Georgia

Member Organizations

Member Organization Associate Other PAOs

  Georgian Federation of Professional Accountants and Auditors

Legal and Regulatory Environment

  • Overview of Statuatory Framework for Accounting and Auditing

    The main legislation establishing corporate financial reporting requirements in Georgia includes the Law of the Republic of Georgia on Entrepreneurs of October 28, 1994 and the Law on Accounting, Auditing and Reporting No. 5386 of 2016. The Law on Entrepreneurs sets the basic financial reporting framework for all commercial entities in Georgia, while the Law on Accounting, Reporting and Auditing establishes the detailed accounting and auditing requirements.

    The Law on Accounting, Reporting, and Auditing differentiates between four categories of reporting entities based on their size (total assets, revenues, and number of employees) and also defines public-interest entities (PIEs), which include listed entities, banks, micro-finance institutions, credit unions, investment funds, insurance companies, among other types of entities.

    PIEs and large enterprises (first category) are required to apply IFRS as issued by the IASB and translated by the Service for Accounting, Reporting and Auditing Supervision (SARAS) under the Ministry of Finance within 6 months from their issuance. Application of the English version of IFRS is permitted. Small and Medium-sized entities (second and the third categories) may apply either IFRS for SMEs or full IFRS. Micro entities (fourth category) and non-entrepreneurial (non-profit) legal entities are permitted to apply IFRS, IFRS for SMEs or the standard set by the SARAS.

    The Law on Accounting, Reporting and Auditing also establishes mandatory audit requirements for PIEs and enterprises in the first and second categories. The third and fourth categories of enterprises and non-entrepreneurial (non-profit) legal entities are exempt from the obligation to have audit of financial statements, unless provided otherwise in the legislation. All statutory audits must be conducted in accordance with ISA as issued by the IAASB and translated by SARAS within 6 months from their issuance. Application of the English version of ISA is permitted.

  • Regulation of Accountancy Profession

    The Law on Accounting, Auditing and Reporting No. 5386 (Law No. 5386) restricts the exercise of the accountancy profession to individuals and entities that meet professional certification and continuous education requirements established by the law and further detailed by the Service for Accounting, Reporting and Auditing Supervision (SARAS) under the Ministry of Finance.

    Certified Accountants

    The law recognizes the qualification of a Certified Accountant, who is defined as an individual certified by a professional organization in accordance with the Professional Certification Standard set by SARAS or is recognized as such under the Law No. 5386, and who can prove their qualification after certification in accordance with the Continuous Education Standard. Certified accountants must be members of one of the professional organizations.

    The Professional Certification Standard defines the subjects for professional certification, the rules for carrying out the exam process, the rules for exemption from exams and tests, the documents to be submitted for professional certification and the rule on certificate issuance. Professional certification is conducted by professional organizations whose certification programs or/ and examination procedures meet the standards set by SARAS and which are recognized in accordance with the SARAS Order on Approving Procedure for Recognition of Certification Programs and Examination Process, 2017.

    According to the SARAS website, as of 2019, SARAS recognized certification programs of three professional organizations: the Georgian Federation of Professional Accountants and Auditors (GFPAA), the Georgian Federation of Auditors, Accountants and Financial Managers (GFAAFM), the Georgian Association of Independent Accountants and Auditors (GAIAA). Only GFPAA is authorized to conduct examinations.

    The Continuous Education Standard defines continuous education programs and the continuous education procedures and authorizes recognized professional organizations to implement and monitor continuous education. According to the SARAS website, as of 2019, GFPAA and GFAAFM are authorized to conduct CPD.

    Auditors

    In order to provide auditing services, certified accountants and audit firms must be registered with SARAS. Auditors must satisfy the following requirements: (i) be a certified accountant; (ii) have at least three years of supervised practical experience; (iii) be a member of professional organization; and (iv) comply with the IESBA Code of Ethics as evidenced by the professional organization or the auditor attesting to the practical experience. SARAS is also entitled to register an individual, who is a full member of a professional organization that is a member of IFAC from the OECD and EU member states, provided they passed a qualification test in Georgian Law.

    Other

    Accountancy professionals other than certified accountants may choose to join a professional organization, which establish internal rules and procedures for regulating their members.

    Regulatory Bodies

    With the adoption of the new Law on Accounting, Auditing and Reporting No. 5386 (Law No. 5386) in 2016, certified accountants are now regulated by the SARAS, with certain functions delegated to recognized professional organizations.

