changes and implications ΙΝ auditing ... -...

ΕΠΙθΕΩΡΗΣΗ ΟΙΚΟΝΟΜΙΚΩΝ ΕΠΙΣΤΗΜΩΝ - Τεύχος 11 (2007) , 81-92

CHANGES AND IMPLICATIONS ΙΝ ΤΗΕ AUDITING PROCEDURE FROM ΤΗΕ IMPLEMENTATION OF INTERNATIONAL ACCOUNTING STANDARDS AND INTERNATIONAL FINANCIAL REPORTING STANDARDS

Abstract

The app lication of Inte rnat iona l Accounting Standards ( IAS)(JJ and International Financial Reporting Standards ( I FRS)ί2 ) aims to contribute to worldwide uniformity a nd ide ntica l demonstratio n of enterprises' accounting achievement. The compliance to IFRS bears changes to businesses' accounts and financial statements' presentation, to accounts' entry treatment and to auditing procedure. Changes have occurred to the auditing authorities due to IFRS enfo rcement. The CPA board has been replaced by the Capital Market Committee, which is responsible to conduct audit control to enterprises adopting IFRS. This paper app roaches a comparison of the auditing standards ίη act and the cl1anges which will result in the auditing procedure due to IAS and IFRS implementation.

JEL Classification: Μ40, Μ41 , Μ42.

Key_words: lnternational Accounting Standards, lnte rna tional Financial

Reporting Standards, Aιι dit ing , Financia l Stcιtements.

( 1) IAS is ;ι fram ewo rk o f Accounιing Sι a nda rd s. Rules. M e ιhods <ι nd Processes ge ne ra lly accepι ed , ιh e esι abli s hιneιll of \νhi ch leads to a unifo rmity o f fi11 anci<1 I sta te me nts s ιructure and consequently to precise ιrue and uniform info rma tio n o f financi a l staι ements' users.

(2) Interna tio na l Accounting Standa rds ιh a ι 'νas published aft e rwards March 2001 ;ιre called Inιerna tional Financial Repo rting Standards IFRS. Those who had been published at period 1973-2001 are naιned Internatio nal Accounting Standards.

Diakomlhalis Mlhalis

Lecturer, Accounting Department,

ΤΕΙ οι Eplrus

Georgakopoulou Eleftherla

lnstructor, βusiness Administratlon

Department, ΤΕΙ οι Crete, Ph . Ο . Candidate,

Hellenic Open Uniνersity

Διακομιχόλης Μιχαήλ

Καθηyητής Εφαρμοyών

Τμήματος Λοyιστικής

ΤΕΙ Ηπείρου

Γεωρyακοπούλου

Ελευθερία

Υηοψ. Διδάκτωρ , ΕΑΠ

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ΔΙΑΚΟΜΙΧΑΛΗΣ ΜΙΧΑΗΛ , ΓΕΩΡΓΑΚΟΠΟΥΛΟΥ ΕΛΕΥθΕΡΙΑ - ΕΠΙθΕΩΡΗΣΗ ΟΙΚΟΝΟΜΙΚΩΝ ΕΠΙΣΤΗΜΩΝ - Τεύχος 11 (2007) , 81-92

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1. Introduction

Pressures for the international harmonization of accounting have grown rapidly since the early '70s when the lnternatio nal Accounting Standards Committee (IASC)<3J was established, a long with the development of stock markets internationally and the growth of international investment (Street et. al, 2001 ). The common basis for financia l reporting based οη high quality global standards provides a platform for efficient cross border investment both within and beyond the European Union. As a result , the globalization of the world economy has led companies around the world to conform the ir financial reporting to the rules laid down by the lnternational Account ing Standards Board (IASB)<4>. The aim of the Board is to get into law a core set of standards that constitute a comprehensive, generally accepted basis of accounting. IFRS must be of high quality and result in comparab ility, transparency and fu ll disclosure.

IFRS are the codification of the accounting principles, rules and policies which have to be fo llowed from accountants and to be fully audited from audi to rs through the preparat ion of fin ancial statements (Vlachos et. al, 2003).

