Bulgaria

Member Organizations

Member Organization Associate Other PAOs

  Institute of Certified Public Accountants of Bulgaria

Legal and Regulatory Environment

  • Overview of Statuatory Framework for Accounting and Auditing

    As a member of the European Union (EU), the financial reporting requirements for commercial entities and financial institutions in Bulgaria are stipulated in EU Directives and Regulations, which are then transposed into Bulgarian national laws. The main applicable national laws are the Accountancy Act of 2015 and the Independent Financial Audit Act of 2016.

    As of January 1, 2017, all public interest entities are required to apply the IFRS as adopted by the EU. Public interest entities, regardless of their size, are (i) issuers of securities on a regulated market in an EU Member State; (ii) credit institutions; (iii) insurance companies; (iv) pension companies and funds managed by them; (v) state and national railways; and (vi) companies providing water and sewage services as a major activity.

    All other entities are required to apply the National Accounting Standards set by the Ministry of Finance. Entities that were applying IFRS before and that are not public interest entities in 2017 may choose to start applying the National Accounting Standards. IFRS for SME has not been adopted and there are no immediate plans to adopt the standard for application in Bulgaria.

    In terms of auditing requirements, the thresholds for statutory audit have increased as per the Accountancy Act of 2015. According to the Act, subject to audit are the financial statements of (i) small entities that exceed at least two of the following—total assets are equivalent to 2 million BGN, total revenue equivalent to 4 million BGN, and an average number of employees of 50; (ii) medium and large entities and PIEs; (iii) medium and large groups, and groups which include PIE; (iv) joint-stock companies and limited partnerships with shares, except for the cases when companies had not conducted any activities throughout the year; and (v) consolidated financial statements and the financial statements of the entities included in the consolidation.

    Article 9 of the Independent Financial Audit Act of 2016 requires audits to be conducted in accordance with ISA, ISQC 1, and other pronouncements issued by the IAASB.

  • Regulation of Accountancy Profession

    The accountancy profession in Bulgaria is regulated by the Institute of Certified Public Accountants in Bulgaria (ICPAB) under the oversight of the Commission for Public Oversight of Statutory Auditors (CPOSA) under the Independent Financial Audit Act of 2016.

    Only the qualifications of certified public accountants and registered auditors are protected under law. Registered auditors are required to be members of ICPAB.

    The Independent Financial Audit Act of 2016 establishes the requirements for initial professional development and continuing professional education for certified public accountants and registered auditors. Specifically, it establishes mandatory university education, the types of subjects, and a range of years of experience depending on the type of university degree that must be achieved in order to enter the certified public accountant education program and qualify for the certification exam.

    In order to become registered auditors, individuals must first become certified public accountants with at least a bachelor’s degree and two years’ professional audit experience, successfully pass ICPAB’s certification examinations and be a member of ICPAB.

    The Independent Financial Audit Act of 2016 establishes relevant criteria for third country auditors and audit entities registration in the register of auditor’s and engagement with ICPAB. ICPAB’s By-Laws also state that certified public accountants who are not registered auditors can be members of ICPAB.

    All certified public accountants can acquire the right to become auditors after completing three years of practical training in the audit field and being registered in the registered auditor registry which is organized and maintained by ICPAB.

    CPOSA is a five-member body (Chairman and four other members), with membership in the Independent Forum of Independent Audit Regulators. It is supported by an administrative function and its main oversight responsibilities include: (i) acquisition and revocation (where necessary) of the right to practice as a registered auditor, and registration of registered auditors including third country auditors; (ii) oversight of ICPAB to which it delegates some of its oversight duties subject to appropriate supervision and approval mechanisms; (iii) review of adoption and compliance with standards of professional ethics, internal control quality in audit entities and during the performance of audits; (iv) approval of the rules and procedures for quality assurance reviews; and (v) operation of a system of investigation and discipline for registered auditors.

    As part of the oversight arrangements set in law, ICPAB is responsible for maintenance and publication of the register of registered auditors and conduct of the quality assurance review of audits of non-public interest entities. ICPAB has good working relationships with other regulatory bodies, for example, the Central Bank and the Financial Services Commission.

