Azerbaijan

Member Organizations

Member Organization Associate

  Chamber of Auditors of Azerbaijan Republic

Legal and Regulatory Environment

  • Overview of Statuatory Framework for Accounting and Auditing

    Accounting Framework

    Preparation of financial statements in Azerbaijan is regulated by the Law of the Republic of Azerbaijan on Accounting that entered into force in 2018. The law stipulates the applicable accounting standards and financial reporting requirements. In accordance with the law, the Ministry of Finance is responsible for enacting the financial reporting standards in the Republic of Azerbaijan.

    Under the law, public interest entities (PIEs) must apply IFRSs. Large entities must prepare their financial statements in accordance with IFRS for SMEs or may opt to apply full IFRS. Medium-sized entities must apply IFRS for SMEs. Small entities must maintain accounting records in accordance with the rules for micro and small businesses established by the Ministry of Finance or may opt to apply IFRS for SMEs.

    PIEs include (i) credit institutions; (ii) insurance companies; (iii) investment funds; (iv) listed companies; (v) non-state (private) social funds; (vi) commercial entities with one or more subsidiary (except very small ones) that must consolidate; and (vii) commercial enterprises exceeding two of the three thresholds related to revenue, total balance sheet, and average number of employees.

    The Ministry of Finance is responsible for the translation of IFRS and has signed the related agreements with the IFRS Foundation. As of 2020, based on the information on the Ministry of Finance website, the 2018 version of IFRS has been translated and is mandatory for application.

    Auditing Framework

    The Law on Audit of 1994 as amended in 2004 defines audit and audit activities, specifies the scope of the entities subject to mandatory audit requirements, establishes the Chamber of Auditors of Azerbaijan Republic (CAAR) as the professional organization for auditors, establishes requirements to become an auditor, and outlines the rights, responsibilities, and liability of the auditor. However, neither the Law on Audit or other rules and regulations specify auditing standards to be applied. De facto, standards required by the CAAR are used. As of 2020, CAAR translated and adopted the 2016–2017 version of the Handbook of International Quality Control, Auditing, Review, Other Assurance, and Related Services Pronouncements.

    Under the Law on Audit, audits are mandatory for business entities that are required to publish their financial statements; in other cases, it is voluntary. PIEs are required to publish their financial statements according to the Law on Accounting of 2004.

  • Regulation of Accountancy Profession

    As of 2020, auditors and chief accountants of certain enterprises are regulated in the Republic of Azerbaijan in accordance with the Law on Audit of 1994 as amended and the Law of the Republic of Azerbaijan on Accounting of 2018, respectively. The profession is regulated by the government agencies and professional organizations of accountants and auditors.

    Auditors

    In order to qualify as an auditor, an individual must (i) have a university degree in accounting, finance, economics, or law; (ii) have three or more years of practical experience; and (iii) successfully pass a certification program and professional examinations administered by the Chamber of Auditors of Azerbaijan Republic (CAAR). To practice as an auditor, an individual must become a member of CAAR, be included in the register of auditors, and fulfill continuous professional development (CPD) requirements.

    Under the Law, CAAR is responsible for (i) maintaining the register for auditors and audit firms; (ii) organizing and implementing a quality assurance review system; (iii) arranging and delivering the CPD program for auditors; (iv) managing and conducting professional examinations for the certification of auditors; (v) establishing and implementing an I&D system; and (vi) monitoring compliance with the Code of Ethics.

    Accountants

    The Law of the Republic of Azerbaijan on Accounting was amended in 2018 to introduce, inter alia, regulation of certain categories of accountants. According to the law, chief accountants of public interest entities (PIEs), large enterprises, government-financed organizations that prepare consolidated accounts except entities with state-owned controlling interest (stock), and listed entities which have outstanding securities in stock exchange, must be qualified as Professional Accountants.

    IPD and CPD requirements for obtaining and maintaining the qualification are prescribed in law and are implemented by the Ministry of Finance, the State Examination Center, and PAOs for accountants.