The purpose of this paper is to report οη a comparatiνe analysis between current audi ting principles and the ones imposed by IFRS. Also, some of the basic changes ίη the financial statements are outlined.

2. Changes to Financial Statements

Financia l Sta te me nts are a structured financia l representa tio n o f the financia l positio n and the transactio ns undertake n by an enterpri se. Comparabili ty and transparency of financial statements are the main reasons fo r the adoption of IFRS. IFRS 1 aims to meet the above mentioned reasons and more specifica lly to ensure comparabili ty with the enterprise's own financial state111ents of previous periods, as well as with the financial statements of other enterprises of the same period (Chartered Certified Accountants, 1998). According to IFRS 1, a comple te set of financial statements includes the fo llowing compo nents: a) balance sheet, b) income sta tement, c) statement of changes ίη equity, d) cash fl ow statement and e) accounting policies and explanatory notes.

(3) IASC was estab lished in the 29/6/ 1973 as a result of an agreen1ent o f the accounting au tho rities

of Austra li a. C<1 11 ada. France, Germany. Jap<1n , Mexico, Ho ll and, United Kingdorn l re land and

USA. T he wo rk of IASC is ca rried o ut by a council con st itιιted by delega tio ns of 13 countries

and 4 o rganisa tio ns tha t a re in tc rested for the presentatio n of fina ncia l sta tements

( 4) T he ln te rnat io nal Accounting Standards Board is responsib le exclusive ly for ιhe deve lopment

o f the ln te rnationa l Accoun ting Standards. Ι η o rder ιο fulfi l it s work ίι takes into consideration

the publi shed accoιιn ting models and plans fro m several count ries fro m which ίι dra,vs the

knowledge to build up accounting standards for the essenti al subjects.

DIAKOMIHALIS MIHAIL, GEORGAKOPOULOU ELEFTHERIA - REVIEW OF ECONOMIC SCIENCES - Νο 11 (2007), 81 -92

The remainder of the paper reviews the changes to the financial statements and to the auditing procedure through the implementation of IFRS. The summary and the conclusion are followed by statements about directions fo r future research.

ί ) Balance Sheet

One of the main objectives of IFRS 1 is to provide a framework within which an entity assesses how to present fairly the effects of transactions and other events (European Financial Reporting Group - EFRAG). The balance sheet according to IFRS is more concise, smaller in size and in analysis than its fo rmer presentation. Additionally, IFRS do not require a specific way of presentation of accounts neither a specific description of accounts on the presumption that the enterprise follows the same way of presentation in each financial year. Every country may adopt an indicative balance sheet draft as the Hellenic Committee of Standardization and Auditing (HCSA) and the Capital Market Committee have indicated the form of financial statements for the Greek enterprises registered in the Athens Stock Exchange Market. Auditors should check all the components of assets and liabilities in order to find out that all the components are classified properly on the balance sheet.

Some of the basic changes required to comply with IFRS are the following: ί ) minority interests should not be presented in equity, ίί) li abilities should be classified as current or non - current, ίίί ) the balance sheet should be cro s -referenced to the notes (Adopting IFRS).

ίί ) Income statement

The income statement should be presented in the format that IFRS 1 requires. As a minimum, the account of the income sta tement should include line items which present the fo llowing amounts: a) revenue, b) the results of operating activities, c) fin ance costs, d) share of profits and losses of associates and jo int ventures accounted for using the equity method, e) tax expense, f) profit or loss from ordinary activities, g) extraordinary items, h) minority interest and ί ) net profit or loss for the period.

The income statement can be presented with two alternative ways; either expenses are classified by nature or by function. Also, the characterization of an expense as extraordinary follows various rules and for that reason the profits from assets' sa les and transactions' di ffe rences are classified in a di fferent way (Chartered Certified Accountants, 1998).

ίίί) Statement of changes in equity

An enterprise should present, as a separate component of its financial statements, a sta tement showing: a) the net profit or loss fo r the period, b) each item of income and expense, ga in or loss which, as required by other standards, is recognized directly in equi ty, and the total of these items, and c) the cumulative effect of changes in accounting policy and the correction of

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fundamental e rro rs dealt with under the Benchmark treatments ίη IAS 8. Changes ίη an enterprise's equi ty. between two balance sheet dates re f\ ect

the increase or decrease in its net assets or wealth during the period, under the particular measurement principles adopted and disclosed in the financial sta tements. Except for changes resulting from transactions with shareholders, such as capital contributions and dividends, the overa ll change ίη equity represents the total ga ins and losses generated by the enterprises activities during the period.

