art%3a10.1007%2fs10997-009-9103-z.pdf

Trajectories of accounting and auditing developmentin EU enlargement: comparative analysis of ten newmember states

Judy Day Peter Taylor

Published online: 16 July 2009

Springer Science+Business Media, LLC. 2009

Abstract This paper presents comparative qualitative analysis of the developmentof accounting and auditing in the ten member states which joined the European

Union in May 2004, eight with transition economies and two with established but

emerging market economies. The post-communist eight shared many similarities at

the outset of transition but subsequent economic and political experiences were

strongly divergent. In contrast, Cyprus and Malta had established market economies

(but at relatively lower levels of development than more established EU member

states). Compared with the transition eight they also differed in having established

accounting and auditing professions. The papers research questions and associated

hypotheses address varying institutional characteristics and comparative inter-

temporal institutional change among the ten member states. In testing these

hypotheses we use qualitative analysis on descriptive data developed as part of the

official EU evaluation of accession states suitability for membership. In adopting

this research approach we are consistent with a range of studies of institutional

change which have been undertaken in an EU context, largely in political theory and

political economy. We find evidence that different trajectories of institutional

development are observable in the ten new member states. This research thus

documents a major exercise in pan-European regulatory change, adds to the record

of the transition to market structures and institutions of eight transition economies,

and assists understanding of accounting development in two emerging economies.

J. Day (&) P. TaylorManchester Business School, University of Manchester, Crawford House,

Manchester M15 6PB, UK

e-mail: [email protected]

P. Taylor

e-mail: [email protected]

P. Taylor

School of Management, University of Liverpool, Liverpool L69 7ZH, UK

123

J Manag Gov (2010) 14:313350

DOI 10.1007/s10997-009-9103-z

Furthermore, it informs understanding of processes under way for other EU

applicants and for new membership applications which may arise in future.

Keywords EU enlargement Accounting transition Regulatory change

1 Introduction

In 1993, at the Copenhagen meeting of the European Council, it was agreed that the

European Union (EU) should be further enlarged by the admission of all those

countries with which association agreements had been concluded, and which wished

to be admitted. Accession would take place as soon as the applicant was able to

satisfy the necessary economic and political conditions. Among these conditions

was a requirement for the existence of a functioning market economy. Appropriate

administrative and judicial structures would be needed to provide the conditions for

effective implementation of relevant EU legislation (sometimes referred to as the

acquis communautaire, henceforth acquis). In 1997 the Luxembourg EuropeanCouncil also agreed that the enlargement of the EU must involve the strengthening

and improvement of the operation of institutions in keeping with the provisions of

the Amsterdam Treaty. As a result, significant expansion has taken place and further

expansion is in prospect. On 1st May 2004 ten new member states, eight of which

were transition countries, joined the EU. Two additional transition countries have

obtained EU membership since the influx of 2004 (Bulgaria and Romania, both

acceding on 1st January 2007) creating a then total membership of 27 countries. At

time of writing three other countries have outstanding candidatures for member-

ship,1 four others have been recognised by the EU as potential candidate members,2

and a range of other countries are possible members of widely varying degrees of

likelihood.

The membership criterion of a functioning market economy was explicitly stated

to involve various prerequisites, among which was that an appropriate legal system,

including the regulation of property rights, should be in place and laws and contracts

must be enforceable. Certain necessary conditions to support these essential

institutions of a market economy did not appear to be explicitly mentioned. Notable

explicit omissions were the need for a well-functioning system of accounting and

auditing practices and procedures which were effectively promulgated and

regulated; and an established accounting and auditing profession. This raises

research questions in two broad areas: firstly, how applicant countries are and have

been assessed on criteria relating to accounting and auditing institutions and systems

1 Namely, Croatia, FYR of Macedonia, and Turkey. Croatia was granted candidate status in 2004 and

accession negotiations opened in 2005. FYR Macedonia became a candidate for membership in

December 2005 but accession negotiations have not yet commenced. Turkeys status with regard to EU

membership has been long, having been an associate member of the EU and its predecessors since 1964, a

candidate member since 1999, and in negotiations for membership since October 2005. Despite the initial

screening process having been completed in October 2006, Turkeys final accession remains

controversial.2 Namely, Albania, Bosnia and Herzegovina, Montenegro, and Serbia.

314 J. Day, P. Taylor

123

prior to a decision on EU membership; secondly how applicants have developed

accounting and auditing institutions and systems in ways which would satisfy the

requirements for accession; thirdly, what patterns are present in this institutional

development; and fourthly, what might be the determinants of difference in those

patterns. The first question has been addressed in an earlier paper (Day and Taylor

2005). In this paper we address the other three research question by presenting a

comparative analysis of the experiences of institutional change in accounting and

auditing of the ten member states which formally joined the EU in May 2004. This

analysis may be applicable to subsequent accession applications.

Our analysis focuses on how the ten 2004 new member states developed

accounting and auditing practices and procedures, accounting and auditing

professions, and relevant regulatory systems. Such an analysis is made interesting

by the magnitude of the simultaneous institutional changes which were represented

and by the variety present amongst the new member states. These new member

states comprised eight transition economies (the Czech Republic, Estonia, Hungary,

Latvia, Lithuania, Poland, the Slovak Republic, and Slovenia) and two emerging

market economies (Cyprus and Malta). Apart from the differences implied by

transition and emerging status other differences can be noted both within and

between these two groups. The transition eight includes countries from Central

Europe (the Czech Republic, Hungary, Poland, the Slovak Republic, and Slovenia)

and the Baltic (Estonia, Latvia, and Lithuania). In addition, although the post-

communist countries as a whole shared many similarities at the outset of the

transition process, their economic and political experiences have been strongly

divergent. Some succeeded in stabilising their economies relatively early and

became set on course for rapid growth and convergence with Western market

economies whilst others have been less successful. Transition economies in general

vary significantly in their level of economic and social development, political,

economic and social stability, and position in the transition cycle and the transition

eight, despite their commitment to and relative success in transition when compared

to the generality of transition countries, exhibit important differences of experience.

Cyprus and Malta, as emerging economies, had established market economic

systems which were at relatively lower levels of economic development at least in

comparison with the more established members of the EU. In comparison with the

eight transition countries they had another interesting difference in that they both

already had established accounting and auditing professions. Thus these ten new

member states represent an interesting and varied sample for analysis.

We consider the research reported in this paper to be important for a number of

reasons. It adds a new dimension to the record of the transition to market structures

and institutions of the eight former communist countries which joined the EU in

2004, as well as assisting in understanding the accounting development of the two

emerging economies which already had democratic and market institutions. It also

further informs our understanding of the EU accession process which is presently

under way for the three countries which are currently candidates for membership

and which are now at various stages on the road to accession and it provides a

framework for the analysis of accounting institutional development in both future

Trajectories of accounting and auditing development 315

123

candidates for EU membership and transition and emerging countries more

generally.

The paper is organised as follows. We present a literature review in Sect. 2 and

go on to outline and discuss our hypotheses. In Sect. 3 we present analyses of

comparative data on the ten countries paths to accession as tests of our hypotheses.

Section 4 contains our conclusions and suggestions for directions for further

research.

