Marjan Odar, Slovenian Institute of Auditors 1 Slovenian Institute of Auditors Marjan Odar, Ph.D....

Marjan Odar, Slovenian Institute of Auditors

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Legal environmentLegal environment

Establishment of the InstituteEstablishment of the Institute: : 9 9 September, 1993September, 1993Legal form:Legal form: Institute, governed by the provisions of the Institute’s Institute, governed by the provisions of the Institute’s

By- laws (Official Gazette By- laws (Official Gazette of the of the RR of of SSlovenia No.lovenia No. 70/01) 70/01)

Slovenian Audit ActSlovenian Audit Act (Official Gazette (Official Gazette of the of the RS RS No. No. 11/01) -harmonised with 11/01) -harmonised with

the EU legislation - the EU legislation -

http://http://www.si-revizija.si/www.si-revizija.si/o_siru/dokumenti/o_siru/dokumenti/zakon_o_revidiranju-an.doczakon_o_revidiranju-an.doc


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Tasks and powersTasks and powers The Institute carries out tasks The Institute carries out tasks

and implements powers in the domain ofand implements powers in the domain of auditing andauditing and other professional domains related to auditingother professional domains related to auditing

Professional domains related to auditing: Professional domains related to auditing: accountingaccounting business financebusiness finance internal auditinternal audit information systems auditinformation systems audit tax tax analysisanalysis and consulting and consulting valuation of valuation of business, real estate, machines and equipment business, real estate, machines and equipment


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Audit services may be Audit services may be provided byprovided by

a company with a company with a a registered office in the Republic registered office in the Republic of Slovenia which has obtained the licence of the of Slovenia which has obtained the licence of the Institute Institute for the provision of for the provision of such services - audit such services - audit companycompany

a certified auditor providing audita certified auditor providing audit services on services on an an individual basis as occupation who has obtained individual basis as occupation who has obtained the licence of the Institute the licence of the Institute for the provision of for the provision of such services - solo-practitionersuch services - solo-practitioner

the professional title is protected by law as long as the professional title is protected by law as long as it ensures adequate qualityit ensures adequate quality


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BOARD

STRUCTURE OF THE ORGANISATIONSTRUCTURE OF THE ORGANISATION

Senior Advisers (3) Legal Adviser

Administrators (2)

DirectorDirector

AUDIT COUNCILAUDIT COUNCIL

AUDIT SECTIONAUDIT SECTION

COUNCIL OF EXPERTSCOUNCIL OF EXPERTS

TAX ADVISORY TAX ADVISORY SECTIONSECTION

BUSINESS BUSINESS FINANCE FINANCE SECTIONSECTION

ACCOUNTING ACCOUNTING SECTIONSECTION

SECTION FOR SECTION FOR VALUATIONVALUATION

SECTION FORSECTION FORINFORMATION SYSTEMSINFORMATION SYSTEMS

AUDIT AUDIT

SECTION SECTION FOR INTERNALFOR INTERNAL

AUDIT AUDIT


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The main governing bodiesThe main governing bodies

Board

Director

Audit Council

Council of Experts


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Board of the InstituteBoard of the Institute – – the the main tasksmain tasks

adopts articles of association and other general actsadopts working and development programs of the

Institute and monitors their implementationdetermins business plans and approves annual

reports of the Institutedetermines policies for price formation of audit

services;determines rates and prices for the services

performed by the Institute


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13 members of the Board are 13 members of the Board are appointed (for a appointed (for a 4-year 4-year term):term):

4 by the founder (Association of the Accountants, Treasurers and Auditors of Slovenia)

6 by registered members of the Institute2 by the minister of finance1 by the employees of the Institute


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Director of the Institute Director of the Institute (appointed for a 4(appointed for a 4--yearyear termterm by the Board of the by the Board of the Institute) Institute) should should

hold the professional title of hold the professional title of a a certified auditorcertified auditor have the qualities and experience required for the have the qualities and experience required for the

management of the Institutemanagement of the Institute be a national of the Republic of Sloveniabe a national of the Republic of Slovenia have a certificate of no previous convictions have a certificate of no previous convictions


