Montenegro

Member Organizations

Member Organization Associate

  Institute of Accountants and Auditors of Montenegro
  Institute of Certified Accountants of Montenegro

Legal and Regulatory Environment

  • Overview of Statuatory Framework for Accounting and Auditing

    The accounting, auditing, and financial reporting framework in Montenegro is defined by the Law on Business Organization of 2002, the Law on Accounting No. 052 of 2016, and the Law on Auditing No. 001 of 2017.

    The Law on Business Organizations outlines the formation, operation, and dissolution of all legal entities in Montenegro. For joint stock companies, it establishes financial reporting requirements, which include the requirement to prepare and submit audited financial statements to shareholders.

    Key pieces of secondary legislation aimed at enabling implementation of the requirements in the aforementioned laws include the (i) Decree on Entrusting of Affairs of Public Administration Bodies Competent for Accounting and Auditing No. 33/10 of 2010 (Decree No. 33/10); (ii) Rulebook on Form and Content of Forms of Financial Statement of Companies and Other Legal Entities of 2011; and (iii) Rulebook on Form and Content of Forms of Financial Statement of Investment Funds of 2012.

    In addition to the requirements of the above laws and regulations, banks, insurance companies, and listed entities must comply with financial reporting requirements specified in the Law on Banks of 2008, Law on Insurance Companies of 2006, and Law on Securities of 2000, respectively.

    Accounting Framework

    Article 5 of the Law on Accounting No. 052 of 2016 introduces the following categories of entities for financial reporting purposes based on their size:

    • Micro entities: an average number of employees that does not exceed 10; total annual revenue that does not exceed EUR 700,000; and total assets that do not exceed EUR 350,000;
    • Small entities: an average number of employees higher than 10, but less than 50; total annual revenue in excess of EUR 700,000.00 and less than EUR 8,000,000; and total assets increased by EUR 350,000.00 and less than EUR 4,000,000;
    • Medium entities: an average number of employees greater than 50, but less than 250; total annual revenue in excess of EUR 8,000,000, and less than EUR 40,000,000; and total assets increased from EUR 4,000,000, and less than EUR 20,000,000; and
    • Large entities: an average number of employees greater than 250; total annual revenue is in excess of EUR 40,000,000; and total assets above EUR 20,000,000.

    The law also defines public interest entities (PIEs) as (i) issuers of securities and other financial instruments traded on a regulated market; (ii) banks and other financial institutions; (iii) insurance companies; and (iv) large entities.

    The Law on Accounting No. 052 of 2016 stipulates that all companies are required to prepare financial statements in accordance with IAS/IFRS as translated and promulgated by the Ministry of Finance or a Competent Authority. The competent authority must be a member of IFAC and obtain related rights. The Decree No. 33/10 acknowledges the Institute of Certified Accountants of Montenegro (ICAM) as the competent authority for accounting and auditing activities referred to in the Law on Auditing No. 001 of 2017 and the Law on Accounting No. 052 of 2016 as the holder of the Consortium with the University of Podgorica Faculty of Economics of Montenegro and the Serbian Association of Accountants and Auditors.

    Auditing Framework

    The Law on Auditing No. 001 of 2017 regulates the conditions and manner of performing audits of financial statements. Under the Law, audits are mandatory for PIEs and medium-sized entities. The Law requires audits to be conducted in accordance with ISA as issued by the IAASB and promulgated by the Ministry of Finance or a competent authority entrusted by the Ministry.

  • Regulation of Accountancy Profession

    Certified Accountants and Certified Auditors are the only categories of accountancy professionals regulated by law in Montenegro. They are regulated at the state level by the Ministry of Finance and the HYPERLINK "http://www.szr.gov.me/direktor" Council for Audit. Additionally, some of the regulatory functions were delegated from the Ministry of Finance to the Institute of Certified Accountants of Montenegro (ICAM) through the Decree No. 33/10.

    Certified Accountants

    The Law on Accounting No. 052 of 2016 establishes initial professional development (IPD) requirements for Certified Accountants and authorizes the Ministry of Finance to oversee the certification of Certified Accountants, a responsibility that has been delegated to ICAM in accordance with the same Law and the Decree No. 33/10.

    A candidate can apply for the professional title Certified Accountant if they (i) acquired a university degree; (ii) completed three years of practical experience; (iii) passed the examinations for acquiring the title Certified Accountant administered by ICAM; and (iv) provided proof that they have not been convicted of a crime that makes them unworthy to perform accounting tasks.

    The Law on Accounting also provides that individuals with foreign qualifications are eligible to acquire the Certified Accountant qualification if their qualification is obtained from a member of IFAC and provided the certification and training process is equivalent to those of ICAM.