2 Literature review and development of hypotheses

In this section of the paper we consider literature relating to institutional differences

between the sample countries, in particular but not exclusively relating to their

accounting and auditing systems, and also to analyses of institutional change in

other contexts.

It is well-documented that extensive differences existed between communist

accounting and capitalist accounting (Bailey 1988; Garrod and McLeay 1996).

Accounting in the centrally planned economies of the USSR and Eastern Europe

was designed in accordance with communist economic theory and represented

Marxist-Leninist accounting (Seal et al. 1995; Daniel et al. 2001) and thus were

based on quite different objectives, concepts and terminology, and exhibited

distinctly different practices and professional characteristics from those in market

economies. For the external audit of enterprises, differences of similar magnitude

existed. Bychkova (1996) states that auditing as understood in the West never

existed in either Russia or the USSR, rather systems of external control were

present. Similar circumstances were observable elsewhere in communist Eastern

Europe. Furthermore, accounting and auditing did not exist as professions in the

sense that they do in most capitalist countries (see for example Sucher and Zelenka

1998 for the Czech Republic).

The foregoing points to the initial existence of substantial institutional gaps for

all eight transition economies both in the broad sense of transition to market based

institutions as well as their more narrowly focussed and administratively driven

transition to EU structures and practices. Recognition of this raises two related

questions: were the institutional gaps for each of the eight transition economies

effectively the same; and were the paths which they followed to close those gaps

effectively the same (both in terms of speed and other characteristics)?

Whilst the accounting systems of these eight member states may have possessed

broadly comparable institutional bases at the end of communism, they also have

distinct histories and cultural values, both pre- and post-communism, which suggest

that particular characteristics might emerge in their accounting and auditing systems

during transition. Thus, accounting in the countries of Eastern Europe before the

communist era was subject to a range of influences with dominant influences in

certain countries being Austrian and German (see Seal et al. 1995; Krzywda et al.

1995). Thus, adopting the methodology of Gray (1988) we might argue that history

and culture in the eight transition economies would generally tend to favour

statutory control over professionalism in accounting and audit regulation,


123

uniformity over flexibility in accounting regulation, conservatism over optimism in

accounting practices, and secrecy over transparency in disclosure and financial

reporting.3 Empirical evidence from transition countries tends to bear this out.

Daniel et al. (2001) note in the case of Slovakia that post-1989 changes in the

accounting system were strongly influenced by Continental European models.

Borbely and Evans (2006) in an analysis of developments in Hungarian accountingregulation during transition note a persistent influence of taxation on accounting,

and of other Continental European, code-law regulatory and accounting features,

reflecting inter alia an over-strong influence of government and legislation and acontinuation of traditional approaches stressing detailed accounting methods in both

practice and accounting education. The influence of centralised direction is also

present in Slovakia through the role played in the development of accounting

practices by the Ministry of Finances Department of Accounting Methodology.

Kosmala-MacLullich (2003) and Kosmala (2005) in empirical research on the

introduction of the construct of the true and fair view into Polish financial reporting

in the context of European harmonisation and EU accession, concluded that Polish

practice perceived the true and fair view to be primarily a matter of formal and legal

compliance because of the continuing difficulty of expressing judgements based

upon accumulated experience when much of Polish experience reflected Continental

European influence, in particular the German tradition, and the regulatory and

economic arrangements of a centrally planned economy (see also Dragneva and

Millan 2002, for both Hungary and Poland).

In addition, there is some support in the literature for a prediction of degrees of

homogeneity in trajectories of institutional change arising from an expected high

degree of commonality in the objectives of policy makers. For example Boross et al.

(1995) (see also Borbely and Evans 2006) cite as policy objectives for the

development of accounting in Hungary during transition, fiscal policy and tax

collection, the need to attract foreign investment, and the presence of international

accountancy firms, and if we add the needs of general economic liberalisation and of

improvement in corporate governance, it is arguable that these influences would be

amongst those facing policy makers in most of these transition economies.

These issues suggest some commonality in trajectories for transition in

accounting and audit among the eight transition economies considered in this

paper but this view may be modified by examining the aims and actions of policy

makers in particular countries. Some researchers thereby argue for a considerable

degree of diversity. Thus, Richard (1998) argues that considerable diversity was

present in the evolving accounting systems of the transition economies, including

variation in the development of accounting principles. He attributes this variety to

the influence of short-term strategic alliances made by particular transition

governments with foreign states and institutions, selected for economic and

political advantage, overriding more fundamental and longer-term cultural and

historical factors. This observation is supported by the findings of a number of

researchers. For example Sucher and Zelenka (1998) note the influence of UK

3 For a more detailed discussion of Gray (1988), and of further work based on his model, see Day and

Taylor (2004a, b).


123

legislation in the development of audit in the Czech Republic, whilst Krzywda et al.

(1998) refer to the diversity of Western influence on the development of audit in

Poland. Adams and McMillan (1997) note UK and French influences on Polish

accounting (see also Jaruga 1993 on these issues as perceived in the early stages of

transition in Poland); Illes et al. (1996) report influences on and reactions to

accounting reform in Hungary; and Jermakowicz and Rinke (1996) present evidence

on the Czech Republic, Hungary, and Poland. Bailey et al. (1995) reports

differences in the pattern of development of accounting reform in Estonia, Latvia

and Lithuania.

Taking a wider view of institutional change and development adds strength to

the argument of heterogeneous experience in transition. Hungary, Poland and the

former Czechoslovakia had already experimented with economic reform before the

breakdown of their communist regimes whilst the other four transition economies

had no equivalent experience. Thus, for example, Hungary was an early

experimenter with economic reforms which sought to address the basic institutional

failings of the communist system. Hungarys early experience with institutional

reform, although clearly flawed, appears to have given it an impetus not shared by

some other transition economies (Crane 1991), suggesting an early-mover

advantage in institutional change. Some of the necessary market-orientated

institutions were in place when the socialist regime was replaced and economic

agents were already familiar with their working when transition formally began.

Additionally, the early reforms helped to create an entrepreneurial class. In

comparison, other transition economies were slow starters and appeared to continue

to lag in certain areas. Detailed modelling and empirical analysis of institutional

change in a sample of twenty-five transition economies by Raiser et al. (2000)

provides evidence to support this conclusion. Raiser et al. find compelling evidence

that economic reforms and political liberalisation are stronger forces than changes in

economic structures induced by those changes. From this they conclude that there

may be positive spillovers from early reforms in liberalisation and privatisation into

institutional reforms, but with a significant lag. Thus, countries which lag behind in

making fundamental changes at an early stage may find it very difficult to catch up

with the leaders in transition. A related theme is the extent to which institutional

legacy from the pre-Communist era assisted certain transition countries in beginning

and accelerating institutional change. In some transition countries pre-transition

institutional legacy was extensive. For example, a stock exchange was established

as early as 1817 in Poland (the Warsaw Mercantile Exchange) and this exchange,

together with exchanges in six4 other cities operated until 1939 (Warsaw Stock

Exchange 2006). Trading recommenced in the recreated Warsaw exchange in 1991.