    In order to obtain a qualification of a Professional Accountant, a candidate must have higher education; confirm theoretical knowledge and professional competence by successfully passing relevant exams conducted by the State Examination Center; and obtain practical training in accounting activities.

    All Professional Accountants must be a member of a PAO for accountants accredited by the Ministry of Finance. The criteria for accreditation are prescribed in the MoF Resolution No. 204 of 2019 and include (i) being a non-profit organization operating in the field of accounting for at least five years supporting implementation of international standards; (ii) conducting relevant trainings and/or examinations and being licensed to conduct educational activities; (iii) having at least 500 members (individuals and legal entities) or 200 members with a certificate of a Professional Accountant; (iv) having necessary processes to support professional development of accountants and a formal plan for professional development of its members; and (v) having necessary processes to investigate and discipline its members.

    As of 2020, the requirements of the new law are being implemented in a phased approach. Chief accountants of PIEs and budget organizations must get qualified December 2021; chief accountants of other enterprises by December 30, 2022.

  • Audit Oversight Arrangements

    There are no independent audit oversight arrangements in the jurisdiction.

    The Law on Audit of 1994 as amended in 2004 establishes the Chamber of Auditors of Azerbaijan Republic as the entity responsible for (i) maintaining the register for auditors and audit firms; (ii) organizing and implementing a quality assurance review system; (iii) arranging and delivering the continuing professional development program for auditors; (iv) managing and conducting professional examinations for the certification of auditors; (v) establishing and conducting an investigation and disciplinary system; and (vi) monitoring compliance with the Code of Ethics.

  • Professional Accountancy Organizations

    Accountants and Risk Professional Association of Azerbaijan (ARPA)

    ARPA, which is a voluntary membership non-governmental organization and a public union, was founded on March 19, 2009 to unite risk management professionals in Azerbaijan (later extended to other professionals, including accountants). ARPA organizes certification programs, conducts research, and disseminates guidance and research publications. The organization offers three certifications for its members: (i) Professional Certification of Accountants (MPS)—developed by ARPA and the Ministry of Finance for professionals who seek to improve their professional level in accounting, finance, and management in the private sector; (ii) Professional Insurer Certification (PSS)—developed by ARPA, the Association of Azerbaijani Insurers (ASA), and Ministry of Finance, for the insurance sector; and (iii) Banking Risk Management Professional Certification (BRM) to enhance the level of professionalism of professional risk managers in the banking sector.

    Association of Professional Financial Managers of Azerbaijan Republic (APFM)

    APFM was established in 2007 as a non-for-profit legal entity with voluntary membership with the mission of developing the accountancy profession through its professional development. In 2019, following the adoption of a new Law on Accounting that introduced regulation of the accounting profession, APFM was acknowledged as PAO for accountants with the responsibility of exercising control over professional activities of its members, representing their interests, and providing expert advice to other stakeholders involved int the policy development. As of 2020, membership in a PAO of accountant is mandatory for all Professional Accountants. APFM organizes trainings for obtaining a Professional Accountant certificate, offers a number of other certificates, organizes seminars, information exchange, and round table discussions, both nationally and internationally. APFM is a member of the European Federation of Accountants and Auditors for SMEs (EFAA).

    Chamber of Auditors of Azerbaijan Republic (CAAR)

    CAAR was established in accordance with the Law on Audit of 1994 as amended to regulate the audit profession. Membership in CAAR is mandatory for auditors and audit firms.

    Under the Law, CAAR is responsible for (i) maintaining the register for auditors and audit firms; (ii) organizing and implementing a quality assurance review system; (iii) arranging and delivering the continuing professional development program for auditors; (iv) managing and conducting professional examinations for the certification of auditors; (v) establishing and conducting an investigation and disciplinary system; and (vi) monitoring compliance with the Code of Ethics.

    In addition to being a member of IFAC, CAAR is a member of the Eurasian Council of Certified Accountants and Auditors, and the EFAA.