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9 members of the9 members of the Audit Council are Audit Council are appointed (for a appointed (for a 4-4-year year term)term) 55 of them of them, who , who shouldshould hold the licence of a certified hold the licence of a certified

auditor, auditor, are appointed are appointed by certified auditorsby certified auditors 3 representatives of the interested public, who 3 representatives of the interested public, who shouldshould

have appropriate professional knowledge and experience have appropriate professional knowledge and experience inin the field of accountancy and finance, the field of accountancy and finance, are appointed are appointed by by the minister of finance (two of them on proposal of the the minister of finance (two of them on proposal of the Chamber of Commerce and Industry of Slovenia)Chamber of Commerce and Industry of Slovenia)

director of the Institute is a member in his capacitydirector of the Institute is a member in his capacity


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11 members of the11 members of the Council of Experts Council of Experts are appointed (for aare appointed (for a 4-year 4-year termterm)

9 by the registered members of the Institute9 by the registered members of the Institute certified auditors, auditors, certified valuators, internal certified auditors, auditors, certified valuators, internal

auditors, management accountants, business finance experts, auditors, management accountants, business finance experts, information systems auditors, tax consultantsinformation systems auditors, tax consultants

2 by university institutions from among the university 2 by university institutions from among the university professorsprofessors


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Professional Professional work of the Institutework of the Institute

organised in sections /committees/organised in sections /committees/ audit section (covered by the Audit Council)audit section (covered by the Audit Council) other sections (covered by the Council of Experts)other sections (covered by the Council of Experts)

• accounting section

• business finance section

• tax advisory section

• section for valuation (real estate, plant and machinery, business)

• section for information systems auditing

• internal audit section


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The sections areThe sections are

represented by the registered members of the Institute

managed by the committees of 5 members (elected by registered members of each section)

The Institute receives no external subsidies

its main source of income its main source of income isis fees for audit fees for audit companies companies, various , various ordinary ordinary training training programs, conferences, seminarsprograms, conferences, seminars

budget - apox. 1. Mio. €budget - apox. 1. Mio. €


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Powers of supervision - Quality AssurancePowers of supervision - Quality Assurance

supervision supervision of of audit companiesaudit companies with the purpose with the purpose to establish whether anto establish whether an audit audit

company observes audit rules in the course of auditingcompany observes audit rules in the course of auditing audit rules: ISAs, Code of Professional Ethics of audit rules: ISAs, Code of Professional Ethics of

External Auditors, Basic Audit Principles, Guidelines External Auditors, Basic Audit Principles, Guidelines for Audit Companies, audit practice statements and for Audit Companies, audit practice statements and recommendations of the Audit Councilrecommendations of the Audit Council

supervision of certified auditorssupervision of certified valuators


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Professional StandardsAccording to the Audit Act the Institute is authorised to According to the Audit Act the Institute is authorised to

adopt and publish the following professional standardsadopt and publish the following professional standards:: accounting standardsaccounting standards auditing standardsauditing standards business and finance standardsbusiness and finance standards internal audit standardsinternal audit standards information systems audit standardsinformation systems audit standards standards in the field of business, real estatestandards in the field of business, real estate,, machine and machine and

equipment valuationequipment valuation


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Already adopted and published

accounting standardsinternal audit standardsbusiness-finance standardsaudit rules business-finance principles


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Important responsibility in the Important responsibility in the accounting fieldaccounting field

According to the According to the Companies’ Companies’ ActAct the Institute is authorised the Institute is authorised to to set and set and prepare Slovenian prepare Slovenian Accounting Standards, which Accounting Standards, which are to be approved by the are to be approved by the Ministry of Finance andMinistry of Finance and

Ministry of EconomyMinistry of EconomyNew SAS New SAS were put into force were put into force

on 1 on 1 January, 2006January, 2006


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Enforcement of professional Enforcement of professional standardsstandards

accounting standards enforced by the Companies’ Act and other special acts

(referring to banks, insurance companies, mutual funds, etc.)