    ICAM is entrusted with the responsibility to (i) adopt, translate, and publish international accounting and auditing standards as well the IESBA Code of Ethics for Professional Accountants; (ii) organize and conduct the certification program for certified accountants; (iii) maintain a registry of certified accountants; and (iv) impose sanctions against individuals that violate any provisions of the law.

    Certified Auditors

    Certified Auditors are regulated under the Law on Auditing No. 001 of 2017, which outlines the procedures for licensing, registration, and initial and continuing professional development of Certified Auditors; establishes auditing standards; requires maintaining an audit registry; establishes the Council for Audit as an oversight body; and authorizes the Ministry of Finance to regulate the audit activity.

    Prospective Certified Auditors are required to satisfy the following criteria (i) acquire the title of Certified Accountant from ICAM; (ii) complete practical experience in the area of auditing for a minimum of three years, of which at least two years are under the supervision of another Certified Auditor; and (iii) provide proof that they do not have criminal record.

    The Ministry of Finance is responsible for (i) issuing/revoking auditor licenses; (ii) managing the registry of Certified Auditors; (iii) validating licenses for candidates from the European Union (EU); (iv) ensuring implementation of IPD and CPD requirements for Certified Auditors; (v) conducting quality assurance reviews; and (vi) maintaining an investigation and disciplinary (I&D) system.

    Article 11 of the Law on Auditing No. 001 of 2017 stipulates that an auditor license can also be obtained by recognition of titles granted by EU Member States. The procedures require verification of compliance with the abovementioned initial professional development requirements.

    The Law on Auditing No. 001 of 2017 mandates the establishment of a Council for Audit to (i) monitor the implementation of auditing standards; (ii) provide advice to policy-makers, regulators and government entities; (iii) provide technical assistance to improve the quality of financial reporting; (iv) publish reports on the transparency of auditing firms and/or Certified Auditors; (v) provide opinions on various issues such as CPD and training; and (vi) improve audit practices in Montenegro.

    In addition, auditors of entities regulated by the Central Bank of Montenegro, the Insurance Supervision Agency, and the Securities Commission must be approved by the respective regulators.

    Other segments of accountants can also choose to become members of a professional accountancy organization (PAO), in which case they become subject to the PAO’s regulations. In addition to ICAM, the Institute of Accountants and Auditors of Montenegro (IAAM) unites accountancy professionals on a voluntary basis and offers a two-tiered certification scheme which recognizes progress and achievement at two different levels: Accountant and Authorized Accountant. IAAM states that it also establishes CPD requirements for its members, requires its members to adhere to ethical requirements, and has established an investigation & disciplinary system for members.

  • Audit Oversight Arrangements

    The Law on Auditing No. 001 of 2017 established the system of public oversight of auditing activity in Montenegro. It provided for the establishment of the Council for Audit, which became operational 2018, with the responsibility for (i) monitoring the implementation of auditing standards; (ii) providing advice to policy-makers, regulators and government entities; (iii) providing technical assistance to improve the quality of financial reporting; (iv) publishing reports on the transparency of auditing firms or Certified Auditors; (v) providing opinions on various issues such as CPD and training; and (vi) improving audit practices in Montenegro.

  • Professional Accountancy Organizations

    There are two professional accountancy organizations (PAOs) in Montenegro.

    The Institute of Accountants and Auditors of Montenegro (IAAM)

    IAAM is the older of the two organizations established under the Law on Accounting and Auditing of 2002. IAAM was responsible for the certification of auditors and regulation of the profession until 2005, when the Law on Accounting and Auditing of 2005 was passed. In 2007, the Ministry of Finance delegated the responsibility for the education, examination, and certification of auditors to the Institute of Certified Accountants of Montenegro (ICAM). IAAM’s focus has become to (i) promote the profession in Montenegro; and (ii) train and educate accounting professionals.

    The Institute of Certified Accountants of Montenegro (ICAM)

    ICAM is a non-governmental, not-for-profit PAO that was established in 2006 as a professional association of accountants and auditors after a decision to split IAAM membership. ICAM’s membership is voluntary and comprises Certified Accountants, Management Accountants, Bookkeepers, and Students. ICAM members provide accounting, consulting (tax, finance), and auditing (internal, external) services. In 2016, ICAM reported that close to 50% of ICAM membership is involved in public practice, with the remaining 50% divided between business/industry, public sector, academia/education, student, and retired members.

