Member Organization Associate
Legal and Regulatory Environment
Overview of Statuatory Framework for Accounting and Auditing
The Law on Accounting and Financial Statement No. 9228 of 2004 determines the financial reporting requirements applicable in Albania. For general purpose financial reporting, two reporting frameworks are applicable in the jurisdiction: (i) National Accounting Standards (NAS) and (ii) IFRS as issued by the IASB, translated and published in Albanian language by the National Accounting Council (NAC).
The following entities are required to apply IFRS: (a) listed companies and subsidiaries of listed companies; (b) banks and non-banking financial institutions; (c) investment firms; and (d) large non-listed companies meeting defined thresholds determined by a Government decree.
Other entities, mostly small and medium-sized entities, use NAS issued by the NAC and approved by the Ministry of Finance of Albania in accordance with the procedures established under Law No. 9228. NAS are based on the international standards. In 2015, the NAC with the assistance of the World Bank completed the revision of NAS to bring them closer in line with the requirements of IFRS for SMEs.
The Law on Statutory Audit and Organization of the Accountancy Profession No. 10091 of 2009 modified in April 2016 by Law No. 47/2016, stipulates provisions governing audit of financial statements. The law requires application of ISA in statutory audits of entities that meet certain thresholds, including those entities which apply IFRS and joint stock companies which apply NAS.
The Albanian Institute of Authorized Chartered Auditors is responsible for the translation of ISA in Albania and, as of 2019, has translated the 2016 version of the standards.
Regulation of Accountancy Profession
The Law on Statutory Audit and Organization of the Accountancy Profession No. 10091 of 2009, modified in April 2016 by Law No. 47/2016, regulates the accountancy profession in Albania. It establishes initial professional development (IPD), continuing professional development (CPD), as well as ethical and other requirements for practicing as an auditor as well as a certified accountant and empowers professional accountancy organizations (PAOs) to enforce the requirements.
The Public Oversight Board (POB), which was established in September 2009 under the Law No. 10091 of 2009 and the Decision of Council of Ministers No. 874 of 2009, is responsible for: (i) the overall oversight of the recognized PAOs; (ii) approving the bylaws and other instruction/regulations for PAOs; (iii) approving the Code of Ethics for professional accountants; (iv) conducting quality assurance reviews; and (v) taking disciplinary actions against sole practitioners and audit firms members; among other functions.
Aspiring professional accountants in Albania must complete a university degree in business or economic studies and then a master’s degree in either accounting or auditing. The candidate is then eligible to enter a professional training program in either the audit (Certified Public Accountant or Statutory Auditor) or accounting streams (Certified Accountant, CA). Statutory auditors may also perform accounting services (e.g. preparation of financial statements) for their clients to whom they do not provide auditing services (i.e. accounting and auditing of the financial statements for the same client is not allowed).
Aspiring auditors enroll in the training program administered by the professional body of auditors—the Institute of Authorized Chartered Auditors of Albania (IEKA). Aspiring accountants enroll in the training programs offered by the professional organizations of accountants. Upon completing a professional body’s training program, the candidate needs to pass the Examination Commission’s statutory exams. The Commission operates under the POB and comprises five members (representing the Ministry of Finance, Ministry of Economy, National Accounting Council, IEKA and one representative from the PAO for accountants) nominated for a period of three years.
The Law No. 10091 regulates some aspects of the accounting profession such as IPD and CPD, organization of professional organizations of accountants, and the quality of accounting services. In addition, the law states that when entities decide to outsource accounting services, they can hire only CAs for such services. However, in practice this requirement is not implemented, and many companies hire uncertified professionals thus diluting the quality of services and increasing competition for the certified professionals.
In order to improve the quality of accounting services, the POB has developed, and is currently implementing, a Strategy and Action Plan on Authorized Accountant Profession Development. In February 2019, the POB issued Regulation No. 9 on the Regulation and Supervision of the Certified Accountant Profession and Professional Organizations of Accountants. The Regulation outlines specific requirements for the certification of accountants and details the oversight process over PAOs for accountants and the profession itself to ensure that all practicing accountants comply with the legal requirements.