auditing standards ISAs and other audit rules are enforced by the Audit Act

other standards enforced by professional rules


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Training programs Language: SloveneLanguage: Slovene Minimum formal education requirement: Minimum formal education requirement: B. Sc.B. Sc. Certification requirements and Certification requirements and trainingtraining programs are programs are offered by offered by

the Institutethe Institute BASIC BASIC TRAININGTRAINING for all for all training training programs (except for certified programs (except for certified

real estate valuator and certified machine and equipment real estate valuator and certified machine and equipment valuator): 76 hoursvaluator): 76 hours

• accountingaccounting 18 hours18 hours• auditingauditing 8 hours 8 hours• business financebusiness finance 15 hours15 hours• corporate and tax lawcorporate and tax law 20 hours20 hours• mathematical and statistical methodsmathematical and statistical methods 10 hours10 hours• business communicationbusiness communication 5 hours 5 hours


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VERIFIED INTERNAL AUDITORVERIFIED INTERNAL AUDITOR basic basic trainingtraining 76 hours76 hours special subjectsspecial subjects

• auditingauditing 41 hours41 hours• accounting and taxationaccounting and taxation 21 hours21 hours• business financebusiness finance 15 hours15 hours

VERIFIED MANAGEMENT ACCOUNTANTVERIFIED MANAGEMENT ACCOUNTANT basic basic trainingtraining 76 hours76 hours special subjectsspecial subjects

• accounting and taxationaccounting and taxation 62 hours62 hours• business financebusiness finance 15 hours15 hours

VERIFIED BUSINESS FINANCE EXPERTVERIFIED BUSINESS FINANCE EXPERT basic basic trainingtraining 76 hours76 hours special subjectsspecial subjects

• business financebusiness finance 52 hours52 hours• accounting and taxationaccounting and taxation 25 hours25 hours


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VERIFIED TAX CONSULTANTVERIFIED TAX CONSULTANT

basic basic trainingtraining 76 hours76 hours special subjectsspecial subjects

• tax procedures and tax audittax procedures and tax audit 47 hours47 hours

• accounting and taxationaccounting and taxation 25 hours25 hours

• business financebusiness finance 15 hours15 hours

VERIFIED INFORMATION SYSTEMS AUDITORVERIFIED INFORMATION SYSTEMS AUDITOR basic basic trainingtraining 76 hours76 hours special subjectsspecial subjects

• information systems auditinginformation systems auditing 40 hours40 hours

• information scienceinformation science 37 hours37 hours


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CERTIFIED BUSINESS VALUATORCERTIFIED BUSINESS VALUATOR basic basic trainingtraining 76 hours76 hours special subjectsspecial subjects

• business valuationbusiness valuation 52 hours52 hours• accounting and taxationaccounting and taxation 26 hours26 hours• business financebusiness finance 15 hours15 hours

CERTIFIED REAL ESTATE VALUATORCERTIFIED REAL ESTATE VALUATOR subjectssubjects

• real estate valuationreal estate valuation 132 hours 132 hours• accounting and taxationaccounting and taxation 15 hours15 hours• business financebusiness finance 15 hours15 hours

CERTIFIED MACHINE AND EQUIPMENT VALUATORCERTIFIED MACHINE AND EQUIPMENT VALUATOR subjectssubjects

• valuation of machines and equipmentvaluation of machines and equipment 132 hours 132 hours• accounting and taxationaccounting and taxation 20 hours20 hours• business financebusiness finance 15 hours15 hours


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Conditions of admission (prescribed by Conditions of admission (prescribed by

the Audit Actthe Audit Act)

certified auditorcertified auditor university degree five years’ working experience

• of which minimum three years in auditing after the date of obtaining the licence to carry out the tasks of an auditor

examination of professional competence to carry out tasks of a certified auditor

certificate of no previsous convictions command of the Slovene language


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auditor

• university degree

• two years’ working experience – in the field of auditing or internal audit

• examination of professional competence to carry out tasks of an auditor

• certificate of no previsous convictions

• command of the Slovene language

certified valuator• university degree

• five years’ working experience in the field requiring knowledge necessary for carrying out tasks of a valuator

• examination of professional competence to carry out tasks of a certified valuator

• certificate of no previsous convictions

• command of the Slovene language


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Conditions of admission (for other titles, Conditions of admission (for other titles, not prescribed by the Audit Actnot prescribed by the Audit Act)

internal auditor, management accountant, business finance expert, information systems auditor, tax consultant