    It is acknowledged by the Decree on Entrusting of Affairs of Public Administration Bodies Competent for Accounting and Auditing No. 33/10 of 2010 (Decree No. 33/10) as the competent authority for accounting and auditing activities referred to in the new Law on Accounting No. 052 of 2016 and the new Law on Auditing No. 001 of 2017. ICAM is entrusted with the responsibility to (i) adopt, translate, and publish international accounting and auditing standards as well the IESBA Code of Ethics for Professional Accountants; (ii) organize and conduct the certification program for Certified Accountants; and (iii) maintain a registry of Certified Accountants. In addition to being a member of IFAC, ICAM is an Associate member of Accountancy Europe.

  • Projects or Other Information

    The Centre for Financial Reporting Reform (CFRR) of the World Bank provided implementation support to the Government of Montenegro through the Institutional Development Fund (IDF) project Capacity Building for Effective Audit Oversight, which was launched in 2013 and completed in 2016. Implementation support involved providing technical assistance to the Government of Montenegro in establishing a system of public oversight and quality assurance for the statutory audit function, which was adopted by the new Law on Auditing No. 001 of 2017.

    Additionally, the World Bank provided monetary support to the Institute of Certified Accountants of Montenegro (ICAM) to strengthen its capacity and undertake the following strategic activities (i) enhance the continuing professional development (CPD) program for members; (ii) carry out a review of ICAM membership requirements and operations to improve the range and quality of services offered to members; (iii) support the enhancement of the internal quality control regime of the auditing profession if selected by the Ministry of Finance for these activities following the adoption of the new Law on Auditing; (iv) enhance ICAM’s educational, training, and examination programs; (v) promote awareness of good corporate disclosure and transparency; (vi) meet IFAC full membership requirements; and (vii) identify activities to support the commercial development of ICAM.

    Further interventions are envisioned as part of the additional funding to support implementation of the newly adopted laws.

Adoption of International Standards

  • Quality Assurance

    The Law on Auditing No. 001 of 2017 introduced the requirement to establish a mandatory quality assurance (QA) review system for all audits to be implemented by the Ministry of Finance under the oversight of the Council on Audit.

    With the aim of preparing the inspectors and audit firms for the implementation of a QA review system, the Department for Audit Oversight of the Ministry of Finance, with the assistance of the World Bank under the Capacity Building for Effective Audit Oversight Project IDF Grant No. TF 013555, developed a manual and guidelines for minimum required audit methodology and working papers, as well as the methodology and manuals for inspectors who have oversight roles. To prepare for the launch of reviews, the Department developed a questionnaire to collect information about certified auditors and audit firms, internal organization of audit firms, their relationship with other auditors, and information about audit engagements and risk analysis that was used as a starting point for planning the oversight of audit work.

    The QA review system became operational in 2019. The extent of alignment of the QA review system with the requirements of SMO 1 remains to be established.

    Current Status: Partially Adopted

  • International Education Standards

    Initial and continuing professional development (IPD and CPD, respectively) requirements for bookkeepers, Authorized Accountant, Certified Accountants, and Certified Auditors are established in the Montenegrin National Accounting Educational Standard (CORS-1), the Law on Accounting No. 052 of 2016 and the Law on Auditing No. 001 of 2017, and are implemented by the Ministry of Finance, the Institute of Certified Accountants of Montenegro (ICAM), and the Institute of Accountants and Auditors of Montenegro (IAAM). Provision of IPD and CPD for auditors is overseen by the Council on Audit.

    Tertiary education is provided by universities, and, according to the World Bank 2017 Accountancy Education: Benchmarking Study, master’s and undergraduate programs compare well against the revised 2015 IES requirements.

    The Law on Accounting No. 052 of 2016 and CORS-1 establish IPD requirements for Certified Accountants and authorize the Ministry of Finance to oversee the certification process implemented by ICAM.

    A candidate may apply for the professional title Certified Accountant if they (i) acquired a university degree; (ii) completed three years of practical experience; (iii) passed examinations; and (iv) provided proof that they have not been convicted of a crime. Certified Accountants must be members of ICAM.

    Prospective Certified Auditors are required to (i) acquire the title of a Certified Accountant; (ii) complete practical experience in the area of auditing for a minimum of three years, of which at least two years are under the supervision of another certified auditor; and (iii) provide proof that they do not have criminal record. To be able to provide auditing services, prospective auditors must obtain a license from the Ministry of Finance.

    ICAM developed its professional education and training program in line with the Montenegrin National Accounting Educational Standard (CORS-1), which is based on 2009 IES requirements and the IESBA Code of Ethics for Professional Accountants. CORS-1 was published in the Official Gazette of Montenegro in August 2014 and is must be applied by accountancy education providers.