Similarly, Poland had a long history of professionalised accountancy (see footnote

21 below) and first legislated on insolvency in 1934 (EBRD 2003).

Supporting evidence from a different perspective comes from indices developed

by de Melo et al. (1996) and the European Bank for Reconstruction and

Development (EBRD) in various studies to measure the extent of reforms needed

4 One of these exchanges was in Vilnius, then part of Poland, but now capital of Lithuania, indicating a

shared institutional legacy.


123

to make markets the main mechanism for resource allocation, and data on these

indices for the eight transition economies is shown in Table 1. The indices are

composites of scores against seven elements.5 The indices reported in Table 1 are

on a linear scale from zero to one where zero represents an unreformed centrally

planned economy and one the standards of a market economy. The year 1990

represents an effective starting point for formal transition following the general

removal of communist regimes around that date.

In interpreting Table 1 it should be noted that the Czech Republic and the Slovak

Republic have the same score in 1990 as they then comprised the single country of

Czechoslovakia. The Table indicates that the three lead countries in institutional

development were Hungary, Poland and, perhaps surprisingly, Slovenia, with the

remaining five clustered some way behind. Comparative data suggests, however,

that the five lagging countries had at least accomplished moderate institutional

development (in comparison in 1990 Russia had an index of 0.15, the republics of

the former Soviet Union other than Russia had indices equivalent to that for Russia,

and Albania had the lowest index at around 0.1 of all transition countries in Europe).

These differences in part reflect different experiences in the pre-transition phase as

well as in the early period of transition among the eight transition economies.

Hungarys opening position was different since it began its transition in 1968 with

the introduction of the New Economic Mechanism when detailed central planning

was abandoned. There was a period of recentralisation in the 1970s which was

followed by additional market-orientated reforms. Thus, many of the reforms

implemented after political transition had already been developed and had begun to

be introduced earlier, suggesting much stronger and longer continuity in reforms

than can be observed for any other transition country (Hare 1991). By early 1991

Hungary had advanced significantly towards a market economy after 20 years of

experience in reform. The benefit of this strong foundation can be seen in the

progress made between 1995 and 1998.

Table 1 Estimated indices ofprogress in institutional reform

for selected transition countries

Source: World Bank (2002),adapted from Fig. 2.1, p. 14

1990 1995 1998

Czech Republic 0.24 0.84 0.88

Estonia 0.27 0.81 0.87

Hungary 0.56 0.85 0.94

Latvia 0.22 0.70 0.77

Lithuania 0.22 0.73 0.77

Poland 0.64 0.82 0.89

Slovak Republic 0.24 0.81 0.84

Slovenia 0.68 0.78 0.82

5 The aspects of institutional reform included in these indices are: the imposition of hard budget

constraints on banks and enterprises, the creation of an enabling environment for private sector

development, legal and judicial reform, macroeconomic stabilisation: price and trade liberalisation:

reform of the tax system and public finances: and reform of public sector institutions.


123

In the case of Czechoslovakia the communist regime was removed from office in

the so-called Velvet Revolution of 1989. Some early transition progress had been

made in 1968 in the Dubcek era but this had been sharply reversed after the Soviet

invasion which also stifled subsequent attempts at reform and made conditions

difficult for transition when the opportunity arose (Brada 1991). Once transition

began in earnest the two parts of Czechoslovakia pursued transition quickly.

In contrast to the transition economies discussed above, Malta and Cyprus are

two emerging market economies. Classification studies of international accounting

and national accounting systems differences, whilst infrequently including either

Cyprus or Malta directly in samples of classified countries, nonetheless consistently

provide classifications which would locate the two countries variously as British

Commonwealth (Nair and Franks 1980) and UK influenced (Nobes 1992) or

similar.6 Relevant academic research on Malta is sparse but institutional detail

supports the foregoing. Malta has been independent since 1964 but during its long

period of association with the UK developed institutions modelled partly on those of

the UK. Thus, the legal system was based on English common law as well as Roman

civil law. The Malta Institute of Accountants (MIA) was founded in 1942 and

following the establishing of an alternative professional body, the Malta Corpo-

ration of Accountants (founded 1954), emerged in its present form in 1965 from the

merger of the two bodies (Malta Institute of Accountants 2008). Recognition of

accountancy as a profession occurred in 1979 through the Accountancy Profession

Act, which introduced the granting of warrants to Certified Public Accountants and

Certified Public Accountants Auditors by the Malta Minister of Finance. Under the

Act the MIA was given statutory recognition and is the only recognised local body.

Legal control of the profession is governed by the Accountancy Board, a

government body appointed under the 1979 Act (Malta Ministry of Finance, the

Economy and Investment 2008). The MIA was approved as a member body of the

Federation des Experts Comptables Europeens in 1989.

In the case of Cyprus, classification studies are well supported by empirical

studies of aspects of Cypriot financial reporting. Thus, Vafeas et al. (1998) observe

that as a result of the countrys history as a British colony, the accounting system in

Cyprus is much closer to the Anglo-Saxon model than to the Continental European.7

The legal system was based on common law with civil law modifications, with

company law having originally been modelled on UK legislation. After indepen-

dence in 1960, public companies were incorporated under the Companies Law,

Chapter 113 of the Laws of Cyprus, which was almost identical to the UK

Companies Act 1948 (Neocleous et al. 2000, p. 317). The Cyprus Income Tax Law,

1961 is based on English revenue law and it is common practice for English tax

cases to be used as precedent in Cyprus and more generally authority from UK Law

is used extensively in Cyprus. In addition the concept of true and fair view has

been prevalent in Cyprus (Vafeas et al. 1998). The country has had for many years a

professional accountancy body, The Institute of Certified Public Accountants of

6 See also Doupnik and Salter (1995), Roberts (1995), and Nobes (1998).7 In making this distinction we note the controversy over the validity of the distinction (see Alexander

and Archer 2000; Nobes 2003). .


123

Cyprus but with membership based on qualification overseas.8 Charitou et al. (2005)

note that a form of over-the-counter stock exchange has been in operation in Cyprus

since the early 1980s through dealers and brokers, but without a proper institutional

framework (Vafeas et al. 1998). Some monitoring of this process was provided by

the Cyprus Chamber of Commerce and Industry but no specialists or official market

makers were used during this period.9 In March 1996, an official Cyprus Stock

Exchange (CSE) was established by government through the Securities and Stock

Exchange Regulations, 1995 and Securities and Stock Exchange Law, 1996,

regulation being provided by a Council and a Securities Commission, both bodies

containing heavy government representation (see Krambia-Kapardis and Psaro

2006). In this respect Cyprus is similar to Malta which established its stock market

in 1992 and to the eight transition countries discussed in this paper which also

opened their stock markets during the 1990s. Krambia-Kapardis and Psaro (2006)

examine the implementation of corporate governance regulation in Cyprus and

observe the importance for reform of the need for foreign capital and the role played

by the CSE following a market crash in 2000, noting that the CSE introduced the

Cypriot Corporate Governance Code in September 2002 and that the Code is

predicated largely on Anglo-Saxon principles of corporate governance.

The foregoing review leads us to develop hypotheses concerning the trajectories

of institutional development of these ten new member states. Firstly, we argue that

the suitability of the institutional legacy at the beginning of the process of accession

is likely to be a significant determinant of trajectories of institutional development.

