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, Reporting and Auditing 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 latter Law 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 enterprises of the first categories are required to apply IFRS as issued by the IASB and translated by the Public Oversight Authority (POA) at the Ministry of Finance within 6 months from their issuance. Application of the English version of IFRS is permitted. Enterprises of the second and the third categories may apply either IFRS for SMEs or full IFRS. Enterprises of the fourth category and non-entrepreneurial (non-profit) legal entities are permitted to apply IFRS, IFRS for SMEs or the standards set by the POA.

    The Law on Accounting, Reporting and Auditing of 2016 establishes mandatory audit requirements for PIEs and first and second categories enterprises. 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 the POA within 6 months from their issuance. Application of the English version of ISA is permitted.

  • Regulation of Accountancy Profession

    In June 2016, a new Law on Accounting, Auditing and Reporting No. 5386 was adopted that established the Public Oversight Authority (POA) at the Ministry of Finance as the authority responsible for the regulation of the profession, which was formerly carried out by the accredited professional organizations (APOs). The POA was established in September 2016 and is expected to become fully operational in January 2017.

    As of November 2016, the POA is in the process of taking over many of the function of APOs as its mandate includes (i) promulgation of international standards, including their translation into Georgian, such as IFRS, IFRS for SMEs, ISA and defining financial reporting standards for the fourth category enterprises and non-entrepreneurial (non-profit) legal 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 professional 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 with the law; (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.

    Prior to 2016, the accounting and auditing profession in the Republic of Georgia was largely self-regulated by the APOs under the Law on Accounting and Financial Audit of 2012. De facto, only the Georgian Federation of Professional Accountants and Auditors was accredited as an APO.

    According to the new Law, professional organizations have now limited role and authority in the regulation of the profession. The law no longer refers to APOs. Instead, it introduced the concept of professional organizations that are defined as professional organizations of accountants or/and auditors, established according to the Georgian legislation, registered as a non-entrepreneurial (non-profit) legal entities, and acting in compliance with the Law and the by-laws adopted on its basis. The responsibilities of the professional organizations include (i) providing certification and continuing professional education of their members; (ii) providing support to their members with the implementation of standards such as IFRS, IFRS for SMEs, IESBA Code, quality control through trainings; (iii) administering qualification exams when recognized as specialized examination bodies; and (iv) investigating and disciplining their individual members, but not the audit firms, in accordance with the procedures developed in agreement with the POA.

    The Law recognizes the qualification of Certified Accountant, who is defined as an individual who is certified by a professional organization of accountants or/and auditors in accordance with professional certification standards set by the POA or is recognized as such under the Law No. No. 5386, and who can prove his/her qualification after certification in accordance with the continuous education standard. Certified accountants must be members of one of the professional organization of auditors and/or accountants.

    In order to provide auditing services, certified accountants and audit firms must be registered with the POA provided they 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. The PAO 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 she/he passed a qualification test in Georgian Law.

    Accountancy professionals other than certified accountants are regulated through their voluntary membership in professional accountancy organizations, which establish internal rules and procedures for regulating their members.

  • Audit Oversight Arrangements

    The Law on Accounting, Auditing and Reporting No. 5386 adopted in June 2016 established the Public Oversight Authority (POA) at the Ministry of Finance as the authority responsible for audit oversight. The POA is expected to become fully operational in January 2017.

    The responsibilities of the POA include (i) promulgation of international standards, including their translation into Georgian, such as IFRS, IFRS for SMEs, ISA; (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)

    GAIAA is a non-governmental, professional association with voluntary membership established in 1999 and, according to its website, comprised of more than 2000 accountants and auditors throughout Georgia. GAIAA membership includes accountants and auditors 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 the Professional Certification Program for Accountants.

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

    The GFAAFM 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 is actively involved in developing accounting and auditing regulations; supporting accounting and auditing reforms; promoting the interests of the profession; and developing certification standards. 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 must now be brought in line with the EU acquis communautaire. This would significantly impact relevant Georgian legislation, which should be revised to ensure that it incorporates the requirements of 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 Public Oversight Authority at the Ministry of Finance with the authority to regulate the auditing profession, the responsibility previously carried out by the Accredited Professional Organizations. The role of the professional organizations will include certification and continuing professional education of its members, supporting member audit firms in establishing quality control mechanisms through review of the control systems against the legal requirements, consultations, trainings, and other forms of assistance.

Adoption of International Standards

  • Quality Assurance

    The new 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 Public Oversight Authority (POA) at the Ministry of Finance within six months from the day of its issuance. The POA is responsible for the establishment and implementation of a quality assurance review system. Reviews must be conducted every three years for public-interest entities and every six years for other types of companies. The POA was established in September 2016 and is expected to become fully operational in January 2017.

    Prior to 2016, the Law on Accounting and Financial Audit of 2012 required accredited professional organizations (APOs) to establish quality assurance (QA) review systems with respect to the audits undertaken by their authorized members. As the only professional accountancy organization in Georgia recognized as an APO, the Georgian Federation of Professional Accountants and Auditors (GFPAA) operated a QA review system, which, according to the GFPAA, complied with most of the requirements of SMO 1, except for the independence of the QA team and the linkage of the QA review system with the investigative and discipline system. The GFPAA has discontinued conducting QA reviews following the adoption of the 2016 Law.