    SARAS is responsible for: (i) promulgation of standards, including their translation into Georgian, such as IFRS, IFRS for SMEs, ISA, IESBA Code of Ethics, and defining financial reporting standards for micro and not profit entities; (ii) defining rules and requirements for auditing; (iii) defining rules for audit quality control system and its monitoring; (iv) monitoring quality control system of auditors/ audit firms registered in the auditors’ registry; (v) defining requirements for professional certification, examination procedures, and continuous education of certified accountants in accordance with IES, EU Directives and approving respective standards; (vi) setting rules for recognition of certification programs, examination procedures and continuous education programs and their recognition; (vii) overseeing professional organizations, examination bodies and other persons engaged in professional educational activities; (viii) maintaining the registries of auditors and audit firms, recognized training and continuous education programs, specialized examination bodies, persons in charge of quality control system monitoring, among others; and (ix) investigation and discipline of auditors and audit firms, among other functions.

    Professional organizations are involved in: (i) the certification and continuing professional education of their members; (ii) administering qualification exams when recognized as specialized examination bodies; and (iii) investigating and disciplining their individual members, except for audit firms, in accordance with the procedures developed in agreement with SARAS.

    Professional organizations of accountants or/and auditors must be established according to the Georgian legislation, be registered as a non-entrepreneurial (non-profit) legal entities, and act in compliance with applicable laws and regulations. They are also required to establish internal policies, systems and procedures for meeting SARAS requirements for professional certification and continuous education and ensuring compliance of its members with the Code of Ethics of the International Ethics Standards Board of Accountants' (IESBA), as well as the requirements for the quality control.

  • Audit Oversight Arrangements

    The Law on Accounting, Auditing and Reporting No. 5386 adopted in June 2016 established the Service for Accounting, Reporting and Auditing Supervision (SARAS) under the Ministry of Finance as the authority responsible for audit oversight.

    The responsibilities of the SARAS include: (i) promulgation of international standards, including their translation into Georgian, such as IFRS, IFRS for SMEs, ISA, and IESBA Code of Ethics; (ii) defining rules and requirements for auditing; (iii) defining rules for audit quality control system and its monitoring; (iv) monitoring quality control systems of auditors and audit firms registered in the auditors’ registry; (v) defining requirements for professional certification, examination procedures and continuous education in accordance with IES, EU Directives and approving respective standards; (vi) setting rules for recognition of certification programs, examination procedures and continuous education programs and their recognition; (vii) overseeing professional organizations, examination bodies and other persons engaged in professional educational activities with the law; (viii) maintaining the registry of auditors and audit firms, recognized training and continuous education programs, specialized examination bodies; and (ix) investigation and discipline of auditors and audit firms, among other functions.

  • Professional Accountancy Organizations

    The Georgian Association of Independent Accountants and Auditors (GAIAA)

    The GAIAA is a non-governmental, professional association established in 1999 and, according to its website, is comprised of more than 2,000 accountants and auditors throughout Georgia working in all fields of the economy including in the public and non-governmental sector. The GAIAA protects the interests of its members; provides training and continuing educational programs for accountants; adopts quality control standards and ensures their implementation through a quality assurance review system for its members who provide auditing services. Since 2006, GAIAA has been a full member of the Eurasian Council of Certified Accountants and Auditors and offers a professional certification program for accountants (CAP/CIPA).

    The Georgian Federation of Auditors, Accountants and Financial Managers (GFAAFM)

    The GFAAFM, established in 2011, unites small and medium audit practices, bookkeepers, accountants and tax advisors, who join the organization on a voluntary basis. It is the successor body of the Audit Council of the Parliament in Georgia, which before 2005 had been authorized to license statutory auditors. The GFAAFM delivers trainings in various areas including tax, internal audit and financial management. It is a full member of the European Federation of Accountants and Auditors for SMEs.

    The Georgian Federation of Professional Accountants and Auditors (GFPAA)

    The GFPAA is a non-governmental, non-for-profit PAO in Georgia. Prior to 2016, it was the only accredited professional organization authorized to regulate auditors. The GFPAA membership is mostly comprised of audit firms, auditors employed by audit firms, sole practitioners, and consultants. The GFPAA offers a certification program under the local accountancy qualification, based on the UK Association of Chartered Certified Accountants (ACCA) qualification curricula translated into the Georgian language. The GFPAA has been an IFAC member since 2000.