Thus, the comparatively long isolation of the eight transition economies from

practices and institutions of Western capitalist accounting and auditing compared to

the experiences of Cyprus and Malta lead us to hypothesise:

H1 The two emerging market economies of Cyprus and Malta are expected toexhibit smoother accession trajectories than the eight transition economies.

Despite the greater volume of (academic) evidence on Cyprus there is little to

justify a significant distinction between it and Malta and as a consequence we

hypothesise that:

H2 Cyprus and Malta are expected to exhibit broadly similar accessiontrajectories.

Within the group of transition economies we noted variation in pre- and early-

transition experiences and approaches and, in particular, the presence of an

observable early-mover advantage amongst transition countries in areas of

economic activity, suggesting the following hypothesis:

8 Applicants for membership must be a member of one of the following bodies: the Institute of Chartered

Accountants in England and Wales; its counterparts in Scotland, Ireland, Canada, South Africa, and New

Zealand, or the Chartered Association of Certified Accountants. Members of the American Institute of

Accountants and the Association of International Accountants may also be accepted for membership.9 See Travlos et al. (2001) for, inter alia, analysis of transactions in the CSE between 1985 and 1995 andchanges that occurred in the structure of the CSE during the period.


123

H3 Hungary, Poland, and the Czech Republic are expected to exhibit smootheraccession trajectories than the other five transition economies.

H3 can also be based on the argument that the overall quality of a countrys

institutions (and the effectiveness of policy-makers responses to the need for

institutional improvement and change) will determine the speed and smoothness of

the accession trajectory. Thus, the weaker are institutions and the more problematic

are policy-makers responses, the less smooth are likely to be accession trajectories.

Consequently we can hypothesise further expected relative trajectories within the

transition group, thus:

H4 Estonia, Latvia, and Lithuania are each expected to experience less smoothtrajectories than Slovenia.

H5 Slovenia is expected to experience a smoother trajectory than the SlovakRepublic.

3 Data, analysis, and discussion

The research questions addressed in this paper concern institutional characteristics

and comparative inter-temporal institutional change. There is a large and complex

academic literature related to the study of such issues embracing micro- and macro-

approaches and qualitative and quantitative modes of institutional representation

and analysis applied in a number of disciplines. In this paper we use descriptive data

developed as part of the official EU evaluation of accession states suitability for EU

membership and analyse that data qualitatively, focusing on institutional develop-

ment through time. In adopting this approach we are consistent with a range of

studies of institutional change which have been undertaken in an EU context,

largely in political theory and political economy (eg Henderson 2003; Johnson 2003

on institutional development in the EU; Schimmelfenning et al. 2003 on EU strategy

to induce institutional change in applicant countries; Sicherl 1999 on disparities

between the institutions of EU Member States).10

We shall consider three components of institutional change during accession,

namely initial institutional gap, accession trajectory, and residual institutional gap.

An institutional gap will be present because of differences between the requirements

of the acquis and the actual organisational and institutional structures in place in theapplicant state (ie institutional misfit) and institutional deficiencies in the applicant

state (ie institutional shortfall).11 The presence of initial institutional gaps for all the

ten new member states is expected although the expectation is that they will be of

different sizes and degrees of seriousness depending inter alia upon the institutionallegacy of the country and the effectiveness of pre-accession preparations. These

expectations are implicit in the hypotheses developed above. The formulation of

precise expectations on the presence of residual institutional gaps on accession is

10 In addition there are a number of methodological studies relevant to the analysis of institutional

change, for example Lindner and Rittberger (2003).11 The concept of institutional gap is widely used in political theory, see for example Borzel (1999).


123

problematic. Accession is not prima facie evidence of the absence of a residualinstitutional gap. Day and Taylor (2005), in a study of the accession assessment

process by EC officials, reported interview evidence that not being in compliance

with an article from the 4th or 7th Directive would be very unlikely to be a reason

for not becoming a member state12 and, despite the possibility of the granting of

derogation for a transition period in areas of non-compliance, it was reported that

derogations were unlikely to arise due to the strictness of application of criteria

related to internal market aspects of the acquis. The path of travel of institutionsduring the accession period (ie between the initial and residual, if any, institutional

gaps) is the institutional trajectory. The concept of institutional trajectory is applied

in various disciplines which study institutional change.13 The sense in which

trajectory is used in such studies, and which is applied in this paper, is as the way in

which a process (in this case institutional change) develops over time. Thus, it

involves identifying a series of institutional states in dynamic development and, by

implication, observing institutional development mechanisms. Underlying the

analysis is assessment of the relative success of national strategies for wide-

ranging institutional reform implemented to achieve accession, each of which

represents a planned trajectory of institutional change through time.

3.1 Data

The data we analyse is generated from the bureaucratic administration of the

accession process itself. The process of accession to the EU broadly begins with the

negotiation of a Trade and Cooperation Agreement which is normally followed by

the conclusion of a more formal Association Agreement. In some cases an

Association Agreement comes into force, or is even negotiated, simultaneously with

the countrys application for membership. The final stage before actual accession is

normally an Accession Partnership. Table 2 shows dates at which the ten new

member states reached these various points in the transition process. Two sources of

data for the analysis of transition trajectories are generated by the stages reported in

Table 2. Following an application for membership, EC officials are required to

produce a report giving an opinion on the application for membership, which is laid

before the European Parliament. Each EC Report on Membership Applicationcontains a section which considers the applicants ability to assume the obligations

of membership. In column two of Tables 3, 4, 5, 6, 7, 8, 9, 10, 11 and 12 we

summarise the findings of the EC Reports on Membership Application for each ofthe ten new member states, with particular emphasis on commentary on their ability

to comply with the acquis on accounting and auditing issues. These analyses giveindications of the extent of institutional gaps at the beginning of the formal

accession process.

12 Sicherl (1999) confirms, at least in the case of Central and Eastern European countries, that decisions

on integration into the EU would turn on political issues not technical ones.13 As recent examples see, from sociology, Garcelon (2006), social economics, Zukowski (2004) and

political theory, Duit (2007).


123

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99

8

Lit

huan

ia1

99

2(I

nfo

rce

19

93

)1

99

5(I

nfo

rce

19

98

)1

99

5/1

99

71

99

8

Mal

ta1971

(Eff

ecti

vel

yan

asso

ciat

ion

agre

emen

tw

hic

hw

asnot

full

yco

mp

lete

d)

Info

rce

19

71

19

90/1

99

3B

ut

susp

end

ed

19

96

and

reac

tiv

ated

19

98

20

00

Po

lan

d1

98

91

99

1(i

nfo

rce

19

94)

19

94/1

99

71

99

8

Slo

vak

Rep

ub

lic

19

90

(Fo

rmer

Cze

cho

slo

vak

ia)

19

91

Cze

chosl

ov

akia

;th

en1

99

3(i

nfo

rce

19

95)

wit

hS

lov

akR

epub

lic

19

95;

No

tfu

lly

app

rov

edu

nti

l1

99

9

19

98

Slo

ven

ia1

98

0,

Su

spen

ded

19

91

.N

ew

agre

emen

tin

forc

e1993

Inte

rim

agre

emen

tin

forc

e1997

1996/1

997

1998


123

The second source of data relates to accession trajectory and is contained in a

series of annual reports on progression to accession for the applicant countries

(henceforth EC Regular Reports). Following acceptance in principle of anapplication for membership, EC officials undertake the preparation, review and

negotiation of a National Programme for the Adoption of the Acquis (NPAA) for

each applicant (see Day and Taylor 2005 for a more detailed description of this

process). Commission officials then produce annual Regular Reports which reviewthe current status of and progress on each individual application for membership.