    The Georgian Association of Independent Accountants and Auditors and the Federation of Auditors, Accountants and Financial Managers, which unite accounting professionals on a voluntary basis, according to their websites, established QA review systems with respect to their relevant members. The extent of alignment of these systems with the requirements of SMO 1 is not clear however.

    With the adoption of the new law, professional organizations in the Republic of Georgia will play a limited role in this area, focusing mainly on providing support to their member audit firms with improving their existing quality control systems through review, consultations, and trainings.

    Current Status: Partially Adopted

  • International Education Standards

    The new Law on Accounting, Auditing and Reporting No. 5386 adopted in June 2016 restricts the exercise of the profession to individuals and entities that meet professional certification and continuous education requirements established by the law and further detailed by the Public Oversight Authority (prior to 2016, these functions were the prerogative of the accredited professional organizations. Under the Law, initial professional development and continuing professional development (CPD) requirements must be in line with IES as well as the EU requirements. Universities, specialized examination bodies, and professional organizations implement the requirements set in law. In particular, professional organizations continue to be responsible for administering certification, continuing professional education of their members, and qualification exams when recognized as specialized examination bodies.

    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 in line with IES; work (iii) work to enhance professional knowledge of the accountancy professionals regarding international standards by introducing enhanced training and CPD programming.

    Current Status: Partially Adopted

  • International Standards on Auditing

    In accordance with the new Law on Accounting, Auditing and Reporting No. 5386 adopted in June 2016, which upholds the requirements of the Law of 2012, all audits must be carried out in accordance with ISA as issued by the IAASB and translated by the Public Oversight Authority (POA) within 6 months from their issuance. Application of the English version of ISA is permitted. The POA was established in September 2016 and is expected to become fully operational in January 2017.

    As of November 2016, the Georgian Federation of Professional Accountants and Auditors, which prior to 2016 was responsible for the promulgation of ISA, reports that in 2010 it translated and made publicly available the 2009 IAASB Handbook and plans to complete the translation of the 2015 Handbook by December 2016.

    Current Status: Adopted

  • Code of Ethics for Professional Accountants

    The new Law on Accounting, Auditing and Reporting No. 5386 adopted in June 2016 requires all certified accountants to abide by the Code of Ethics for Professional Accountants issued by the IESBA. Under the previous law of 2012, only auditors were required to abide by the IESBA Code. The responsibility for translating the IESBA Code under the law is vested with the Public Oversight Authority, which is responsible for ensuring its availability in the official language of Georgia within six months following its update. Application of the English version of the IESBA Code is permitted.

    The Georgian Federation of Professional Accountants and Auditors, which prior to 2016 was responsible for the promulgation of the IESBA Code, reports in its SMO Action Plan that as of November 2016, the 2015 IESBA Code has been translated and has been made publicly available.

    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 has, however, defined a phased strategic plan for the adoption of IPSAS by 2020 and is in the process of translating IPSAS, according to the information provided by the Georgian Federation of Professional Accountants and Auditors in 2016.

    Current Status: Not Adopted

  • Investigation and Discipline

    Under the new 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 newly established Public Oversight Authority (POA) and professional organizations. The POA bears the responsibility for the development of an overall investigative and disciplinary (I&D) system, while professional organizations set the rules and procedures for their members. As of November 2016, the POA is working to draft rules and procedures related to the I&D system, which are expected to come into force in January 2017.

    Prior to 2016, under the Law on Accounting and Financial Audit of 2012, I&D function for auditors was assigned to accredited professional organizations (APOs). The Georgian Federation of Professional Accountants and Auditors, as the only APO, initiated in 2013 drafting supporting rules and regulations; however, as of November 2016, no I&D system has been established and the existing rules and regulations fall short of the requirements of SMO 6.

    As of November 2016, the Georgian Association of Independent Accountants and Auditors established an I&D system for its members; however, the extent of its compliance with the requirements of SMO 6 is not clear. No information is available on the Georgian Federation of Auditors, Accountants and Financial Managers.

    Current Status: Not Adopted

  • International Financial Reporting Standards

    The Law on Accounting, Reporting and Auditing No. 5386 of 2016 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 enterprises of the first categories are required to apply IFRS as issued by the IASB and translated by the Public Oversight Authority (POA) at the Ministry of Finance within 6 months from their issuance. Application of the English version of IFRS is permitted. Enterprises of the second and the third categories may apply either IFRS for SMEs or full IFRS. Enterprises of the fourth category and non-entrepreneurial (non-profit) legal entities are permitted to apply IFRS, IFRS for SMEs or the standards set by the POA. The POA is expected to become fully operational in January 2017.

    As of November 2016, the Georgian Federation of Professional Accountants and Auditors, which prior to 2016 was responsible for the promulgation of IFRS, reports that it has translated and published the 2014 version of IFRS and the 2013 version of the IFRS for SMEs.

    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: 12/2016
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