ίν) Cash Flow Statement

IFRS 7 sets outs the requirements fo r the presentation of the cash f\ ow statement and related disclosures. lt states that cash fl ow in for mation is useful in providing users of financial sta tements with a basis to assess the abili ty of the ente rprise to generate cash and cash equiva le nts and the needs of the e nterpri se to utilize those cash fl ows. The objective of thi s standard is to require the provision of informatio n about the historica l changes in cash and cash equivalents of an enterprise by means of a cash fl ow statement which class ifies cash flows during the period from operating, investing and financing activities.

Cash fl ow info rmation is useful ίη assessing the abili ty of the enterprise to generate cash and ca h equiva lents and enables users to deve lop models to assess and compare the present va lue of the future cash f\ ows o f di ffe rent e nte rprises. lt also enhances the comparability of the reporting of opera ting pe rfo rmance by di ffe rent enterprises because ίt eliminates the effects of using diffe re nt accounting treatments fo r the same transactio ns and events. The cash fl ow statement sho uld repo rt cash fl ows during the period classified by opera ting, investing and financing activities (Chartered Certi fied Accountants, 1998) .

ν. ) Notes to the Financial Statements

Notes to the financia l statements should be prese nted in a systematic manner. Each item o n the face of the balance sheet, income sta tement and cash f\ ow statement should be cross - referenced to any related in fo rmation in the notes. Notes to the financial statements include narrative descriptio ns or more deta il ed analyses of amounts showing on the face o f the ba lance sheet, income sta tement, cash fl ow statement and statement of changes ίη equi ty, as we ll as additio nal in formatio n such as contingent li abilities and commitme nts. T11e components of the notes are the fo llowing o nes: a) statement of compliance with IFRS, b) statement of the measurement basis and accounting po licies applied, c) supporting in fo rmation fo r items presented o n the face of each financial statement in the o rder in which each line item and each financial statement is presented and d) other disclosures, includ ing: ί )

contingencies, commitments and other financial disclosures, and ίί ) non -financial disclosures.

DIAKOMIHALIS MIHAIL, GEORGAKOPOULOU ELEFTHERIA - REVIEW OF ECONOMIC SCIENCES - Νο 11 (2007) , 81-92

3. Auditing changes for specific accounts of the balance sheet statement

It should be mentioned that a lot of changes are made through the implementation of IFRS. It does not only change the way of calculating specific accounts οπ the face of the balance sheet but also affects the auditing procedure. Further more, this paper highlights these changes under the scope of auditing.

ί ) Inventories

According to the existing accounting policy inventories are stated at the lower of cost and market value. The inventories' cost may be determined by one of the fo llowing methods:

1. Individualised Cost Method is applied for inventories and services the cost of which is not ίπ succession interchangeable or ίt is produced and separated for specific work.

2. Cost of ίπ succession interchangeable inventories or inventories not produced nor separated for specific work: In these cases the methods of cost accounting that are applied are the FIFO (First - Ιπ - First - Out) and the median cost method.

3. Median Cost Method. The cost o f inventories emanates from the medium cost o f purchases or production. (Cost of the remaining.inventories of previous period + value of purchases of period) / total quantities used.

4. Απ altem ative method of cost accounting for ίπ succession interchangeable inventories or inventories that are not produced nor separated for specific work is the Last - Ιπ - First - Out (LIFO) method.

Through the implementation of IFRS, inventories are recorded at net realizable value. Additionally, by IFRS the valuation of inventories includes an allocation of fίxed indirect production costs (for example, depreciation of factory buildings) (Adopting IFRS, pp 35 & 63).

ίί ) Property, plant and equipment

Up till now, property, plant and equipment are recorded at purchase or construction cost. By IFRS, they are stated at their fair value. ΑΙΙ the costs that are directly attributable to the acquisition, construction or production are capita lised.