• professional qualifications obtained in graduate school• appropriate working experience • examination of professional competence to carry out tasksof

a certain profession• certificate of no previsous convictions • command of the Slovene language• fulfilment of requirements set by the code of ethics for the

profession in question


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Continuing Continuing trainingtraining requirements requirements

30 hours of 30 hours of trainingtraining per year (for all titles) per year (for all titles)


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Audit profession - Legal Basis

Auditing ActInternational Standards on AuditingBasic Auditing Principles Other auditing rules, adopted by the

Slovenian Institute of Auditors


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HIERARCHY OF THE AUDITING RULES

AUDITING ACT

BASIC AUDITINGPRINCIPLES

CODE OFPROFESSIONAL

CONDUCTINTERNATIONAL STANDARDS

ON AUDITING ANDINTERNATIONAL AUDITING

PRACTICE STATEMENTS

IFAC'SCODE OF ETHICS

INTERPRETATION OF THEAUDITING ACT

SLOVENIAN AUDITINGSTANDARDS

EXPLANATIONS ANDGUIDELINES OF THEAUDITING COUNCIL

METHODICAL MATERIALOF THE INSTITUTE

POSITIONS OF THEAUDITING COUNCIL

PROFESSIONAL LITERATURE

GENERALLY ACCEPTEDAUDITING ACTIONS IN

FOREIGN PRACTICE


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Auditing Council

decides about the issue and withdrawal of licences for auditing firms and certified auditors (auditors);

supervises the auditing;adopts the auditing rules;lays down the criteria for obtaining the certificate of

a certified auditor and auditor;performs other professional tasks related to the

development of the auditing profession.


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Quality control

Auditing firmsCertified auditorsAuditors

The quality control is performed: by monitoring, collecting and verifying the reports, by reviewing the operations of the entities under

control.


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Monitoring

Carried out by experts: authorised by the Director of the Institute; employed at the Institute.

4 certified auditors and 1 lawyer42 auditing firmsapp. 150 active certified auditors (out of 189)


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Quality controlauditing firm;within the auditing firm:

each certified auditor (statutory auditor) - directly; auditors - indirectly (through the review of the files);

minimum three years’ cycle for auditing firms with listed companies;

minimum five years’ cycle for other auditing firms;all the documents of the firm must be available.


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Disciplinary sanctions for certified auditors and auditors

withdrawal of the licence;public warning.


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Withdrawal of the licence• the licence was obtained by stating false data;• the person has been convicted of a commercial or property crime;• he/she holds investments in the client;• he/she is connected with the client in another manner that could give

rise to a doubt as to the independence and objectivity of auditing;• he/she violates the auditing rules, which results in a deficient and

misleading audit report;• he/she violates the duty to preserve the secrecy of confidential data;• he/she repeatedly violates other provisions of auditing rules.


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Conditional withdrawal of the licence

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


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Public warning

violation of the auditing rules;no grounds for withdrawal or conditional

withdrawal of the licence.


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Disciplinary sanctions for auditing firms

order for elimination of violation;imposition of additional measures;withdrawal of the licence.


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Order for elimination of violation

The auditing firm violates the prohibition connected with the

investments; carries out the activities prohibited under the

Auditing Act; is organised as a joint-stock company but it has not

issued registered shares; violates the duty of reporting and notification; violates other auditing rules.


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Imposition of additional measures

Seriously violation of auditing rules.Measures:

• the improvement of procedures of internal supervision of auditing;

• the improvement of procedures of internal supervision concerning the flow of confidential data;

• the change of internal structure of the auditing firm;

• other measures required for implementation of the auditing rules.


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Withdrawal of the licence

the licence was obtained by stating false data;

additional measure was imposed on the auditing firm, and the competent body (old or newly appointed) failed to eliminate the violations and/or to take additional measures.


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Publishing of the final sanctions

The summarised decision is to be published in the professional journal of the Institute (Revizor - The Auditor).


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Disciplinary sanctions in the years 2003 - 2005

Certified auditors: 19 public warnings:

• 12 final,

• 7 not final (4 cases at the court); 1 withdrawal (final).