Under the regulation, PAOs for accountants must follow the professional standards established by IFAC, in particular the SMOs and the Code of Ethics. Recognition as an authorized PAO for accountants is automatically granted to Members and Associates of IFAC; other PAOs need to provide evidence that they comply with the IFAC requirements. The POB reserves the right to request IFAC’s opinion on certain matters.
As of September 2019, there are three PAOs uniting accountants in Albania: the Albanian Institute of Certified Accountants; the Association of Accountants and Financial Experts of Albania; and the Association of Certified Accountants. PAOs regulate their members (accountants) through their own internal procedures and guidelines, producing and maintaining a registry of their members, and providing ongoing trainings. All three PAOs find their origin in education, with the leadership usually including professors in public or private universities. Dual membership exists; however, professionals are usually “active” in one organization.
Two of the existing PAOs, including IKM, applied to the POB to confirm their recognition as a PAO for accountants under the Regulation of 2019. As of September 2019, IKM is the only PAO for accountants recognized by the POB. The recognition will be valid for ten years and will be reviewed after that period.
The audit profession is regulated by Law No. 10091, which was amended in 2016 to revise some of the provisions related to its regulation and the role of the PAO of statutory auditors. The Law specifies the requirements to enter the audit profession and be registered in the audit or audit firm registries. The Law also adopts ISA as translated in Albanian; requires auditors and audit firms to establish internal control quality procedures; authorizes professional bodies and regulators to establish external QA systems; and mandates participation in CPD programs for all statutory practicing auditors; among other requirements.
Aspiring auditors are required to have a master’s degree; to have performed at least three years of practical experience under the supervision of an auditor or an audit firm; to have attended the qualification training on IAS/IFRS, National Accounting Standards, ISA, and professional ethics; and to successfully pass all required professional exams.
The authority for organizing and regulating the statutory audit profession in Albania is granted to the IEKA, supervised by the POB. Membership in the IEKA is mandatory for practicing statutory auditors. IEKA’s responsibilities include translation and adoption of ISA, developing professional modules for the statutory audit profession, establishing a proper process for recognizing higher education institutions’ professional curricula for candidates attending statutory audit programs, and establishing an investigation and discipline system and ethical requirements in line with the IESBA Code for auditors under the oversight of the POB.
Statutory auditors providing services to banks and insurance companies are also subject to additional regulation by their respective regulators. Both the Bank of Albania (BoA) and the Financial Supervisory Authority (FSA) have the power to annually approve the auditors of banks and insurance companies, respectively. Auditors are obligated to report immediately to the regulator any material fact that is in breach of the legislation. A qualified opinion normally triggers an investigation by the regulators. Both the BoA and FSA have the power to ask for re-audit and to disallow the auditor to perform audits in the future.
Audit Oversight Arrangements
The Public Oversight Board (POB) was established in September 2009 under the Law on Statutory Audit and Organization of the Accountancy Profession No. 10091 and the Decision of Council of Ministers No. 874 of 2009. The Law was substantially amended in 2016 to strengthen the POB in terms of human and financial resources as well as operations and enhance the investigation and discipline as well as quality assurance review processes of auditors, among other areas.
The POB is comprised of five non-practitioners with a substantial experience in the field of accounting and auditing, nominated by the Minister of Finance in an independent and transparent selection procedure. In performing its supervisory duties POB is supported by an administrative secretariat.
The POB is directly responsible for public oversight of the audit profession and audit regulations in Albania. Under Law No. 10091, the POB’s remit comprises (i) overall oversight of the professional accountancy organizations; (ii) approving the bylaws of professional accountancy organizations and the Code of Ethics for Professional Accountants; (iii) conducting quality assurance reviews of public and non-public interest entities with the right to delegate the reviews of non-public entities to the Albanian Institute of Authorized Chartered Auditors; and (iv) taking disciplinary actions against sole practitioners and audit firms. The POB is a member of International Forum of Independent Audit Regulators.