These reports on respective NPAAs go to the European Council. These RegularReports cover all areas of the acquis, as well as making more generalrecommendations on political and other issues. Annual reports were prepared on

each of the ten new member states for the years 19982002, together with a

composite report (henceforth Comprehensive Monitoring Report) which summa-rised the overall position for all the applicants (see European Union 1998, 1999,

2000, 2001, 2002, 2003). These reports, together with the judgements on the ten

applications for membership have been examined for references relating to

accounting and auditing aspects of the acquis and Tables 3, 4, 5, 6, 7, 8, 9, 10, 11and 12 summarise the findings of this analysis.

3.2 Data analysis

Table 2 gives an overall indication of accession trajectory by dating certain key

events in the accession process for each of the ten new member states. It is clear that

for the eight transition economies the whole process was compressed into a far

shorter period of time than was the case for the two emerging market economies.

We note that Malta concluded an Association Agreement as early as 1971, 20 years

before the earliest date for an Association Agreement with any of the transition

eight (Czechoslovakia as was, and Poland). The Association Agreement with

Cyprus came in 1972, with a customs union protocol following in 1987.

Applications for membership from Cyprus and Malta were also earlier (Cypruss

application was 1990, accepted 1993 and Maltas 1990, accepted 1993, suspended

1996 and reactivated 1998). Moreover, neither Cyprus nor Malta had an accession

partnership in place until 2000 for political reasons.14 This overview weakens

support for H1 that Cyprus and Malta are expected to exhibit smoother accession

trajectories than the eight transition economies. However, we may note additionally

that the ECs reviews of the ten applications for membership indicated that, as

expected, Cyprus and Malta had (in 1993 for both) each already achieved

compliance with a substantial part of the elements of the acquis relating toaccounting and auditing (which come under the heading of Company Law),

indicating relatively small initial institutional gaps. This is supported by the reviews

of applications for membership of the transition economies undertaken between

1994 and 1997 (excepting Slovakia whose application was not fully approved until

14 Negotiations with Cyprus were delayed mainly because of the issue of reunification with Northern

Cyprus, and negotiations with Malta were suspended for 2 years in the mid-1990s after a change of

government.


123

Tab

le3

Acc

essi

on

traj

ecto

ryof

Cypru

s

Com

men

tfr

om

EC

report

on

mem

ber

ship

appli

cati

on

EC

regula

rre

port

son

pro

gre

ssto

acce

ssio

n,

19982002,

and

com

pre

hen

sive

monit

ori

ng

report

,2003

1998

1999

2000

2001

2002

2003

Dat

eof

Appli

cati

on

1990

Dat

eof

favoura

ble

Rep

ort

1993

Com

pan

yla

wal

read

yin

corp

ora

ted

much

of

the

rele

van

tpar

tsof

the

acq

uis

Pro

gre

ssre

port

edin

com

pan

yla

wbut

stil

lar

eas

wher

eal

ignm

ent

wit

hth

eacq

uis

was

nec

essa

ry

Alt

hough

Cypru

sfo

llow

ing

IAS

s,m

uch

of

EU

Dir

ecti

ves

pro

vis

ions

on

bal

ance

shee

tsan

dpro

fit

and

loss

acco

unts

yet

tobe

imple

men

ted.

Conce

rnover

curr

ent

rule

sfo

rpri

vat

eex

empt

com

pan

ies

and

the

off

-shore

sect

or

Enfo

rcem

ent

iden

tifi

edas

issu

e

Acq

uis

on

com

pan

yla

wst

ill

open

toneg

oti

atio

n,

wit

hli

ttle

furt

her

pro

gre

sshav

ing

bee

nm

ade

inth

ear

eas

of

com

pan

yan

dac

counti

ng

law

.

Leg

isla

tion

bri

ngin

gth

eap

pro

val

of

the

stat

uto

ryau

dit

or

inli

ne

wit

hth

ere

quir

emen

tsof

the

8th

Dir

ecti

ve

stil

louts

tandin

g

Com

pute

risa

tion

of

com

pan

ies

regis

try

inpro

gre

ssm

akin

gth

epubli

cati

on

of

com

pan

ydocu

men

tsea

sier

Com

pan

ies

fail

ing

toco

mply

wit

hfi

ling

of

annual

report

snow

bei

ng

stru

ckoff

com

pan

ies

regis

ter

No

par

ticu

lar

dev

elopm

ents

wer

enote

din

the

area

of

acco

unti

ng

law

but

pro

gre

ssnote

din

1999

on

enfo

rcem

ent

of

com

pan

yla

wco

nti

nued

Imple

men

tati

on

of

the

8th

Dir

ecti

ve

pro

ceed

ing

Cypru

sco

nsi

der

edto

be

toa

larg

eex

tent

inli

ne

wit

hth

eacq

uis

on

acco

unti

ng

Neg

oti

atio

ns

on

the

chap

ter

of

the

acquis

on

com

pan

yla

wnow

pro

vis

ional

lycl

ose

d

Pro

vis

ions

of

the

8th

Dir

ecti

ve

had

bee

nen

acte

din

the

Cypru

sC

om

pan

ies

(Am

endin

g)

Law

of

2001

Posi

tion

on

acco

unti

ng

law

now

consi

der

edin

line

wit

hth

eacq

uis

(des

pit

ece

rtai

nre

serv

atio

ns)

Inst

itute

of

Cer

tifi

edP

ubli

cA

ccounta

nts

of

Cypru

sap

pro

ved

asth

eco

mpet

ent

regula

tory

pro

fess

ional

body

Adm

inis

trat

ive

capac

ity

for

enfo

rcin

gco

mpan

yla

wbei

ng

stre

ngth

ened

by

furt

her

appoin

tmen

tsto

the

offi

ces

of

the

regis

trar

of

com

pan

ies

and

the

offi

cial

rece

iver

Leg

isla

tion

tofu

lfil

the

requir

emen

tsof

the

4th

Dir

ecti

ve

and

cert

ain

oth

erco

mpan

yla

wD

irec

tives

urg

entl

yre

quir

ed

Dra

ftla

win

corp

ora

ting

the

outs

tandin

gre

quir

emen

tsof

the

4th

and

7th

Dir

ecti

ves

adopte

din

Sep

tem

ber

2003

Am

endm

ents

toco

mpan

yla

wal

low

ing

non-

qual

ified

audit

ors

topra

ctic

ean

dau

dit

acco

unts

of

publi

cly

list

edco

mpan

ies

rais

ednew

conce

rns

about

com

pat

ibil

ity

wit

hacq

uis


123

Tab

le4

Acc

essi

on

traj

ecto

ryof

Mal

ta

Com

men

tfr

om

EC

report

on

mem

ber

ship

appli

cati

on

EC

regula

rre

port

son

pro

gre

ssto

acce

ssio

n,

19982002,

and

com

pre

hen

sive

monit

ori

ng

report

,2003

1998

1999

2000

2001

2002

2003

Dat

eof

Appli

cati

on

1990

but

susp

ended

1996

and

reac

tivat

ed1998

Dat

eof

Fav

oura

ble

Rep

ort

1993

and

updat

ed1999

Fai

rly

good

deg

ree

of

com

pli

ance

inco

mpan

yla

w(i

ncl

udin

gac

counti

ng

and

audit

ing)

