Croatia

Member Organizations

Member Organization Associate Other PAOs

  Croatian Audit Chamber

Legal and Regulatory Environment

  • Overview of Statuatory Framework for Accounting and Auditing

    The Companies Act regulates business activities in Croatia and sets basic financial reporting requirements for companies. This Act is complemented by the Accounting Act (as amended in 2018) which establishes requirements for mandatory contents of bookkeeping documents, bookkeeping procedures, and regulates the use of a unique Chart of Accounts. Under the Act, public interest entities (PIEs) are required to apply International Financial Reporting Standards (IFRS). The 2013 version of IFRS is being applied. PIEs include large entrepreneurs, listed companies, companies of specific national interest, credit institutions, insurance and reinsurance companies, pension funds, leasing companies, and investment funds, among others. The Financial Reporting Standards Board (FRSB) of the Ministry of Finance (MoF) reviews translations of IFRS for approval and adoption in Croatia. Other entities must apply national accounting standards issued by the FRSB.

    The Audit Act (amended in 2017), and the Accounting Act regulates auditing activities and establishes mandatory audit requirements for the following types of companies: (1) large; (2) medium-sized; (3) PIEs; (4) limited partnerships and limited liability companies that exceed certain thresholds in terms of their size and number of employees; and (5) statements of entrepreneurs included in mergers or divisions. Under the Audit Act, audits must be conducted in accordance with the 2016 International Standards of Auditing (ISA) as promulgated by the International Auditing and Assurance Standards Board. The overall responsibility of implementing and translating ISA lies with the Croatian Audit Chamber, under the oversight of the MoF.

  • Regulation of Accountancy Profession

    In the Republic of Croatia, only certified auditors are regulated. The Audit Act (amended in 2017) regulates auditing activities in Croatia. It sets out the conditions of access to the profession, the main powers and responsibilities of the Croatian Audit Chamber (CAC), and general audit requirements.

    Certified auditor candidates must meet the following requirements: (i) a university or post-graduate degree in accounting; (ii) five years of practical experience, of which three years must be conducting statutory audits under the supervision of a certified auditor; and (iii) fulfillment of audit examinations with passing scores. All certified auditors are required to become members of CAC.

    The amended Audit Act of 2017 resulted in a shift of certain regulatory responsibilities from the CAC to the Ministry of Finance (MoF). Effective January 1, 2018, the MoF became responsible for the following activities: (i) establishment of initial professional development (IPD) requirements for certified auditors; (ii) establishment of continuous professional development (CPD) requirements for certified auditors; (iii) issuance of licenses for certified auditors and audit firms; (iv) maintenance of the register of certified auditors and audit firms; (v) establishment of a QA review system for certified auditors and audit firms; (vi) establishment of an investigation and discipline system for certified auditors and audit firms; and (vii) oversight of CAC’s activities. The Audit Public Oversight Committee was abolished and the role of oversight over CAC’s activities was transferred to the MoF.

    Under the MoF’s oversight, CAC has the authority over the following activities: (i) conduct IPD training with respect to the audit examinations; (ii) conduct CPD courses for certified auditors; (iii) conduct the audit examinations; and (iv) translation of auditing standards and ethical requirements for certified auditors.

    The accounting profession in Croatia is not regulated, with a degree in accounting being the only requirement for providing bookkeeping and other accounting services. Although the Croatian Association of Accountants and Financial Experts unites accountants in the jurisdiction through voluntary membership of individual practitioners in its regional branches, it does not establish entry, educational, ethical, or other requirements for its members.

  • Audit Oversight Arrangements

    The oversight of the audit profession was initially undertaken by the Ministry of Finance, in accordance with the Audit Act. The Audit Act was amended in 2017 and the act abolished the APOC. The Ministry of Finance assumed the role for the oversight of the audit profession with responsibility for the following activities: (i) establishment of initial professional development requirements for certified auditors; (ii) establishment of continuous professional development requirements for certified auditors; (iii) issuance of licenses for certified auditors and audit firms; (iii) maintenance of the register of certified auditors and audit firms; (iv) establishment of a QA review system for certified auditors and audit firms; (v) establishment of an investigation and discipline system for certified auditors and audit firms; and (vi) oversight of Croatian Audit Chamber’s activities.

  • Professional Accountancy Organizations

    The Croatian Association of Accountants and Financial Experts (CAAFE)

    The CAAFE unifies Croatian accountants through voluntary membership of individual practitioners in its regional branches. It does not establish entry, educational, ethical, or other requirements for its members. A degree in accounting continues to be the only requirement for providing bookkeeping and other accounting services.

    The Croatian Audit Chamber (CAC)

    The CAC is the professional accountancy organization that unites all certified auditors in Croatia; membership in the PAO is mandatory. The Audit Act, as amended in 2017 regulates the functions of CAC under the oversight of the Ministry of Finance. According to the Audit Act, CAC’s responsibilities include the following: (i) conduct IPD training with respect to the audit examinations; (ii) conduct continuing professional development courses for certified auditors; (iii) conduct the audit examinations; and (iv) authority to translate auditing standards and ethical requirements for certified auditors.

    The CAC is a member of Accountancy Europe.

