Reports on the Observance of Standards and Codes (ROSC)

Frédéric GielenLead Financial Management

SpecialistEurope and Central Asia Region

SERBIA

THE WORLD BANK

Background:

The Need for a Strengthened International Financial Architecture1990s – Emerging Market Crises and contagion effects

East Asia (Thailand)

Philippines

Malaysia

Hong Kong

Indonesia

Taiwan

South Korea

ROSC - SERBIA

Background:

The Need for a Strengthened International Financial Architecture

Shift from ex-post crisis resolution

Ex-ante crisis prevention

ROSC - SERBIA

Background:

Origins of the ROSC program

The G-22 Reports: focus on crisis prevention

- Transparency and Accountability (Led to ROSC program)

- Strengthening National Financial Systems

- Government guarantees to the private sector

ROSC - SERBIA

The ROSC program: Comprises 12 Fundamental Standards

Securities Regulation

Banking Supervision

Accounting & Auditing

Corporate Governance

Insurance Supervision

Insolvency & Creditor Rights

ROSC - SERBIA

Importance of High Quality Accounting and Auditing

Accounting and

Auditing

Development of Capital Markets

Job Creation

Financial Stability

Private Sector Growth

Financial Sector Development

Improved Access to Credit

Financial Information

ECONOMIC GROWTH

ROSC - SERBIA

A&A ROSC: Assessing the Quality of the A&A Framework

Economic Context

Legal & Institutional Framework

Accounting in Practice

Auditing in Practice

RecommendationsFINDINGS

Factu

al A

ssessm

en

t

Perc

ep

tion

s

ROSC - SERBIA

A&A ROSC: Assessing the Quality of the A&A Framework

Benchmarks:

International Financial Reporting Standards

International Standardson Auditing

Acquis communautaire Good international practice

ROSC - SERBIA

A&A ROSC: Global Coverage

Latin America and the Caribbean

Europe and Central Asia

Middle East and North Africa

Africa

South Asia

East Asia

ROSC - SERBIA

A&A ROSC: in Europe and Central Asia (August 5, 2005)

ROSC - SERBIA

The Case of Serbia: Economic Goals

- Access to credit, particulary for SMEs

- Development of capital markets

- Development of the private sector

- European Union Integration

Promote: Avoid:

ROSC - SERBIA

How can A&A help?

Accounting and

Auditing

Development of Capital Markets

Job Creation

Financial Stability

Private Sector Growth

Financial Sector Development

Improved Access to Credit

ECONOMIC GROWTH

ROSC - SERBIA

ROSC is a the first step in the process of reform

Statutory Framework

Monitoring & Enforcement

Education & Training

Accounting Profession &

Ethics

Accounting Standards

Auditing Standards

ROSC - SERBIA

All supporting pillars need to be strengthened

Statutory Framework

Monitoring & Enforcement

Education & Training

Accounting Profession &

Ethics

Accounting Standards

Auditing Standards

ROSC - SERBIA

A&A ROSC Findings

Standards claim compliance with IFRS but actually

diverge in some instances

IFRS

ISA

Acquis Communautaire

Good International Practice

(+)

(-)

ROSC - SERBIA

AccountingStandards

A&A ROSC Findings

Inappropriate scope of application of IFRS

IFRS

ISA

Acquis Communautaire

Good International Practice

(+)

(-)

ROSC - SERBIA

Statutory Framework

A&A ROSC Findings

New Law on Business Companies

IFRS

ISA

Acquis Communautaire

Good International Practice

(+)

(-)

ROSC - SERBIA

Statutory Framework

A&A ROSC Findings

Lack of consolidated accounts

IFRS

ISA

Acquis Communautaire

Good International Practice

(+)

(-)

ROSC - SERBIA

Statutory Framework

A&A ROSC Findings

Underpinning of the audit profession yet to be

established

IFRS

ISA

Acquis Communautaire

Good International Practice

(+)

(-)

ROSC - SERBIA

Statutory Framework

A&A ROSC Findings

No requirement for audit practice quality review

IFRS

ISA

Acquis Communautaire

Good International Practice

(+)

(-)

ROSC - SERBIA

Monitoring and

Enforcement

A&A ROSC Findings

No effective accounting standard enforcement

mechanisms

IFRS

ISA

Acquis Communautaire

Good International Practice

(+)

(-)

ROSC - SERBIA

Monitoring and

Enforcement

A&A ROSC Findings

No professional qualification that can lead to auditor

status

IFRS

ISA

Acquis Communautaire

Good International Practice

(+)

(-)

ROSC - SERBIA

Education and Training

A&A ROSC Findings

Supportive of IFAC Statements of Membership

Obligations (SMOs)

IFRS

ISA

Acquis Communautaire

Good International Practice

(+)

(-)

ROSC - SERBIA

Accounting Profession and Ethics

A&A ROSC Findings

Use of International Standards on Auditing and

the IFAC Code of Ethics

IFRS

ISA

Acquis Communautaire

Good International Practice

(+)

(-)

ROSC - SERBIA

AuditingStandards

ROSC Recommendations: Promoting Confidence in Serbian MarketsStatutory Framework

Accounting andAuditingStandards

Academic and Professional

Education

Monitoring& Enforcement

ROSC - SERBIA

Statutory Framework

Sound framework conducive to reliable financial reporting

- Phased-in transposition of acquis communautaire

- Statutory audit requirements

- Improve financial transparency requirements

ROSC - SERBIA

Accounting and Auditing Standards

Robust and internationally accepted accounting and auditing standards

- Application of IFRS by public interest entities but not SMEs

- Adopt current ISA in their entirety

ROSC - SERBIA

Academic and Professional Education

Underpins de facto compliance with legal and regulatory requirements

- Enhance academic education

- Implement professional examination

- Implement and monitor CPD requirements

ROSC - SERBIA

Monitoring and Enforcement

Essential to guarantee the quality of financial information

- Establish a well governed audit profession, incl. quality assurance and public oversight

- Establish institutionalized financial information mechanisms

ROSC - SERBIA

Implementing the ROSC Recommendations

National Steering

Committee

IAIS

IFAC

IASB

DevelopmentPartners

Basel Committee

European Commission &Committees

World Bank

ROSC - SERBIA