No

pro

gre

ssre

port

pro

duce

d;

Mal

tas

appli

cati

on

for

mem

ber

ship

susp

ended

in1996

and

reac

tivat

edin

1998

Fai

rly

good

deg

ree

of

com

pli

ance

wit

hth

eacq

uis

inth

efi

eld

of

com

pan

yla

wnote

d

Mal

tahad

alre

ady

imple

men

ted

nea

rly

all

the

com

pan

yan

dac

counti

ng

law

Dir

ecti

ves

Rep

ort

did

not

note

any

furt

her

dev

elopm

ents

Rep

ort

note

dth

atth

ead

min

istr

ativ

esy

stem

regar

din

gac

counti

ng

had

bee

nm

odifi

edin

ord

erto

bet

ter

imple

men

tth

eacq

uis

Mal

tain

stit

ute

of

acco

unta

nts

reco

gnis

edby

Gover

nm

ent

asan

offi

cial

adm

inis

trat

ive

body

resp

onsi

ble

for

most

adm

inis

trat

ive

work

pre

vio

usl

yca

rrie

dout

by

acco

unta

ncy

boar

d

Nec

essa

ryam

endm

ents

toal

ign

law

wit

hth

e8th

Dir

ecti

ve

dra

fted

but

not

yet

adopte

d

Now

larg

ely

inli

ne

wit

hth

eacq

uis

.C

om

mit

men

tson

acco

unti

ng

met

and

countr

ysh

ould

be

inposi

tion

toim

ple

men

tacq

uis

inth

isar

eafr

om

dat

eof

acce

ssio

n

No

tran

siti

on

arra

ngem

ents

inre

spec

tof

acco

unti

ng

or

audit

ing

law

reques

ted


123

Tab

le5

Acc

essi

on

traj

ecto

ryof

Cze

chR

epubli

c

Com

men

tfr

om

EC

report

on

mem

ber

ship

appli

cati

on

EC

regula

rre

port

son

pro

gre

ssto

acce

ssio

n,

19982002,

and

com

pre

hen

sive

monit

ori

ng

report

,2003

1998

1999

2000

2001

2002

2003

Dat

eof

Appli

cati

on

1996

Dat

eof

favoura

ble

opin

ion

1997

Exis

ting

legis

lati

on

alre

ady

som

ew

ayto

com

pli

ance

wit

hE

Uac

counti

ng

and

audit

ing

requir

emen

ts;

pla

nned

amen

dm

ents

expec

ted

toco

mple

tepro

cess

Poss

ibil

ity

of

tran

siti

onal

pro

ble

ms

of

imple

men

tati

on

due

tosh

ort

age

of

qual

ified

acco

unta

nts

and

audit

ors

note

d

Acc

ounti

ng

Act

and

the

Act

on

Audit

ors

tobe

or

had

bee

nim

ple

men

ted

on

sched

ule

Tra

nsi

tional

pro

ble

ms

rela

ting

toim

ple

men

tati

on

and

ash

ort

age

of

suit

ably

qual

ified

audit

ors

stil

lev

iden

t

Acc

ounta

nts

now

regis

tere

dw

ith

cham

ber

of

audit

ors

and

tobe

exam

ined

by

com

mis

sion

com

pose

dof

Min

istr

yof

Fin

ance

offi

cial

san

dac

counta

nts

appoin

ted

by

cham

ber

of

audit

ors

No

furt

her

pro

gre

ssre

port

edin

oth

erar

eas

New

Act

on

Audit

ors

tobe

info

rce

from

1Ja

nuar

y2001

Over

all

asse

ssm

ent

that

legis

lati

on

inac

counta

ncy

alre

ady

larg

ely

inli

ne

wit

hacq

uis

,al

though

new

legis

lati

on

(expec

ted

for

the

end

of

2000)

stil

lnec

essa

ryto

fill

rem

ainin

ggap

s

Chap

ter

of

acq

uis

on

com

pan

yla

wpro

vis

ional

lycl

ose

d

New

Act

on

audit

ors

info

rce

ensu

ring

full

com

pli

ance

wit

hacq

uis

Am

endm

ents

mad

eto

legis

lati

on,

incl

udin

gch

anges

toth

esc

ope

of

Acc

ounti

ng

Act

,defi

nit

ion

of

acco

unti

ng

yea

r,an

dru

les

on

dis

closu

rean

ddep

reci

atio

n

Com

mis

sion

for

stra

tegic

issu

esin

acco

unti

ng

&au

dit

ing

esta

bli

shed

asad

vis

ory

body

atM

inis

try

of

Fin

ance

on

pro

posa

lsfo

rre

stru

cturi

ng

acco

unti

ng

syst

eman

dpro

fess

ional

regula

tion

Am

endm

ent

toA

ccounta

ncy

Act

toal

ign

acco

unti

ng

legis

lati

on

wit

hacq

uis

info

rce

inJa

nuar

y2002

requir

ing

use

of

IAS

sfo

rco

nso

lidat

edac

counts

of

list

edco

mpan

ies

and

fair

val

ue

acco

unti

ng

for

som

efi

nan

cial

inst

rum

ents

Nat

ional

acco

unti

ng

legis

lati

on

nee

ds

toin

clude

addit

ional

requir

emen

tsto

ensu

refu

llco

mpli

ance

wit

hacq

uis

,e.

g.