    The Centre for Financial Reporting Reform (CFRR) of the World Bank provided support to the Government of Montenegro as well as ICAM (see 2017 Accountancy Education: Benchmarking Study) to enhance educational requirements. The World Bank determined that although ICAM’s program incorporates most of the IES requirements related to IPD, a structured review and update to the education program and the teaching resources of ICAM is needed. Specifically, greater alignment in areas such as governance, risk and ethics, and advanced financial and performance management would be beneficial. CPD and practical experience requirements, as well as the enforcement of the requirements, also need to be further aligned with those of IES.

    The Institute of Accountants and Auditors of Montenegro (IAAM), the second IFAC member organization in the jurisdiction, maintains a two-tiered certification scheme that offers voluntary qualifications of accountant and authorized accountant. The extent of alignment of IAAM’s educational programming with the IES needs to be established.

    Current Status: Partially Adopted

  • International Standards on Auditing

    The Law on Auditing No. 001 of 2017 requires all mandatory audits to be conducted in accordance with ISA as issued by the IAASB and translated and published by the designated competent authority, the Institute of Certified Accountants of Montenegro. Under the Law, audits are mandatory for public interest and medium-sized entities.

    As of 2020, the Serbian translation of 2016–2017 ISA as completed by the Serbian Association of Accountants and Auditors is available. However, it is not clear whether it has been made publicly available or is only available in a printed form.

    Current Status: Partially Adopted

  • Code of Ethics for Professional Accountants

    The Law on Accounting No. 052 of 2016 and the Law on Auditing No. 001 of 2017 require Certified Accountants and Certified Auditors, the two legally protected designations, to adhere to the Code of Ethics as issued by IESBA and translated and published by the designated competent authority, the Institute of Certified Accountants of Montenegro (ICAM). ICAM reports that the 2016 version of the IESBA Code is required for application as of 2020.

    Other segments of accountants can also choose to become members of a professional accountancy organization (PAO), in which case they become subject to the PAO’s regulations. While the law does not prescribe mandatory use of the IESBA Code of Ethics for all accountants, the Institute of Accountants and Auditors of Montenegro (IAAM) reports that its members are required to follow the code of ethics applicable to Certified Accountants and Auditors.

    Current Status: Partially Adopted

  • International Public Sector Accounting Standards

    The Law on State Property of 2009 and the Law on Financing of Local Self-Government of 2010 prescribe accounting standards for the public sector in Montenegro, with the Ministry of Finance responsible for their adoption.

    The Rulebook on the Method of Making and Submitting of Financial Statements of the Budget, State Funds and Units of Local Self-Government of 2010 prescribes the application of accounting standards that are based on IPSAS and use a modified cash-basis of accounting. The Government of Montenegro, in its Strategy for 2015, stated that it plans to introduce the accrual-basis of accounting in the public sector.

    In November 2019, the Government of Montenegro adopted the Law on Accounting in Public Sector. The new law, which will come into effect in 2022, is expected to partially harmonize existing practices with some of the accrual-basis IPSAS.

    Current Status: Partially Adopted

  • Investigation and Discipline

    The Law on Auditing No. 001 of 2017 establishes investigation and disciplinary provisions for Certified Accountants and Certified Auditors, the two protected designations in the jurisdiction.

    Under the law, the Ministry of Finance establishes and operates an I&D system for auditors under the oversight of the Council on Audit. The law outlines requirements for conduct as well as applicable sanctions for any misconduct.

    ICAM reports that it operates its own system for its members (Certified Accountants and Certified Auditors must be members of ICAM) that is largely in line with SMO 6 requirements, with the exception of two areas that need improvements—imposing an extensive range of penalties, and public interest considerations. ICAM delayed revising its I&D system pending the adoption of the Law on Auditing of 2017. As of 2020, it is not clear if the system has been fully aligned with the requirements of SMO 6.

    The second IFAC member organization in the jurisdiction, the Institute of Accountants and Auditors of Montenegro (IAAM), which unites other accountants on a voluntary basis, reports that the mechanisms it established for the I&D of its members are partially in line with SMO 6 requirements. The institute reported gaps in the approach for initiation of proceedings (only complaints-based) as well as the lack of linkage with the results of QA reviews. Furthermore, members of the Disciplinary Committee only comprise professional accountants.

    Current Status: Partially Adopted

  • International Financial Reporting Standards

    The Law on Accounting No. 052 of 2016 requires that all legal entities prepare financial statements in accordance with IAS/IFRS as issued by the IASB and translated and published by the designated competent authority, the Institute of Certified Accountants of Montenegro.

    The latest version of IFRS translated into the Serbian language is the 2009 version and several standards from the 2013 Bluebook, which were translated by the Serbian Association of Accountants and Auditors.

    IFRS for Small- and Medium-sized Enterprises (SMEs) was translated in 2013 but is not 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: 09/2020
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