Professional Accountancy Organizations
The Albanian Institute of Authorized Chartered Auditors (IEKA)
IEKA is the only professional body of statutory auditors in Albania, recognized by the Law on Statutory Audit and Organization of the Accountancy Profession No. 10091 as modified by law 47/2016. IEKA is a non-profit association that unites all statutory auditors (local and foreign) who exercise their profession in public practice in Albania, either independently as natural persons or as part of an audit firm. Membership in IEKA is mandatory for practicing auditors only. IEKA has the right to regulate the audit profession under the oversight of the Public Oversight Board (POB). IEKA’s responsibilities include the translation and adoption of ISA, developing professional modules for the statutory audit profession, establishing a proper process for recognizing higher education institutions’ professional curricula for candidates attending statutory audit programs, and establishing an investigation and discipline system and ethical requirements in line with the IESBA Code for auditors under the oversight of the POB.
The Albanian Institute of Certified Accountants (IKM)
IKM was originally established as the Liaison of Certified Accounting Professionals (LPKM) by the Decision of the First Instance Court of Tirana No. 1590 dated 18/05/2000. During its 2006 organizational reforms, LPKM re-established itself as IKM, a non-governmental, non-profit, non-religious, and non-political organization. It is officially recognized by Legal Decree No. 8788 dated 07/11/2000 on Non for Profit Organizations and operates in accordance with Law No. 10091. IKM’s membership is comprised solely of Certified Accountants, who in Albania may choose to join one of the existing recognized professional organizations for accountants. Members of IKM provide a variety of services including bookkeeping; compilation of financial statements; preparation of prospective financial statements; tax consulting; financial management consulting; internal control systems design and internal audit services; non-statutory auditing, and other services. A substantial percentage of IKM’s membership are accountants in business. Members of IKM do not provide statutory audit services. As of September 2019, IKM is the only PAO for accountants recognized by the POB.
The Association of Accountants and Finance Experts of Albania (SHFKSH)
SHFKSH is comprised of individuals who have an interest in accountancy in Albania. It is a private entity with some requirements for membership. Its members include Certified Accountants, accounting professors, teachers, students, and tax and customs inspectors. SHFKSH is not a member of IFAC. No further information is available.
The Association of Certified Accountants (SHKM)
SHPKM was established in 2008 and is comprised of individuals who bear the title of Certified Accountants and provide services as independent practitioners, private and public sector (including customs). SHKM is not a member of IFAC and no additional information is available.
Projects or Other Information
Adoption of International Standards
Under the Law on Statutory Audit and Organization of the Accountancy Profession No. 10091 of 2009 as amended in 2016, the responsibility for conducting quality assurance (QA) reviews of statutory audits is vested with the Public Oversight Board (POB), with an option to delegate QA reviews of audits of non-public interest entities (PIEs) to the Albanian Institute of Authorized Chartered Auditors (IEKA). Previously the POB had been conducting the reviews and employing IEKA’s technical staff as inspectors; however, as of 2018, the POB’s own inspectors conduct the reviews.
In its 2016 SMO Action Plan, IEKA indicated that the existing QA review arrangements were in line with the requirements of SMO 1.
Although not required by law, in September 2010 the Albanian Institute of Certified Accountants (IKM) established regulations on QA review for its members, who are certified accountants and do not provide statutory audit services. It set up the Quality Control Committee as an independent body in the General Assembly and adopted related regulations and manuals. IKM reports that its quality control regulations are in-line with ISQC 1 and the overall system is in line with SMO 1 apart from the requirement for a regular review of the effectiveness of the system. These reviews have not been conducted in the past but are planned for 2019.
Current Status: Adopted
International Education Standards
The Law on Statutory Audit and Organization of the Accountancy Profession No. 10091 of 2009 as amended in 2016, establishes initial professional development (IPD), including the content of educational programs, and continuing professional development (CPD) requirements for statutory auditors. For certified accountants, the law establishes some IPD requirements and a general requirement for CPD, which is further defined by the professional organizations for accountants.
Aspiring professionals are required to have a formal professional education, obtain practical experience, pass examinations, and maintain continuous professional development. Although the requirement for obtaining practical experience exists, it is not being monitored for certified accountants.
Certification of professionals is conducted by the Examination Commission under the Public Oversight Board (POB) in line with the requirement of the amended Law No. 10091 that authorizes the POB to certify auditors and accountants.