Auditing firms: 7 orders for elimination of the violation.


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The Auditing Profession - history

The period 1996 - 2001 the first Slovenian Auditing Act

• the Institute is responsible for the monitoring of statutory audits

special rules accepted by the Council of Experts• peer review system

43 auditing firms 100 statutory auditors - practitioners


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The period 2002 - 2004 the second Slovenian Auditing Act

• the quality control procedure is prescribed in details by the act

monitoring system• the experts of the Institute

– one lawyer

– four certified auditors

42 auditing firms 130 statutory auditors - practitioners


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Quality assurance 8.th Directive

independent from the review persons

subject to the public oversight

governed by knowledgeable non-practitioners

independent and transparent nomination procedure

ultimate responsibility for• the approval and registration

• the adoption of auditing rules

• continuous education, quality assurance and investigative and disciplinary systems

Auditing Act monitoring system, carried

out by the Institute’s experts Auditing Council

governed by knowledgeable non-practitioners by coincidence

the election (5) and the appointment (3)

ultimate responsibility for• the issue and withdrawal of

licences

• the adoption of auditing rules

• the external quality control

• the establishment of the educational criteria


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8.th Directive

funding must be secured and free from the influence by statutory auditors and auditing firms

Institute’s rates the quality control

(monitoring system and Auditing Council) is funded by the supervision fee defined in the Institute’s rates; the sum of the fees to be paid for an individual year should not exceed the actual costs of supervision for that year


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8.th Directive

adequate resources

Actual situation

According to the present activity of the Institute’s monitoring system and of the Auditing Council the resources (human resources and funding) are adequate.


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8.th Directive

Persons who carry out quality assurance

appropriate professional education

relevant experience in statutory audit and financial reporting

specific training on quality assurance reviews

Actual situation

The experts of the Institute one lawyer and four certified

auditors with the licence specific training on quality

assurance review the lawyer and one certified

auditor - a certificate to conduct the procedures based on the General Administrative Procedure Act


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8.th Directive

The selection of the reviewers

under an objective procedure designed to ensure that there are no conflicts of interest between the reviewers and the reviewed person

Actual situation

The whole monitoring team is working at the Institute

no inherent conflicts of interest


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8.th Directive

The scope of the quality assurance review must include an assessment of

the compliance with auditing rules

the quantity and quality of resources spent

the audit fees charged the internal control

system of the auditing firm

Actual situation

The quality assurance review of the auditing firm includes an assessment of

the documentation and report of at least one client of each engagement partner in the auditing firm

the quantity and quality of resources spent

the audit fees charged the internal quality control

system of the auditing firm


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8.th Directive

Report the main conclusions of

the quality assurance review

Actual situation

Report in accordance with the

General Administrative Procedure Act

must contain a detailed description of the auditing rules’ violations


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8.th Directive

The frequency of the quality control

every six years every three years for

statutory auditors or auditing firms that carry out statutory audits of public interest entities

Actual situation

The frequency of the quality control

every five years every three years for

auditing firms and statutory auditors with listed clients


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8.th Directive

The overall results of the quality assurance system

published annually

Actual situation

The overall results of the quality assurance system

published in the annual report of the Institute


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8.th Directive

Recommendations of quality reviews

shall be followed up by the statutory auditor or auditing firm

otherwise disciplinary actions or sanctions

Disclosure to the public

Actual situation

Recommendations in the case of smaller violations

of the auditing rules

Disciplinary sanction in the case of serious violations

Disciplinary sanction (withdrawal of the licence or public warning) is published in ‘Revizor’.


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Conclusions

The Slovenian auditing profession meets almost all requirements of the proposed Directive.

There are no obstacles for mutual recognition of regulatory arrangements between Member States in the field of public oversight if they are conceived on the principles of the proposed Directive.

Marjan Odar, Slovenian Institute of Auditors 1 Slovenian Institute of Auditors Marjan Odar, Ph.D....

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Transcript of Marjan Odar, Slovenian Institute of Auditors 1 Slovenian Institute of Auditors Marjan Odar, Ph.D....