By existing accounting policy, when, at the balance sheet date, property, plant and equipment shows a permanent impairment ίπ value, it is written down to the lower value. This accounting policy is reviewed by IFRS, where there is πο concept of "permanent impairment". Assets are written down when recoverable amount is less than ca rrying amount (Adopting IFRS, pp 56).

ίίί ) Investments

Financial fixed assets include investments ίπ unconsolidated subsidiaries, associated companies and other companies, financial receivables held fo r

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ΔΙΑΚΟΜΙΧΑΛΗΣ ΜΙΧΑΗΛ , ΓΕΩΡΓΑΚΟΠΟΥΛΟΥ ΕΛΕΥθΕΡΙΑ - ΕΠΙθΕΩΡΗΣΗ ΟΙΚΟΝΟΜΙΚΩΝ ΕΠΙΣΤΗΜΩΝ - Τεύχος 11 (2007), 81-92

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investment purposes, treasury stock and other ecurιtιes . The receivab le accounts are held fo r investment reasons, as well as the treasury stock and other investment titles. According to 1 FRS, treasury stock should be presented as a deduction from equity as required by IAS 32, rather than an investment.

Up till now, investments in unconsolidated subsidiaries, in companies in which the Group exercises joint control with other partners and associated companies, are normally accounted for using the equi ty method. Also, investments in other compan ies are va lued at cost and a permanent impairment in value is provided as a direct reduction of the investment account.

On the other hand, IFRS regard that unconsolidated subsidiaries should be consolidated. Additionally, investments ίη other companies should be measured at fair value as ava ilable for sale assets under IAS 39.

Απ audi tor through the auditing procedure should rea lize if the securities as they are recorded have been estimated correctly and will notice if any miscalculation has been done fo r their eva luation. Securities are measured at fair value as available fo r sa le or at amortized cost, rat her than at cost. By IFRS, financial assets are impaired if their carrying amount is greater than their recoverable amount. Managements' role is to assess at each balance sheet whether there is any objective evidence that an asset may be impaired and to estimate the recoverable amount of that asset.

As far as, current assets are regarded, the auditor should take into account the method for calculating their va lue. Current assets also include investments and securities acquired as a temporary investment and by existing principles and va lued at the lower of cost and market, cost being determined on lndividualised Cost or LIFO or Median Cost or FIFO basis. By IFRS, securities are classified as financial assets at fair value through profit or loss, trading assets are measured at fair value (Adopting IFRS, pp 60).

ν) lntangible Assets

According to the existing accounting policy, goodwill is included in the category of intangible assets. By IFRS, goodwill is appeared separately in the fi nancial statements and does not dea l with other intangible assets. Goodwill should not be amortized but should be tested for impairment at the date of transition and then at least an nually. Amortization charged before date of transition is not restated. The auditor through the auditing procedure should check the separate presentat ion of goodwill in the financial statements and not being incorporated with other intangible assets.

lt should be mentioned that by IFRS charges cannot be deferred because they are expected to benefit future periods. Only costs that meet the definition of an asset can be capita lised. Expenses that benefit future periods are carried in the direct results. Such kinds of expenses are: resea rch expenses, expenses of foundation and first settlement, development costs, advertising expenses (Adopting IFRS, pp 58).

DIAKOMIHALIS MIHAIL, GEORGAKOPOULOU ELEFTHERIA - REVIEW OF ECONOMIC SCIENCES - Νο 11 (2007) , 81 -92

4. Auditing changes for other accounts

ί ) Earπiπgs per share

As far as the preseπtatioπ of earπiπgs per share ίπ the fiπaπcial s tatemeπts

is coπcerπed, IFRS foresee the preseπta tio π of basic aπd iso lated earπiπgs per share ίπ the iπcome statemeπt. The above meπtioπed earπiπgs should be stated by exact ly the same way through a ll the accouπtiπg periods ίπ the fiπaπcial sta temeπts. The e πterprise ίπ o rder to provide better iπforma tioπ to the users of fiπaπcial statemeπts should make kποwπ the amouπts which were used fo r the calculatioπ of the above meπtioπed earniπgs per share.