  • Projects or Other Information

Adoption of International Standards

  • Quality Assurance

    The Law on Audit of 1994 as amended in 2004 requires all auditors to be members of the Chamber of Auditors of Azerbaijan Republic (CAAR) and be subject to its quality assurance (QA) review system. The system was developed in 2008 and subsequently updated. Inspections are carried out by CAAR at least once every three years, with 35 quality controls conducted in 2016, 47 in 2017, 24 in 2018, and 46 in 2019.

    CAAR reports that ISQC 1 and ISA 220 (2016-2017 IAASB Handbook) have been adopted. In 2018, CAAR conducted a self-assessment of its QA review system against SMO 1 requirements and reported a high-level of compliance, except for requirements related to the review cycle and consideration of public oversight. In its 2020 SMO Action Plan, CAAR indicates that the system was brought overall in line with SMO 1, with the exception of adoption of the most recent version of ISQC 1 and ISA 220.

    Current Status: Partially Adopted

  • International Education Standards

    Initial and continuing professional development requirements (IPD and CPD, respectively) for auditors and chief accountants of certain enterprises, the only categories of professional accountants regulated at the state level, are stipulated in the Law on Audit of 1994 as amended and the Law of the Republic of Azerbaijan on Accounting of 2018, respectively.

    Under the Law on Audit, responsibility for IPD of auditors is shared between universities and training institutes (IES 1) and the Chamber of Auditors of Azerbaijan Republic (CAAR) (IES 2–6), which regulates auditors in the jurisdiction. Specifically, the law requires (i) university education in accounting, finance, economics, or law; (ii) three or more years of practical experience; and (iii) successful completion of the professional certification program and examinations administered by CAAR. To practice as an auditor, an individual must become a member of CAAR, be included in the register of auditors, and fulfill CPD requirements. The extent of alignment of educational requirements for auditors with those of latest IESs remains to be established.

    In 2018, amendments to the Law of the Republic of Azerbaijan on Accounting introduced a requirement for chief accountants of certain specified entities to obtain a mandatory qualification of a Professional Accountant in order to provide services. IPD and CPD requirements for obtaining and maintaining the qualification are established in law and are being implemented by the government agencies and PAOs of accountants.

    In order to obtain a qualification of a Professional Accountant, a candidate must have higher education; confirm theoretical knowledge and professional competence by successfully passing the relevant exams conducted by the State Examination Centre; and undergo practical training in conducting accounting activities. PAOs of accountants must ensure professional development of their members and have a formal CPD plan.

    As of 2020, the requirements of the new law are being implemented in a phased approach and the extent of alignment of the IPD and CPD requirements with those of latest IESs remains to be established.

    Current Status: Partially Adopted

  • International Standards on Auditing

    The Law on Audit of 1994 as amended in 2004 defines audit and audit activities, specifies the scope of the entities subject to mandatory audit requirements, and establishes the Chamber of Auditors of Azerbaijan Republic (CAAR) as the professional self-regulatory organization for auditors.

    However, neither the Law on Audit or other rules and regulations specify auditing standards to be applied. De facto, standards required by the CAAR are used. As of 2020, CAAR translated the 2016–2017 version of the Handbook of International Quality Control, Auditing, Review, Other Assurance, and Related Services Pronouncements. No plans to adopt the most recent version of the standards have been reported as of 2020.

    Proposed amendments to the Law on Audit are expected to legally authorize CAAR to establish auditing standards in the Republic of Azerbaijan; however, the expected date of adoption of the law is not clear as of the time of drafting of this report.

    Current Status: Partially Adopted

  • Code of Ethics for Professional Accountants

    The Law on Audit of 1994 as amended in 2004 stipulates ethical requirements for auditors, without referencing the IESBA Code of Ethics.

    Although not specifically required by law, in 2010 the Ethics Committee of the Chamber of Auditors of Azerbaijan Republic (CAAR), which regulates the audit profession and to which all auditors must maintain membership, adopted a resolution requiring application of the IESBA Code for its members. As of 2020, the Chamber reports to have translated the 2018 International Code of Ethics for application by its members. CAAR indicates that a new Law on Audit is being considered, which will directly require adherence to the IESBA Code of Ethics for all auditors in the jurisdiction.