  • Projects or Other Information

    The Government of Georgia signed an Association Agreement with the European Union (EU) in June 2014. Accordingly, Georgian legislation is now being brought in line with the EU acquis communautaire and the EU Directives and Regulations in the area of accounting and auditing.

    In 2015, the World Bank published the results of its assessment of the accounting and auditing environment in the Republic of Georgia. Although the Government of Georgia was overall commended for its commitment to improving the corporate financial reporting framework, it was noted that the focus now should be on developing the capacity to fully implement and enforce the changed structural framework, and raising the professional level and capacity of accountants, auditors, and regulators. As far as the accountancy profession is concerned, the World Bank pointed out to the need to: (i) strengthen accounting academic curricula in line with IES and align university programs with professional educational programs; (ii) enhance continuing professional education and training to bring it in line with IES; (iii) work to enhance professional knowledge of the accountancy professionals regarding international standards; (iv) improve professional development training for professional auditors and develop an ISA compliant standard audit methodology; and (v) introduce a system of public oversight of the audit profession, among other recommendations.

    In 2016, in line with the recommendations of the World Bank and in a move to align the corporate financial reporting requirements in the jurisdiction with those of the EU, a new Law on Accounting, Auditing and Reporting No. 5386 of June 8, 2016 was adopted. The new law established the Service for Accounting, Reporting and Auditing Supervision (SARAS) with the authority to regulate the auditing profession, the responsibility previously carried out by the accredited professional organizations.

Adoption of International Standards

  • Quality Assurance

    The Law on Accounting, Auditing and Reporting No. 5386 adopted in June 2016 requires an auditor/audit firm to establish quality control policy and procedures in accordance with the International Standards on Quality Control adopted and translated by the Service for Accounting, Reporting and Auditing Supervision (SARAS) under the Ministry of Finance within six months from the day of its issuance.

    SARAS is responsible for the establishment and implementation of a quality assurance (QA) review system. Reviews are conducted every three years for public-interest entities and every six years for other types of companies.

    According to the assessment conducted in 2019 by the Georgian Federation of Professional Accountants and Auditors, an IFAC member, the QA system in the jurisdiction complies with the requirements of SMO 1, with the exception of assessment and documentation of the QA team.

    Current Status: Partially Adopted

  • International Education Standards

    The Law on Accounting, Auditing and Reporting No. 5386 adopted in June 2016 restricts the exercise of the profession to individuals and entities that meet initial and continuing professional development (IPD & CPD) requirements established by the law and further detailed by the Service for Accounting, Reporting and Auditing Supervision (SARAS) under the Ministry of Finance.

    Under the Law, IPD & CPD requirements must be in line with IES as well as the EU requirements. 2015 IES were translated into Georgian in 2018.

    The law recognizes the qualification of a Certified Accountant, who is defined as an individual certified by a professional organization in accordance with the Professional Certification Standard set by SARAS or is recognized as such under the Law No. No. 5386, and who can prove their qualification after certification in accordance with the Continuous Education Standard.

    Universities, specialized examination bodies, and professional organizations implement the requirements set in law. Professional organizations, recognized as such by SARAS, are responsible for administering certification, continuing professional education of their members, and qualification exams when accredited as specialized examination bodies by SARAS.

    According to the SARAS website, as of 2019, SARAS recognized certification programs of three professional organizations: the Georgian Federation of Professional Accountants and Auditors (GFPAA), the Georgian Federation of Auditors, Accountants and Financial Managers (GFAAFM), the Georgian Association of Independent Accountants and Auditors (GAIAA). Only GFPAA is authorized to conduct examinations, and GFPAA and GFAAFM are authorized to conduct CPD.

    Although substantial progress has been made in bringing accountancy education in the country in line with the international standards by legally mandating compliance of educational programming with the IESs, according to the World Bank (2015), there is a need to: (i) strengthen accounting academic curricula in line with IES and align university programs with professional educational programs; (ii) enhance continuing professional education and training to bring it fully in line with IES; and (iii) enhance professional knowledge of the accountancy professionals regarding international standards by introducing enhanced training and CPD programming.

    In this regard, the GFPAA, an IFAC member, reports that accounting academic programs of universities are in line with IES at the fundamental level, with full compliance of all programs with IES to be achieved in 2022 as prescribed by SARAS. As of 2019, CPD programming fully complies with the IES requirements and the Continuous Education Standard.