  • Projects or Other Information

Adoption of International Standards

  • Quality Assurance

    The Audit Act in Croatia sets provisions for the establishment and implementation of a mandatory quality assurance (QA) review system for all audits. The Act was amended in 2017 and effective January 1, 2018, the QA review system is under the purview of the Ministry of Finance (MoF).

    Prior to 2018, the Audit Act empowered the Croatian Audit Chamber (CAC), under the oversight of the Audit Public Oversight Committee, with responsibility for the establishment and implementation of a mandatory QA review system for all audits. According to the Act, audit firms carrying out audits of public interest entities are subject to a three-year review cycle. All other audit firms carrying out statutory audits are subject to a six-year review cycle.

    In line with this mandate, the CAC adopted a QA system in 2010 with the assistance of the Institute of Chartered Accountants in England and Wales through a twinning arrangement financed by the World Bank. As indicated by the CAC, the QA review system was established in accordance with the Audit Act, the CAC Statute, the Internal Act on Supervision and Quality Assurance Reviews, and the requirements of SMO 1 (revised 2012). All relevant ISA and ISQCs have been adopted as quality control standards.

    With the effective date of the amended Audit Act, CAC reports that the QA review system has transitioned to the MoF and is in the process of operationalization.

    The CAC assessed the MoF’s QA system against the requirements of SMO 1 and it aligns with a majority of the requirements.

    Current Status: Partially Adopted

  • International Education Standards

    Only auditors in Croatia are subject to professional education requirements. For other segments of the profession, a degree in accounting is the only requirement for providing bookkeeping and other accounting services.

    Under the Audit Act (amended in 2017), the Ministry of Finance (MoF) is responsible for establishing initial professional development requirements (IPD) for certified auditors and for continuous professional development (CPD) requirements for certified auditors. The Croatian Audit Chamber (CAC), subject to MoF oversight, is empowered to conduct CPD trainings and to provide IPD training courses for candidates preparing to take the audit examinations administered by the MoF. The CAC is also given the authority to conduct audit examinations.

    Under the new Audit Act, CAC reports that the revised IES 1–7 have been adopted while CAC is in the process of adopting IES 8 for its members.

    Current Status: Partially Adopted

  • International Standards on Auditing

    The Audit Act (amended in 2017) and the Accounting Act regulate auditing activities and establish mandatory audit requirements for the following types of companies: (1) large; (2) medium-sized; (3) PIEs; (4) limited partnerships and limited liability companies that exceed certain thresholds in terms of their size and number of employees; and (5) statements of entrepreneurs included in mergers or divisions. Under the Audit Act, audits must be conducted in accordance with ISA as promulgated by the IAASB. The responsibility of translating ISA lies with the Croatian Audit Chamber (CAC), under the oversight of the Ministry of Finance.

    The CAC has established processes to incorporate new and revised ISA on an ongoing basis. In 2018, CAC completed the translation of the 20162017 Handbook of International Standards on Auditing and Quality Control, which is the currently effective standard being applied in Croatia.

    Current Status: Partially Adopted

  • Code of Ethics for Professional Accountants

    Under the Audit Act, all auditors in Croatia are required to abide by the IESBA Code of Ethics as translated by the Croatian Audit Chamber (CAC). In line with this mandate, the CAC adopted and translated the 2010 edition of the IESBA Code of Ethics into Croatian, which is publicly available on the CAC’s website. In 2018, CAC completed the translation of the 2016 IESBA Code of Ethics and its amendments regarding the long association with audit client and the client's non-compliance with laws and regulations. No plans have been indicated to review the 2018 International Code of Ethics for adoption.

    Current Status: Partially Adopted

  • International Public Sector Accounting Standards

    The Ministry of Finance is responsible for setting public sector accounting standards and has not adopted IPSAS. No plans on the adoption of IPSAS had been announced as of June 2019.

    Current Status: Not Adopted

  • Investigation and Discipline

    The Audit Act in Croatia (amended in 2017) sets provisions for the establishment and implementation of a mandatory investigation and discipline (I&D) system for all certified auditors and audit firms. Previously, the Audit Act empowered the Croatian Audit Chamber (CAC) to implement the I&D system for the profession. The Act was amended in 2017 and effective January 1, 2018, the I&D system is under the purview of the Ministry of Finance. The CAC assessed the current I&D system of the MoF and reports that it aligns with a majority of SMO 6 requirements except that the composition of the various committees do not include professional accountants or non-accountants.

    In accordance with the amended Audit Act, the CAC has established a Court of Honor to serve as its I&D system for its members. The CAC assessed its system and reports that it aligns with the majority of SMO 6 requirements, except that while the Court of Honor is an independent entity, both the investigative and disciplinary committees are one and the same and does not include non-auditors amongst its composition.

    Current Status: Partially Adopted

  • International Financial Reporting Standards

    Under the Accounting Act, public interest entities (PIEs) are required to apply IFRS when preparing their financial statements. The 2015 amendments to the Accounting Act introduced a new definition of PIEs, which now include large entrepreneurs, listed companies, companies of specific national interest, credit institutions, insurance and reinsurance companies, pension funds, leasing companies, and investment funds, among others. The Financial Reporting Standards Board (FRSB) of the Ministry of Finance reviews translations of IFRS for approval and adoption in Croatia. The 2013 version of IFRS is being applied.

    Other companies must apply national accounting standards issued by the FRSB. IFRS for SMEs have not been adopted.

    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: 08/2019
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