    In 2018, amendments to the Law of the Republic of Azerbaijan on Accounting introduced mandatory regulation of chief accountants of certain specified entities It is not clear whether the law establishes ethical requirements to be followed by the certified professionals.

    Other accountants may also choose to join professional associations and be subject to their regulation. No information on the adoption of the IESBA Code of Ethics by other associations is available.

    Current Status: Partially Adopted

  • International Public Sector Accounting Standards

    Under the Law of the Republic of Azerbaijan on Accounting that came into force in January 2019, budgetary organizations and municipalities must prepare financial statements in accordance with IPSASs as adopted for application in the jurisdiction by the Ministry of Finance.

    It appears that the Ministry of Finance translated the 2012 Handbook of International Public Sector Accounting Pronouncements and made it available on its website. At the time of the writing of the report, the extent of actual implementation of IPSAS as well as the version of the standards that is applied remains to be established.

    The Chamber of Auditors of Azerbaijan Republic indicates in its SMO Action Plan that the IPSAS adoption process began in 2009 under the World Bank’s Corporate and Public Sector Accountability Project (CAPSAP) with the Government of Azerbaijan that included a component dedicated to the adoption and implementation of accrual-based IPSAS.

    Current Status: Partially Adopted

  • Investigation and Discipline

    Under the Law on Audit of 1994 (Article 15), investigation and discipline (I&D) of auditors is performed by the Chamber of Auditors of Azerbaijan Republic (CAAR). Article 8 of the CAAR Regulations details the rules and procedures for I&D of auditors and the Ethics, Disputes, and Disciplinary Committee oversees CAAR’s I&D function.

    In 2014, CAAR conducted a self-assessment of its I&D system against SMO 6 requirements and identified gaps in (i) the range of sanctions; (ii) activities undertaken to ensure that the public is aware of the I&D system; and (iii) publicizing the results of I&D proceedings. As of 2020, the gaps persist.

    Additionally, since 2019, the amended Law of the Republic of Azerbaijan on Accounting introduced a requirement for certification of accountants and their mandatory membership in an accredited PAO for chief accountants of a number of specified entities. Accredited PAOs must have in place a system for investigating and disciplining their members. As of 2020, the requirements of the new law are being implemented and other requirements for I&D of this category of accountants remain to be established.

    Finally, other accountants may choose to join professional accountancy organizations and be subject to their regulation. No information is available on whether the organizations have established I&D processes and whether those are in line with the SMO 6 best practices.

    Current Status: Partially Adopted

  • International Financial Reporting Standards

    Preparation of financial statements in the Republic of Azerbaijan is regulated by the Law of the Republic of Azerbaijan on Accounting that entered into force in 2018.

    Under the law, public interest entities (PIEs) must apply IFRSs. Large entities must prepare their financial statements in accordance with IFRS for SMEs or may opt to apply full IFRS. Medium-sized entities must apply IFRS for SMEs. Small entities must maintain accounting records in accordance with the rules for micro and small businesses established by the relevant authority or may opt to apply IFRS for SMEs.

    The Ministry of Finance is responsible for the translation of IFRS and their enactment and has signed the related agreements with the IFRS Foundation. As of 2020, based on the information on the Ministry of Finance website, the 2018 version of IFRS has been translated and is mandatory for application.

    Current Status: Partially Adopted

Disclaimer

IFAC bears no responsibility for the information provided in the SMO Action Plans prepared by IFAC member organizations. Please see our full Disclaimer for additional information.

 

Methodology

Methodology
Last updated: 01/2021
We welcome feedback. Please email membership@ifac.org

 

Thank you for your interest in our publications. These valuable works are the product of substantial time, effort and resources, which you acknowledge by accepting the following terms of use. You may not reproduce, store, transmit in any form or by any means, with the exception of non-commercial use (e.g., professional and personal reference and research work), translate, modify or create derivative works or adaptations based on such publications, or any part thereof, without the prior written permission of IFAC.

Our reproduction and translation policies, as well as our online permission request and inquiry system, are accessible on the Permissions Information web page.

For additional information, please read our website Terms of Use. ALL RIGHTS RESERVED.

Agree