Accordiπg to the exj st iπg staπdards, there was πο ob liga tioπ to the ca lcul a tio π aπd the preseπtat io π of the earπiπgs per share ίπ the fiπaπcial

s tatemeπts. The auditor duriπg the audit should compare aπd verify the amouπts which were used for the calcu lat io n of earπiπg per share.

The reductio n of the earπiπgs ίπ a lot of eπterprises is comiπg into light, and perhaps this coπstitutes grea t reason of worry through the implementa tion of IFRS (Kak ridis, Α, 2005: 811). Α lot of questioπs arise to the auditors for issues which demand immediate expl aπ a tioπs such as: a) which ea rπiπgs should be used for distributed divideπds aπd reseIΎes?, b) The rules which do ποt al\ow the earπiπgs distributioπ for which equity capital aπd first set tlemeπt expeπses

should be ca lculated (Paraskevopoulos G. , 2003).

ίί) Deferred iπcome taxes

Accordiπg to the ex i stiπg accouπtiπg po licy, iπcome taxes were calculated through the distributioπ of profits. Οπ the coπtrary, iπcome tax is recogπised

uπder IFRS as aπ expeπse aπd goes straight to the iπcome sta temeπt.

The adoptioπ of IFRS could result ίπ the creatioπ of more differeπces

betweeπ accouπtiπg and tax results. The auditor should focus οπ these differeπces aπd fiπd out if they have beeπ caused because of in efficieπt tax plaππiπg. Under these circu111staπces , the auditor should πotice if the eπterprise has adopted aπ efficieπt tax plaππiπg tha t could aπticipate ways of recogπiziπg, solviπg aπd recordiπg the deferred tax differeπces uπder IFRS (Vlachos et al, 2003).

IAS 12 requires deferred tax to be ca lculated οπ temporary differeπces, πο t

timiπg diffe reπces. It has detail ed rules ίπ specific a reas that may result ίπ

differeπces ίπ the tax assets aπd liab ilities that are recogπized. The auditor should iπvestigate if the recorded taxes ίπ the fiπaπcial statemeπts are precise aπd if the tax rate aπd the tax base are the right oπes.

Deferred tax li ab ilities are recoded regardless of the probability that a future tax paymeπt may be required. Deferred tax asset aπd li ab ilities should be offset if they relate to the same tax jurisdictio n. Also, deferred tax assets should ποt be class ified as curreπt assets. They should be disclosed as a ποπ curreπt separate item οπ the statemeπt aπd face of the balaπce sheet.

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ίίί) Group Accouπtiπg

Before the implemeπtatioπ of IFRS, eπtities or subsidiaries whose opera tioπs

are ποt homogeπeous with those of the Group have beeπ excluded from the scope of coπsolidatioπ. Eπtities, fo r which it would be ποt practicable to obtaiπ

the πecessary iπformatioπ οπ a timely basis or without disproportioπa te expeπse,

have ποt beeπ coπsolidated . lAS 27, does ποt permit the exclus ioπ of subsidiaries that have ποπ - homogeπeous operatioπ s.

Accordiπg to IFRS, assets aπd liabilities, costs aπd reveπues of the subsidiaries coπsolidated compaπies are recorded ίπ the fiπaπcial sta temeπts

igπoriπg the acquis itio π perceπtage. Iπvestmeπts are elimiπated from the stockholders' equi ty of subsidiaries compaπies. The share of stockholders aπd the results arisiπg duriπg compaπy' s opera tio π which are att ributed to miπority

rights are recorded separately ίπ the coπsolida ted fiπaπcial statemeπts. The miπority rights should πο t be recorded ίπ the share equity capital.

AJso, a πegative decliπe of the sharecapital should be recogπized straight ίπ iπcome (reveπue or earπiπgs) aπd be preseπted ίπ the balaπce sheet. Additioπally, the profit recorded οπ iπtercompaπy sales of plaπt aπd equipmeπt produced aπd sold at prices ίπ Ιίπ e with market coπditioπ should be elimiπa ted

οπ coπsolida tioπ ίπ accordaπce with IAS 27.