Professional accounting education programs are delivered by professional accountancy organizations, licensed state owned and/or private higher education institutions, and universities. The Albanian Institute of Authorized Chartered Auditors (IEKA) reports that in 2018 the responsibility for establishing the content of the professional educational curricula for auditors has been delegated by the POB to IEKA, which collaborates with the PAOs for accountants.
Since 2014, the World Bank has been assisting the profession and academia in bringing the educational requirements closer in line with IES. In 2014, a gap analysis of national requirements against pre-2015 IES was conducted and revisions of accounting and auditing curricula for university education and professional certification were subsequently undertaken. In addition, one of the World Bank’s projects focused on creating a sustainable mechanism for curricula update that will promptly respond to changes in the international standards; developing learning materials; and conducting trainings.
Nevertheless, according to the World Bank 2017 Accountancy Education: Benchmarking Study, although overall the educational requirements at the time of the assessment were well aligned with the 2015 IES, the content of the curricula for university education and professional certification could be further aligned with the international standards. The following were identified as areas that need improvement: (i) introducing courses on ethics, IPSAS, auditing and assurance subjects at the undergraduate level; and (ii) incorporating IT competencies.
IKM and IEKA reports that, in collaboration with the Center for Financial Reporting Reform of the World Bank, major changes in line with the revised IES are being introduced to the curricula for statutory auditors and certified accountants. A project to bring IKM’s CPD requirements in line with IES 7 is also being implemented by the World Bank. As part of the project, a three-year CPD strategy for IKM has been developed.
There is no information whether other professional organizations uniting accountants have brought their programming and CPD in line with the revised IES.
Current Status: Partially Adopted
International Standards on Auditing
The Law on Statutory Audit and Organization of the Accountancy Profession No. 10091 of 2009 as amended in 2016 requires application of ISA as issued translated in Albanian, in all statutory audits. The Albanian Institute of Authorized Chartered Auditors (IEKA) is responsible for the translation of ISA and has translated the 2016 version of the standards.
To ensure ongoing translation of the new and revised ISA, a joint committee was set up between IEKA and the Society of Certified Accountants and Auditors of Kosovo (SCAAK) in order to implement a timely translation process of new or revised ISA as they become available.
IEKA has also translated and published both parts of the Guide to Using International Standards on Auditing in the Audits of Small- and Medium-Sized Entities (ISA Guide).
Current Status: Adopted
Code of Ethics for Professional Accountants
The Law on Statutory Audit and Organization of the Accountancy Profession No. 10091 of 2009 as amended in 2016 requires application of the IESBA Code of Ethics for all professional accountants. The requirement of the law is enforced and implemented by the professional organizations of accountants and auditors for their respective members under the oversight of the Public Oversight Board (POB).
The Institute of Authorized Chartered Auditors (IEKA), a PAO for auditors, leads the translation of the IESBA Code in the jurisdiction and has adopted the 2015 IESBA Code with modifications to allow in some instances for more stringent requirements than those required by the IESBA Code. Modified sections include those on professional ethics and incompatibility, conflicts of interest, and confidentiality and professional secrecy. The POB approved the Code as translated by IEKA for application in the jurisdiction.
IEKA has established an ongoing process for reviewing new and revised pronouncements of the IESBA, although with a time lag. No plans to adopt the most recent version (2018) of the IESBA Code have been reported.
As far as certified accountants are concerned, one of the three existing PAOs for accountants—the Albanian Institute of Certified Accountants (IKM)—adopted the IESBA Code (2015 version) as translated by IEKA for application by its members. No information on other PAO for accountants is available.
Current Status: Partially Adopted
International Public Sector Accounting Standards
The authority responsible for establishing public sector accounting standards in Albania is the Ministry of Finance of Albania (MoF), which receives the opinion of the National Accounting Council on this subject in accordance with Law on Accounting and Financial Statement No. 9228 of 2004. As reported by the IFAC member organizations in the jurisdiction—the Institute of Authorized Chartered Auditors (IEKA) and the Albanian Institute of Certified Accountants (IKM)—as of 2019, the public sector entities in Albania apply adjusted cash-based accounting rules as stipulated in the Law No. 9228 of 2004.
The MoF has not yet adopted IPSAS but has translated IPSAS in 2010 and is considering adoption of the international pronouncements in a phased approach. IKM reports that as of 2019 the MoF, with the support of the World Bank, has launched a project to adopt IPSAS for public sector.