    The main functions and responsibilities of ICPAB under the Act include, but are not limited to: (i) maintaining and publishing the register of registered auditors and certified public accountants; (ii) organizing certification exams in accordance with CPOSA’s requirements; (iii) organizing a quality assurance system for its members and conducting reviews based on directives from CPOSA; (iv) monitoring compliance with relevant ethics requirements; (v) liaising with authorities on activities that support adoption of international standards and best practices in accounting and auditing, including providing comments on draft laws and regulations; (vi) supporting its members through delivery of training and dissemination of materials for certification exams and for continuing professional development, and adoption and implementation of professional guidance; and (vii) conducting research in audit, accountancy, financial analysis and other areas.

  • Audit Oversight Arrangements

    The Commission for Public Oversight of Statutory Auditors carries out independent public oversight of the audit profession in Bulgaria according to the Independent Financial Audit Act of 2016.

    Oversight arrangements extend to both registered auditors and Institute of Certified Public Accountants in Bulgaria (ICPAB). The five-member body (Chairman and four other members), with membership in the Independent Forum of Independent Audit Regulators, is supported by an administrative function and its main oversight responsibilities include: (i) acquisition and revocation (where necessary) of the right to practice as a registered auditor, and registration of registered auditors including third country auditors; (ii) oversight of ICPAB to which it delegates some of its oversight duties subject to appropriate supervision and approval mechanisms; (iii) review of adoption and compliance with standards of professional ethics, internal control quality in audit entities and during the performance of audits; (iv) approval of the rules and procedures for quality assurance reviews; and (v) operation of a system of investigation and discipline for registered auditors.

  • Professional Accountancy Organizations

    The Institute of Certified Public Accountants in Bulgaria (ICPAB)

    The ICPAB is the only professional accountancy organization in Bulgaria, and the Accountancy Act of 2015 is what led to the establishment of the institute. Membership in ICPAB is mandatory for registered auditors.

    The main functions and responsibilities of ICPAB under the Independent Financial Audit Act of 2016 include, but are not limited to: (i) maintaining and publishing the register of registered auditors and certified public accountants; (ii) organizing certification exams in accordance with the Commission for Public Oversight of Statutory Auditors’ (CPOSA) requirements; (iii) organizing a quality assurance system for its members and conducting reviews based on directives from CPOSA; (iv) monitoring compliance with relevant ethics requirements; (v) liaising with authorities on activities that support adoption of international standards and best practices in accounting and auditing, including providing comments on draft laws and regulations; (vi) supporting its members through delivery of training and dissemination of materials for certification exams and for continuing professional development, and adoption and implementation of professional guidance; and (vii) conducting research in audit, accountancy, financial analysis and other areas.

    ICPAB is also a member of Accountancy Europe.

  • Projects or Other Information

    Significant changes in the regulatory framework for the accountancy profession occurred in 2015 and 2016 to address new requirements in EU legislation. First, a new Accountancy Act was adopted by the National Assembly on 24 November 2015 and promulgated in the State Gazette on 1 December 2015.to introduce a number of changes in accounting legislation. This Act repealed the Accountancy Act of 2001.A new Independent Financial Audit Act was adopted by the National Assembly on 15 November 2016 and promulgated in the State Gazette on 22 November 2016 and introduced substantial changes in relation to the audit of public interest entities. It repealed the Independent Financial Audit Act of 2001.

Adoption of International Standards

  • Quality Assurance

    According to Chapter 9 of the Independent Financial Audit Act of 2016, all registered auditors (national and third country) and audit firms are subject to a mandatory system of quality assurance (QA) reviews. The Commission for Public Oversight of Statutory Auditors (CPOSA) has legal mandate, clearly outlined in the Independent Financial Audit Act of 2016 for implementation of the QA review mechanisms through its rules, regulations, and activities. CPOSA’s system of quality assurance, initially developed by the Institute of Certified Public Accountants in Bulgaria (ICPAB), distinguishes between the audit of public interest entities (PIEs) and non-PIEs with respect to frequency of reviews and whether the reviews are conducted by CPOSA or ICPAB. PIEs are expected to undergo reviews of their internal control procedures and practices once every three years by CPOSA inspectors, whereas controllers of ICPAB conduct quality assurance reviews of auditors of non-PIEs at least once in six years.

    ISQC 1 is the adopted quality control standard.

    According to the self-assessment conducted by ICPAB, the existing QA review system incorporates the main requirements of SMO 1.

    Current Status: Adopted

  • International Education Standards

    The Independent Financial Audit Act of 2016 outlines the requirements for initial professional development (IPD) and continuing professional education (CPD) for certified public accountants and registered auditors. Specifically, it establishes mandatory university education, the types of subjects, and a range of years of experience depending on the type of university degree that must be achieved in order to enter the certified public accountant education program and qualify for the certification exam. Responsibility for conducting IPD is shared between Bulgarian universities (IES 1), as stipulated in the High Education Act, and the Institute of Certified Public Accountants in Bulgaria (ICPAB) (IES 2–6).