ίν) Foreigπ Curreπcy Traπslatioπ

Foreigπ subsidiaries' balaπce sheets are traπslated ίπtο euros by applyiπg year - eπd exchaπge rates. Foreigπ subsidiaries' iπcome sta temeπts are tra πs l a ted u siπg average exch aπge rates. Exchaπge differeπces resultiπg from the traπs l atioπ of opeπiπg stockholders' equi ty at curreπt exchaπge rates aπd at the exchaπge rates used at the eπd of the previous year, as well as differeπces

betweeπ πet iπcome expressed at average exchaπge rates, are reflected ίπ

stockholders' equity as 'cumulative' traπsl a tioπ adjustmeπts. Such reseινes

relatiπg to iπvestmeπts ίπ subsidiaries or associated compaπies are iπcluded ίπ the iπcome s ta temeπt wheπ the iπvestmeπts are sold to third parties. Resultiπg

exchaπge gaiπs aπd losses are iπcluded ίπ the iπcome statemeπt. The existiπg accouπtiπg policy complies with IFRS but should be expaπded to describe how each subsidiary's measuremeπt curreπcy is determiπed.

Derivative fiπaπcial iπstrumeπts, iπcludiπg foreign exchaπge coπtracts,

should iπitially be recogπised ίπ the ba l aπce sheet at cost aπd subsequeπtly remeasured at their fair value. Certaiπ derivatives are des igπated as either: 1) a hedge of the fair va lue of a recogπised asset or liab ility or of a firm commitmeπt

(fair value hedge ), 2) a hedge of a fo recasted tra πsactioπ ( cash flow hedge ), or 3) a hedge of a πe t iπvestmeπt ίη a foreigπ eπtity οπ the date a derivative coπtract is eπtered into.

Chaπges ίη the fair value of derivatives that are highly effective should be recogπised ίη the income sta temeπt. Where the forecasted traπsactioπ results ίη the recogπitioπ of a π asset o r of a liability, the ga iπs aπd losses previously deferred ίη equity are transferred from equity aπd iπcluded ίπ the iπitia l


measurement of the cost of the asset o r liability. Otherwise, an1ounts deferred ίη equi ty should be transferred to the income statement and classified as revenue or expense ίη the same period during which the hedged firm commi tment or forecasted transaction affects the income statement. Certain derivative transactions are not included ίη IAS 39 and therefore, should be recognised ίη the income statement.

ν) Provisions

According to the existing accounting policy, restructuring reseJΎes include the costs to carry out corporate reorganisation and restructuring plans; they are provided ίη the year ίη which the company fo rmally decides to implement such plans, where such costs can be reasonably estimated. Under IFRS, the provision fo r restructuring costs should be recognised only when there is a legal or constructive obligation.

IAS 37 imposes (permi ts) the recognition of certain provisions as tax expenses ίη the future, while ίt requires deta iled information ίη the notes of fin ancial statements for liab ilities which do not meet the criteria fo r accounting recognition. During audit, audi tors should check if a ll the requirements of IAS 37 are ful fill ed .

ν ί ) Investor's Briefing

1) Ways of briefing a) Press Publication of Concise Financial Statements b) Publication ίη the Internet and ίη the official web page of enterprise of

analytic Financial Statements with the Auditor's Report 2) Reference to the Board of Directors report and Notes to the Financial

Statements 3) The type of reports and the Auditors' certificates, which can express: a) Confo rm opinion b) Exception of g) Accent d) Negative opinion

5. Problems from the application of IAS and IFRS ίη Greece

The main problems than the applicat ion of IAS and IFRS ίη Greece, according to Price Water House Coopers concerned:

Α) Ιη the delayed decision-making by the Responsible Authori ties with regard to the obliga tion of publica tion ( content and time frame ).

Β) Ιη the di fficul ty of co ll ection and trea tment of required info rmation (especially ίη groups with a lot of affiliated companies) .

C) Ιη the lack of specia lised executives with experience ίη IAS / IFRS application.

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Ο) ln the unde restimation o f the challenge's di fficul ty by all the involved institutions ( companies, supervisory authorities, audi tors).

