15 hours
VERIFIED BUSINESS FINANCE EXPERTVERIFIED BUSINESS FINANCE EXPERT basic basic trainingtraining 76 hours76 hours special subjectsspecial subjects
• business financebusiness finance 52 hours52 hours• accounting and taxationaccounting and taxation 25 hours25 hours
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VERIFIED TAX CONSULTANTVERIFIED TAX CONSULTANT
basic basic trainingtraining 76 hours76 hours special subjectsspecial subjects
• tax procedures and tax audittax procedures and tax audit 47 hours47 hours
• accounting and taxationaccounting and taxation 25 hours25 hours
• business financebusiness finance 15 hours15 hours
VERIFIED INFORMATION SYSTEMS AUDITORVERIFIED INFORMATION SYSTEMS AUDITOR basic basic trainingtraining 76 hours76 hours special subjectsspecial subjects
• information systems auditinginformation systems auditing 40 hours40 hours
• information scienceinformation science 37 hours37 hours
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CERTIFIED BUSINESS VALUATORCERTIFIED BUSINESS VALUATOR basic basic trainingtraining 76 hours76 hours special subjectsspecial subjects
• business valuationbusiness valuation 52 hours52 hours• accounting and taxationaccounting and taxation 26 hours26 hours• business financebusiness finance 15 hours15 hours
CERTIFIED REAL ESTATE VALUATORCERTIFIED REAL ESTATE VALUATOR subjectssubjects
• real estate valuationreal estate valuation 132 hours 132 hours• accounting and taxationaccounting and taxation 15 hours15 hours• business financebusiness finance 15 hours15 hours
CERTIFIED MACHINE AND EQUIPMENT VALUATORCERTIFIED MACHINE AND EQUIPMENT VALUATOR subjectssubjects
• valuation of machines and equipmentvaluation of machines and equipment 132 hours 132 hours• accounting and taxationaccounting and taxation 20 hours20 hours• business financebusiness finance 15 hours15 hours
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Conditions of admission (prescribed by Conditions of admission (prescribed by
the Audit Actthe Audit Act)
certified auditorcertified 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
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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
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Conditions of admission (for other titles, Conditions of admission (for other titles, not prescribed by the Audit Actnot 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
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Continuing Continuing trainingtraining requirements requirements
30 hours of 30 hours of trainingtraining per year (for all titles) per year (for all titles)
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Audit profession - Legal Basis
Auditing ActInternational Standards on AuditingBasic Auditing Principles Other auditing rules, adopted by the
Slovenian Institute of Auditors
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HIERARCHY OF THE AUDITING RULES
AUDITING ACT
BASIC AUDITINGPRINCIPLES
CODE OFPROFESSIONAL
CONDUCTINTERNATIONAL STANDARDS
ON AUDITING ANDINTERNATIONAL AUDITING
PRACTICE STATEMENTS
IFAC'SCODE OF ETHICS
INTERPRETATION OF THEAUDITING ACT
SLOVENIAN AUDITINGSTANDARDS
EXPLANATIONS ANDGUIDELINES OF THEAUDITING COUNCIL
METHODICAL MATERIALOF THE INSTITUTE
POSITIONS OF THEAUDITING COUNCIL
PROFESSIONAL LITERATURE
GENERALLY ACCEPTEDAUDITING ACTIONS IN
FOREIGN PRACTICE
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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.
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Quality control
Auditing firmsCertified auditorsAuditors
The quality control is performed: by monitoring, collecting and verifying the reports, by reviewing the operations of the entities under
control.
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Monitoring
Carried out by experts: authorised by the Director of the Institute; employed at the Institute.
4 certified auditors and 1 lawyer42 auditing firmsapp. 150 active certified auditors (out of 189)
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Quality controlauditing 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.
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Disciplinary sanctions for certified auditors and auditors
withdrawal of the licence;public warning.
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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.
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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.
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Public warning
violation of the auditing rules;no grounds for withdrawal or conditional
withdrawal of the licence.
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Disciplinary sanctions for auditing firms
order for elimination of violation;imposition of additional measures;withdrawal of the licence.
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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.
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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.
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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.
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Publishing of the final sanctions
The summarised decision is to be published in the professional journal of the Institute (Revizor - The Auditor).
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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.
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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
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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
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Quality assurance 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
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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
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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.
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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
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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
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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
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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
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8.th Directive
The frequency of the quality control
every six years every three years for
statutory auditors or auditing firms that carry out statutory audits of public interest entities
Actual situation
The frequency of the quality control
every five years every three years for
auditing firms and statutory auditors with listed clients
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8.th Directive
The overall results of the quality assurance system
published annually
Actual situation
The overall results of the quality assurance system
published in the annual report of the Institute
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8.th Directive
Recommendations of quality reviews
shall be followed up by the statutory auditor or auditing firm
otherwise disciplinary actions or sanctions
Disclosure to the public
Actual situation
Recommendations in the case of smaller violations
of the auditing rules
Disciplinary sanction in the case of serious violations
Disciplinary sanction (withdrawal of the licence or public warning) is published in ‘Revizor’.
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Conclusions
The Slovenian auditing profession meets almost all requirements of the proposed Directive.
There are no obstacles for mutual recognition of regulatory arrangements between Member States in the field of public oversight if they are conceived on the principles of the proposed Directive.