    Certification examinations are organized and held by the ICPAB subject to oversight arrangements by the Commission for Public Oversight of Statutory Auditors (CPOSA). CPOSA also oversees ICPAB in organizing and conducting CPD for certified public accountant candidates and registered auditors as per the Independent Financial Audit Act of 2016.

    Overall, while some of the requirements of IES appear to be in place, the extent of alignment needs to be established.

    Current Status: Partially Adopted

  • International Standards on Auditing

    According to Article 9 of the Independent Financial Audit Act of 2016, audits must be conducted in accordance with ISA, ISQC 1, and other pronouncements as issued by the IAASB.

    The Institute of Certified Public Accountants in Bulgaria (ICPAB) reports to have established an ongoing process to translate ISA on an annual basis. As of the date of the assessment, the 2016–2017 version of the standards are in use and made publicly available via ICPAB’s website.

    Current Status: Adopted

  • Code of Ethics for Professional Accountants

    Article 10 of the Independent Financial Audit Act of 2016, requires application of the IESBA Code of Ethics for auditors as issued by IESBA and adopted by the Institute of Certified Public Accountants in Bulgaria (ICPAB). Furthermore, ICPAB requires its members, who comprise in addition to registered auditors other accountancy professionals, to comply with the IESBA Code of Ethics.

    ICPAB reports to have established an ongoing process for reviewing new and revised pronouncements of the IESBA. As of the date of the assessment, the 2016 version of the IESBA Code of Ethics for Professional Accountants has been adopted for all professional accountants in the jurisdiction.

    Current Status: Adopted

  • International Public Sector Accounting Standards

    The Ministry of Finance is responsible for establishing public sector accounting standards and has adopted modified cash-basis accounting standards for application in the public sector. There are no verifiable plans to adopt IPSAS at this time.

    Current Status: Not Adopted

  • Investigation and Discipline

    The Commission for Public Oversight of Statutory Auditors (CPOSA) is required under the Independent Financial Audit Act of 2016 to have a system of investigation and discipline in place for registered auditors. The law envisaged a collaborative approach in this regard between CPOSA and the Institute of Certified Public Accountants in Bulgaria (ICPAB).

    CPOSA’s I&D process of the conduct of statutory auditors adopts both a complaints and information-based approach for initiating proceedings. Based on CPOSA’s annual report on its activities, identified features of the system include: (i) an investigation by staff of CPOSA; (ii) communication of findings to investigated individual or entity; (iii) application of sanctions ranging from increased quality control inspections to revocation of the right to conduct audits for a specified period; and (iv) an appeals process, which allows for suspension of I&D enforcement of activities. Although CPOSA’s existing I&D system appears to incorporate the main requirements of SMO 6, the extent of alignment needs to be established.

    ICPAB also established an I&D system for its members. Its disciplinary committee investigates members’ violations of the institute’s bylaws in performing their activities. Disciplinary sanctions are outlined in Article 41 of the Independent Financial Audit Act of 2016, and chapter seven of ICPAB’s By-laws. ICPAB’s I&D system, which forms part of the functions of the public oversight, incorporates most of the requirements of the revised SMO 6. As of the date of the assessment, the only missing requirement pertains to the composition of the disciplinary committee since it only includes professional accountants.

    Current Status: Partially Adopted

  • International Financial Reporting Standards

    The Accountancy Act of 2015 stipulates the accounting standards that are applicable in Bulgaria, and prescribes application of IFRS as endorsed in the European Union (EU) and published in the EU Official Journal.

    As of January 1, 2017, all public interest entities are required to apply the IFRS as adopted by the EU. Public interest entities, regardless of their size, are (i) issuers of securities on a regulated market in an EU Member State; (ii) credit institutions; (iii) insurance companies; (iv) pension companies and funds managed by them; (v) state and national railways; and (vi) companies providing water and sewage services as a major activity.

    All other entities are required to apply the National Accounting Standards set by the Ministry of Finance. Entities that were applying IFRS before and that are not public interest entities in 2017 may choose to start applying the National Accounting Standards. IFRS for SME has not been adopted and there are no immediate plans to adopt the standard for application in Bulgaria.

    Current Status: 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: 12/2017
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