dis

closu

rere

quir

emen

tson

num

ber

of

staf

f,em

olu

men

tsan

dad

van

ces

todir

ecto

rs,

incl

usi

on

of

pro

fit

and

loss

acco

unt

of

par

ent

com

pan

ies

inco

nso

lidat

edac

counts

,an

dso

me

audit

and

publi

cati

on

requir

emen

ts

Com

mit

men

tson

acco

unti

ng

met

and

countr

ysh

ould

be

inposi

tion

toim

ple

men

tacq

uis

inth

isar

eafr

om

dat

eof

acce

ssio

n

Adm

inis

trat

ive

stru

cture

sas

sess

edas

adeq

uat

e


123

Tab

le6

Acc

essi

on

traj

ecto

ryof

Est

onia

Com

men

tfr

om

EC

report

on

mem

ber

ship

appli

cati

on

EC

regula

rre

port

son

pro

gre

ssto

acce

ssio

n,

19982002,

and

com

pre

hen

sive

monit

ori

ng

report

,2003

1998

1999

2000

2001

2002

2003

Dat

eof

appli

cati

on

1995

Dat

eof

favoura

ble

opin

ion

1997

Rec

ent

and

pla

nned

legis

lati

on

expec

ted

tobri

ng

acco

unti

ng

inli

ne

wit

hE

UD

irec

tives

and

IAS

s

Posi

tion

on

audit

ing

less

clea

rdue

tola

ckof

info

rmat

ion

Tra

nsi

tional

pro

ble

ms

of

lack

of

qual

ified

acco

unta

nts

and

audit

ors

would

nee

dm

ajor

effo

rtto

per

mit

pro

per

imple

men

tati

on

of

new

and

impen

din

gle

gis

lati

on

No

pro

gre

sson

acco

unti

ng

or

audit

ing

inst

ituti

onal

dev

elopm

ent

report

ed

Pro

ble

ms

of

adm

inis

trat

ive

capac

ity

and

short

age

of

qual

ified

audit

ors

note

d

Adopti

on

of

Audit

ing

Act

1999

note

ddea

ling

wit

hap

pro

val

of

per

sons

carr

yin

gout

stat

uto

ryau

dit

s,th

ele

gal

fram

ework

wit

hin

whic

hth

eyoper

ate,

and

bas

icpri

nci

ple

sfo

rth

eIn

stit

uti

on

of

Auth

ori

sed

Audit

ors

Neg

oti

atio

ns

on

com

pan

yla

wch

apte

rof

acq

uis

pro

vis

ional

lycl

ose

d

Auth

ori

sati

on

Com

mit

tee

for

Audit

ors

esta

bli

shed

wit

hre

pre

senta

tives

from

gover

nm

ent

bodie

san

doth

erag

enci

es

Note

dth

attr

ainin

gan

dqual

ifica

tion

of

audit

ors

nee

ded

rein

forc

emen

t

Mea

sure

sin

rela

tion

toco

nso

lidat

edac

counts

stil

louts

tandin

g

Reo

rgan

isat

ion

of

Acc

ounti

ng

Sta

ndar

ds

Boar

dst

ill

requir

ed

Acc

ounti

ng

Act

amen

ded

toin

troduce

requir

emen

tsfo

rco

nso

lidat

edac

counts

inli

ne

wit

h7th

Dir

ecti

ves

and

IAS

s

Iden

tifi

cati

on

of

nee

dfo

rgover

nm

enta

lsu

per

vis

ion

of

self

-re

gula

ting

Inst

itute

of

Auth

ori

sed

Audit

ors

toen

sure

publi

ccr

edib

ilit

yof

audit

s

Act

on

auth

ori

sed

publi

cac

counta

nts

of

Feb

ruar

y2002

larg

ely

alig

ned

wit

hacq

uis

No

dev

elopm

ents

note

don

audit

ing

Over

all

legis

lati

on

was

consi

der

edto

be

inli

ne

wit

hac

counti

ng

&au

dit

ing

elem

ents

of

acq

uis

Rei

tera

tion

of

min

or

conce

rns

on

short

com

ings

inA

cton

auth

ori

sed

publi

cac

counta

nts

;so

me

dis

crep

anci

esre

lati

ng

toau

dit

ing

whic

hnee

ded

tobe

corr

ecte

d;

nee

dfo

rgover

nm

ent

super

vis

ion

of

the

Inst

itute

of

Auth

ori

sed

Audit

ors

note

d

Over

all

countr

yw

ould

com

ply

wit

hacq

uis

by

acce

ssio

n


123

Tab

le7

Acc

essi

on

traj

ecto

ryof

Hungar

y

Com

men

tfr

om

EC

report

on

mem

ber

ship

appli

cati

on

EC

regula

rre

port

son

pro

gre

ssto

acce

ssio

n,

19982002,

and

com

pre

hen

sive

monit

ori

ng

report

,2003

1998

1999

2000

2001

2002

2003

Dat

eof

appli

cati

on

1994

Dat

eof

favoura

ble

opin

ion

1997

Countr

yhad

bas

icle

gis

lati

ve

fram

ework

inpla

ce

Poss

ible

tran

siti

onal

pro

ble

ms

of

imple

men

tati

on

due

tosh

ort

age

of

qual

ified

acco

unta

nts

and

audit

ors

.O

ncu

rren

tti

met

able

thes

epro

ble

ms

capab

leof

reso

luti

on

Note

dth

atth

ere

wer

ear

eas

of

acco

unti

ng

law

wher

efu

rther

chan

ge

was

stil

lnee

ded

Pla

nned

audit

ing,

dev

elopm

ents

had

bee

nin

stit

ute

d;