According to 2190/1920 act, · ente rprises a re obliged to annιιa l financial sta tements publicatio n of at least twe nty days before the a nnιι a l regular gene ral assembly o f sha reholde rs, however according to the 360/1985 act, enterprises listed in the Athens Stock Exchange Market (ASE M) a re compe\led to publish concise financial statements at the latest up to two months afteιwards the end of fin ancia l yea r (unless if complete financial state n1ents have been pιιb lished

tί\Ι then). None of a ll these had changed in the IAS/IFRS assembly, resulting to

confusio n of tl1e market as fo r what and up to when they a re the registe r in the ASE M companies compe lled to publish. The pa rticul ar problem had been more complicated fro m the make that the IAS/IFRS do not fo recast concise annual economic situatio ns. lf the register in the ASEM companies had chosen alte rnative to publish concise economic situation of the fo urth quarter of the yea r, in compliance to the IAS (" lnte rim Financia l Repo rting"), these would have no t be ing audited, and the refore these financial statements would have been diffe red from the fin al, complete statements. Moreove r, according to the PWHC the allowed by the law pe ri od of two months fo r the annual financial statements' complicatio n is judged insufficient, because the increased vo lume of info rmation compared to the He llenic General Accounting Plan (HGAP). The provisiona l solutio n of the one month extensio n offered ext raordinarily in 2006 by the Capita l Market Committee, shoιιld -acco rding to the PWHC- lead to modi fica tio n o f the relative law, to legitimize this solution.

6. Other issues relevant to the application of IAS and IFRS ίη Greece

ί ) Financial Statements compliance to the lAS/IFRS

T he Capita l Market Committee is responsible fo r the compliance of the registe red companies with the IAS / IFRS. According to the findings of PWHC, exceptiona lly vast inhomogeneousness has been recorded in the annual fin ancial statements o f 2005. The practica l expe rience of company led to the conclusion that "there is a great number of financial statements that do no t include a ll the required noti fications" by the IAS/IFRS.

The specialisation of executives in the supervisory institutions, ίη the ente rpri ses, in the aud iting companies, as well as the improvement and upgrade of information systems that are used by the registe red companies, will contribute to resolve the problem.

ίί ) Pro fits Distribution and Reserve Funds

With legislative regulation of the Ministry of Finance, it was disto rting a llowed to companies that realised loses from the first application of IAS /IFRS - because of the social securi ty issue , the doubtful accounts e tc,- to igno re the


prediction the 2190 act on relative weakness of dividend distributio n. Moreover, the Hellenic Committee of Standardization and Auditing (HCSA), has reported in recent directive thai the tax free reserve funds a re calcula ted on the produced pro fits, acco rding to the IAS /IFRS, without clari fy ing if this inte rpre tation has been acceptable by the tax authorities. The obligatory by the legislation dividend payment as pe rcentage of profits - the highest, from the 35% o f annual pro fits or the 6% o f capita stock - will force the companies to distribute profits which potentially will re f\ ect the ir cash liquidity. The PWHC proposes the suppression o f this obligation, with the re la tive decision to let on the discreet facility of each ente rprise (SID: 1594748) .

7. Conclusions

The changes that will occur in the accounting procedure because of the implementatio n of the IFRS, obviously will affect the auditing procedure in theore tica l and practica l level.

Audi to rs should adjust the auditing procedure on the basis of IAS and IFRS regula tions in order to exercise effective ly ente rprises' audit , ensuring validity, complete ly evidence and representation of reali ty in the ir fin ancial charts (Paraskeuopoulos G ., 2003 :18).

With the implementation of IAS and IFRS in Greece, audito rs would be obliged to report , e ithe r that the company has applied the LAS and IFRS or that ίt has not applied them. The auditors' remarks would be restricted on the estimation matters the company has made, or on the omissions of signi ficant information of the company's financia l charts (Cotsilinis Κ., 2003 :1 5). The attempt of this paper was to furnish a comparative approach of the changes that will occur from the implementation of the IAS and IFRS in the economic charts and financial statements, and underline the changes and the in1pacts on the auditing procedure .

8. References

1. Adopting IFRS, (2003) Pricewate rhouseCoopers.

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27. www. pwc.com/ifrs.

28. www. ifac.org.

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