Current Status: Not Adopted
Investigation and Discipline
The Law on Statutory Audit and Organization of the Accountancy Profession No. 10091 as amended in 2016 authorized the Public Oversight Board (POB) to investigate and discipline auditors, including members of the Institute of Authorized Chartered Auditors (IEKA).
Prior to 2016, IEKA was responsible for the regulation of auditors, including investigation and discipline, and had established a system that was reported to be fully in line with the requirements of SMO 6. IEKA reports that the existing investigative and disciplinary (I&D) arrangements will be further reviewed to incorporate the provisions of the Law No. 10091.
In addition, auditors of entities regulated by the Bank of Albania (BoA) and the Financial Supervisory Authority (FSA) are obligated to report immediately to the regulator any material fact that is in breach of the legislation. A qualified opinion normally triggers an investigation by the regulators. Both BoA and FSA have the power to ask for re-audit and to disallow the auditor to perform audits in the future. The POB cooperates with regulators.
As of 2019, the Law No. 10091 does not contain specific requirement for I&D of certified accountants. I&D processes for accountants are established and implemented for members of professional associations for accountants in accordance with the regulations issued by the POB. The regulations are reportedly not in line with the requirements of SMO 6.
Members of the Albanian Institute of Certified Accountants (IKM), an IFAC member organization, who join IKM on a voluntary basis, are subject to sanctions for any misconduct, including breach of the code of ethics and professional conduct. IKM reviewed the requirements of SMO 6 (revised 2012) in 2014 and has been working to address the gaps. Nevertheless, IKM’s system continues to fall short of the international best practices. Areas of less than full compliance, according to the 2019 self-assessment conducted by the institute, include lack of separation between investigation and discipline functions; the I&D committee comprises only professional accountants; and the decisions for the sanctions are made available to the general assembly only, and not the general public.
Information on any of the I&D systems maintained by other professional accountancy organizations, which are not members of IFAC, is not available.
Current Status: Partially Adopted
International Financial Reporting Standards
The Ministry of Finance of Albania (MoF) is responsible for setting accounting standards in the country in accordance with Law on Accounting and Financial Statement No. 9228 of 2004. The mandate of the National Accounting Council of Albania (NAC) is to draft national accounting standards based on international accounting standards, which then are approved by the MoF.
The Law No. 9228 of 2004 on Accounting and Financial Statements as amended in 2006 requires (a) listed companies and subsidiaries of listed companies; (b) banks and non-banking financial institutions; (c) investment firms; and (d) large non-listed companies meeting defined thresholds to prepare their legal entity and consolidated financial statements using IFRS translated into Albanian. The 2017 version of IFRS is being applied at the time of the assessment.
All other companies follow Albanian National Accounting Standards (NAS) set by the NAC and approved by the Minister of Finance. In 2015, NAC with the assistance of the World Bank completed the revision of NAS to bring them closer in line with the requirements of IFRS for SMEs. Differences, however, do remain.
Current Status: Adopted
- Public Oversight Board (POB)
- Albanian Institute of Authorized Chartered Auditors (IEKA)
- Albanian Institute of Certified Accountants (IKM)
- National Accounting Council (NAC)
- Law on Accounting and Financial Statement No. 9228, 2004
- Law on Statutory Audit and Organization of Accountancy Profession No. 10091, 2009 (in Albanian)
- Law No. 47/2016, 2016 (in Albanian)
- National Accounting Standards (NASs)
- IFRSs as translated in Albanian
- IEKA, SMO Action Plan, September 2016.
- IFRS Foundation, IFRS Application Around the World, Jurisdictional Profile: Albania, May 2019.
- IKM, SMO Action Plan, October 2019.
- International Forum of Independent Audit Regulators website.
- World Bank, Accountancy Education: Benchmarking Study, 2017.
- World Bank, Accountancy Education: A Collection of Good Practices, 2017.
- World Bank, Financial Sector Assessment Program: Albania Corporate Sector Financial Reporting?Technical Note, February 2014.
- World Bank, Report on the Observance of Standards and Codes?Accounting and Auditing: Albania, 2006.
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