    Current Status: Adopted

  • International Standards on Auditing

    In accordance with the Law on Accounting, Auditing and Reporting No. 5386 adopted in June 2016, all audits must be carried out in accordance with ISA as issued by the IAASB and translated by the Service for Accounting, Reporting and Auditing Supervision (SARAS) under the Ministry of Finance within 6 months from their issuance. Application of the English version of ISA is permitted. Other pronouncements issued by the IAASB such as International Standards on Review Engagements (ISRE), International Standards on Assurance Engagements (ISAE), International Standards on Related Services (ISRS), and International Standards on Quality Control (ISQC 1) are also adopted by the SARAS.

    According to the website of SARAS, as of 2019, the translated 2018 IAASB Handbook was adopted effective October 2018 by the SARAS Decree n-15.

    Current Status: Adopted

  • Code of Ethics for Professional Accountants

    The Law on Accounting, Auditing and Reporting No. 5386 adopted in June 2016 requires all certified accountants, the only segment of the profession regulated at the state level, to abide by the Code of Ethics for Professional Accountants issued by the IESBA. In addition, professional organizations of accountants or/and auditors must ensure compliance of all their members with the Code.

    The responsibility for translating the IESBA Code under the law is vested with the Service for Accounting, Reporting and Auditing Supervision (SARAS) under the Ministry of Finance, which is responsible for ensuring its availability in the official language of Georgia within six months following any update. Application of the English version of the IESBA Code is permitted.

    The 2018 International Code of Ethics for Professional Accountants in Georgian language was adopted in October 2019 by the SARAS Decree n-15.

    Current Status: Adopted

  • International Public Sector Accounting Standards

    The Ministry of Finance is responsible for adopting public sector accounting standards in the Republic of Georgia. The International Public Sector Accounting Standards (IPSAS) have not been adopted in the country and public sector accounting is based on the former Soviet accounting system. The Ministry of Finance, however, announced a plan to adopt IPSAS in a phased approach by 2020. The status of implementation of the reforms is not known at the time of writing of this report.

    Current Status: Not Adopted

  • Investigation and Discipline

    Under the Law on Accounting, Auditing and Reporting No. 5386 adopted in June 2016, the responsibility for the investigation and discipline of professional accountants is shared between the Service for Accounting, Reporting and Auditing Supervision (SARAS) under the Ministry of Finance and professional organizations.

    SARAS bears the responsibility for the development of an overall investigative and disciplinary (I&D) system for certified accountants, the only segment of the profession regulated at the state level. Certified accountants must be members of one of the recognized professional organizations, which are responsible for detecting violations and imposition of disciplinary actions on their members and setting the respective rules and regulations that are to be approved by SARAS.

    According to the assessment conducted in 2019 by the Georgian Federation of Professional Accountants and Auditors, an IFAC member, the I&D system in the jurisdiction partially complies with the requirements of SMO 6. Areas where further improvements are needed include establishment of a process for the independent review of complaints on which there was no follow-up; defining a process for liaison with outside bodies on possible involvement in serious crimes and offences; and a regular review of implementation and effectiveness of the system and implementation of corrective actions.

    Current Status: Partially Adopted

  • International Financial Reporting Standards

    The Law on Accounting, Auditing and Reporting No. 5386 of 2016 differentiates between four categories of reporting entities in Georgia based on their size (total assets, revenues, and number of employees) and also defines public-interest entities (PIEs), which include listed entities, banks, micro-finance institutions, credit unions, investment funds, insurance companies, among other types of entities.

    PIEs and large enterprises (first category) are required to apply IFRS as issued by the IASB and translated by the Service for Accounting, Reporting and Auditing Supervision (SARAS) under the Ministry of Finance within 6 months from their issuance. Application of the English version of IFRS is permitted. Small and Medium-sized entities (second and the third categories) may apply either IFRS for SMEs or full IFRS. Micro entities (fourth category) and non-entrepreneurial (non-profit) legal entities are permitted to apply IFRS, IFRS for SMEs or the standard set by the SARAS.

    As of December 2019, the 2019 IFRS and 2015 IFRS for SMEs as translated into Georgian are being applied.

    Current Status: Adopted

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Methodology

Methodology
Last updated: 12/2019
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