new

ly-c

reat

edC

ham

ber

of

Audit

ors

addre

ssin

gsh

ort

age

of

qual

ified

audit

ors

but

stil

lgap

s

No

pro

gre

ssre

port

edin

area

spre

vio

usl

yfo

und

defi

cien

t;note

dth

athig

hdeg

ree

of

confo

rmit

yhad

alre

ady

bee

nac

hie

ved

New

law

on

acco

unti

ng

tota

ke

effe

ctfr

om

2001

topro

vid

efo

rfu

rther

alig

nm

ent

wit

hacq

uis

and

for

legal

bas

isfo

rin

troduct

ion

of

nat

ional

acco

unti

ng

stan

dar

ds

Chap

ter

of

acq

uis

on

com

pan

yla

wcl

ose

d

Cham

ber

of

Audit

ors

has

7,0

00

audit

ors

and

audit

ing

firm

sre

gis

tere

d

Sti

llno

acco

unti

ng

stan

dar

ds

body

and

no

nat

ional

acco

unti

ng

stan

dar

ds

intr

oduce

d

Acc

ounti

ng

and

audit

ing

elem

ents

of

acq

uis

stat

edto

be

subst

anti

ally

met

Modifi

cati

ons

toA

cton

Acc

ounti

ng

esta

bli

shed

legal

bas

isfo

rac

counti

ng

stan

dar

ds

Now

pro

vis

ion

for

exte

rnal

qual

ity

contr

ol

of

audit

ors

Modifi

cati

ons

tocr

imin

alco

de

now

allo

wvio

lati

ons

of

acco

unti

ng

regula

tions

tobe

rigoro

usl

yad

dre

ssed

Fundin

gm

ade

avai

lable

toen

able

the

tran

slat

ion

of

IAS

sin

toM

agyar

Ver

ynea

rly

full

yal

igned

wit

hacq

uis

on

acco

unti

ng

and

audit

ing

Rec

ent

revis

ion

toval

uat

ion

rule

sfo

ran

nual

and

conso

lidat

edac

counts

of

cert

ain

types

of

com

pan

ies,

ban

ks

and

oth

erfi

nan

cial

inst

ituti

ons

rem

ained

tobe

dea

ltw

ith,

asdid

intr

oduct

ion

of

nat

ional

acco

unti

ng

stan

dar

ds

Adm

inis

trat

ive

stru

cture

sas

sess

edas

adeq

uat

e


123

Tab

le8

Acc

essi

on

traj

ecto

ryof

Lat

via

Com

men

tfr

om

EC

report

on

mem

ber

ship

appli

cati

on

EC

regula

rre

port

son

pro

gre

ssto

acce

ssio

n,

19982002,

and

com

pre

hen

sive

monit

ori

ng

report

,2003

1998

1999

2000

2001

2002

2003

Dat

eof

appli

cati

on

1995

Dat

eof

favoura

ble

opin

ion

1997

New

law

son

acco

unti

ng

wer

egood

star

tto

alig

nm

ent

wit

h4th

Dir

ecti

ve

and

furt

her

amen

dm

ents

in1996

incr

ease

dra

teof

pro

gre

ss

Furt

her

legis

lati

on

pla

nned

for

acco

unti

ng

and

audit

ing

Pra

ctic

alim

ple

men

tati

on

of

law

sco

uld

be

dif

ficu

ltdue

toa

short

age

of

suit

ably

qual

ified

acco

unta

nts

and

audit

ors

Tra

inin

gce

ntr

efo

rac

counta

nts

and

audit

ors

had

bee

nes

tabli

shed

toad

dre

sssh

ort

age

of

qual

ified

per

sonnel

No

oth

erpro

gre

ssnote

d

Acq

uis

scre

enin

gpro

cess

on

com

pan

yla

wnow

com

ple

ted

No

new

legis

lati

on

on

acco

unti

ng

and

audit

ing

adopte

dsi

nce

pre

vio

us

report

Curr

ent

legis

lati

on

stil

lre

quir

edso

me

amen

dm

ent

tobe

full

yin

line

wit

hacq

uis

but

pro

cess

of

alig

nm

ent

consi

der

edto

be

quit

efa

rad

van

ced

Rec

om

men

ded

that

atte

nti

on

be

pai

dto

ensu

ring

effe

ctiv

eim

ple

men

tati

on

and

enfo

rcem

ent

of

legis

lati

on

Det

aile

dneg

oti

atio

ns

open

edon

com

pan

yla

wch

apte

rof

acq

uis

Law

on

annual

acco

unts

amen

ded

Dec

ember

1999

toal

ign

wit

h4th

Dir

ecti

ve

Law

on

Conso

lidat

edA

nnual

Acc

ounts

info

rce

Januar

y2000

toal

ign

dom

esti

cla

ww

ith

the

7th

Dir

ecti

ve

but

som

ein

com

pat

ibil

itie

sbet

wee

noth

erdom

esti

cla

ws

regula

ting

acco

unta

ncy

and

som

egap

s

Furt

her

work

nec

essa

ryto

achie

ve

alig

nm

ent

wit

h8th

Dir

ecti

ve

on

audit

ing

Adm

inis

trat

ive

capab

ilit

yst

ill

lack

ing.

Shar

edre

sponsi

bil

ity

bet

wee

nM

inis

try

of

Fin

ance

and

Min

istr

yof

Eco

nom

ycr

eate

dnee

dfo

rcl

ose

rco

oper

atio

n

Law

on

Sw

orn

Audit

ors

due

tobe

info

rce

inea

rly

2002,

tran

sposi

ng

8th

Dir

ecti

ve

into

dom

esti

cla

w

Am

endm

ents

toL

awon

Annual

Acc

ounts

of

Ente

rpri

ses

info

rce

Apri

l2001

Pro

cess

of

imple

men

ting

IAS

sco

nti

nuin

g

Pra

ctic

alim

ple

men

tati

on

of

conso

lidat

edac

counti

ng

assi

sted

by

issu

eof

Man

ual

on

Pre

par

atio

nof

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lidat

edA

nnual

Acc

ounts

Lat

via

nF

inan

cial

Acc

ounti

ng

Sta

ndar

ds

Com

mit

tee

bei

ng

esta

bli

shed

but

furt

her

work

on

its

legal

bas

isnec

essa

ry

Over

all,

alig

nm

ent

wit

hac

counti

ng

and

audit

ing

elem

ents

of

acq

uis

consi

der

edgood

Law

on

Sw

orn

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ors

info

rce,

tran

sposi

ng

8th

Dir

ecti

ve

into

dom

esti

cla

w

IAS

imple

men

tati

on

conti

nuin

g

Imple

men

tati

on

of

conso

lidat

edac

counti

ng

conti

nuin

g

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anci

alA

ccounti

ng

Sta

ndar

ds

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mit

tee

now

esta

bli

shed

Chap

ter

of

acq

uis

on

com

pan

yla

wpro

vis

ional

lycl

ose

d

Acc

ounti

ng

and

audit

ing

legis

lati

on

appea

red

bro

adly

inli

ne

wit

hacq

uis

Super

vis

ion

of

audit

ors

reso

lved

;m

ain

issu

ere

mai

nin

gw

asam

endm

ent

of

dom

esti

cla

wto

allo

wfa

irval

ue

acco

unti

ng

No

tran

siti

onal

arra

ngem

ents

reques

ted

Countr

yin

posi

tion

toco

mply

wit

hac

counti

ng

and

audit

ing

elem

ents

of

acquis

;no

par

ticu

lar

conce

rns

note

d


123

Tab

le9

Acc

essi

on

traj

ecto

ryo

fL

ith

uan

ia

Co

mm

ent

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po

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00

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7

Ex

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ith

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ing

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pro

spec

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win

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ito

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arat

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ns

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gh

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ing

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her

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tin

g

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ics

for

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ors

app

rov

ed

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ug

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ely

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ng

aps,

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that

the

nec

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uti

on

alst

ruct

ure

sn

eed

edto

be

esta

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,p

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ual

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sts

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oti

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n)

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ual

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rst

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tory

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ith

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ativ

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ity

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equ

ate

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pec

ted

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ntr

yw

ou

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po

siti

on

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lyfu

lly

wit

hac

cou

nti

ng

and

aud

itel

emen

tso

fa

cqu

isb

yac

cess

ion


123

Tab

le1

0A

cces

sion

traj

ecto

ryo

fP

ola

nd

Com

men

tfr

om

EC

report

on

mem

ber

ship

appli

cati

on

EC

regula

rre

port

son

pro

gre

ssto

acce

ssio

n,

19982002,

and

com

pre

hen

sive

monit

ori

ng

report

,2003

1998

1999

2000

2001

2002

2003

Dat

eof

appli

cati

on

1994

Dat

eof

favoura

ble

opin

ion

1997

Act

son

acco

unti

ng

and

audit

ing

model

led

on

EU

dir

ecti

ves

and

IAS

sex

iste

d

No

real

pro

ble

ms

fore

seen

aslo

ng

aspla

ns

wer

efu

lfill

ed

Poss

ible

tran

siti

onal

pro

ble

ms

of

imple

men

tati

on

due

tosh

ort

age

of

qual

ified

acco

unta

nts

and

audit

ors

Pro

ble

ms

of

short

age

of

qual

ified

audit

ors

agai

nid

enti

fied

Note

dth

atex

isti

ng

acco

unti

ng

law

sbro

adly

inli

ne

wit

hacq

uis

and

that

imple

men

tati

on

was

mai

nis

sue

No

furt

her

pro

gre

ssre

port

edin

area

spre

vio

usl

yfo

und

defi

cien

t

Note

dth

ata

hig

hdeg

ree

of

confo

art%3a10.1007%2fs10997-009-9103-z.pdf

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