Serbia, Republic of
Member Organization Associate
Legal and Regulatory Environment
Overview of Statuatory Framework for Accounting and Auditing
The Republic of Serbia, a European Union (EU) membership candidate country, introduced new legislation in 2013 to enhance the accounting, auditing, and financial reporting requirements in Serbia to be in line with the relevant EU Directives.
The Law on Accounting of 2013 stipulates the requirements for the preparation of financial statements, including applicable accounting standards and financial reporting thresholds. In accordance with the law, the Ministry of Finance is responsible for enacting financial reporting standards in the Republic of Serbia and has adopted IFRS and IFRS for SMEs as issued by the IASB and translated into Serbian.
The Law mandates the use of IFRS for the preparation of separate and consolidated financial statements of public interest entities (PIEs) defined as large entities, financial institutions, public companies established under the Capital Markets Law, and legal entities categorized as PIEs by the government regardless of the entity’s size. Large companies are defined as meeting two of three size criteria, namely: average value of total assets greater than €17.5 million; operating income greater than €35 million; and average number of employees greater than 250.
Small and medium-sized entities are required to use IFRS for SMEs, although medium-sized entities may elect to apply IFRS. To be categorized as small, an entity must meet two of the following three criteria: average total assets valued at between €350,000 and €4.4 million; operating income between €700,000 and €8.8 million; and average number of employees between 10 and 50. Medium-sized entities are defined as meeting two of the following three criteria: average total assets valued at between €4.4 million and €17.5 million; operating income between €8.8 million and €35 million; and average number of employees between 50 and 250.
Micro entities may apply IFRS for SMEs or the requirements in the National Rulebook for Accounting and Financial Reporting for the preparation of statutory financial statements. Micro entities are those which meet two of the three following criteria: average total assets of less than €350,000; operating income of less than €700,000; and average number of employees of less than 10.
The Law on Auditing of 2013 upholds the audit requirements of the Law on Accounting and Auditing of 2006, defines the scope of the entities subject to mandatory audit requirements, and establishes the Audit Public Oversight Board of Serbia.
Under the Law on Auditing, all large and medium-sized entities, financial institutions, public entities established under the Capital Markets Law, and sole proprietors that generate income in excess of €4.4 million in the previous financial year must have an audit of the financial statements conducted.
Mandatory membership in the Chamber of Authorized Auditors of Serbia is required of all statutory auditors and audit firms, and auditor (not audit firm) rotation after seven consecutive years. Audits must be conducted in accordance with ISA as issued by the IAASB, translated into Serbian, and promulgated by the Ministry of Finance.
The Law on Capital Market of 2011 requires mandatory audit firm rotation after five consecutive years and restricts audit firms from providing consulting services to audit clients. Similarly, the Law on Banks of 2005 requires mandatory audit firm rotation after five consecutive years and restricts the provision of consulting services to audit clients. In addition, the Law on Banks stipulates that bank auditors should be chosen from a list of eligible auditors published by the National Bank of Serbia (NBS), and that the NBS must be notified of the appointment of the bank’s auditor within 15 days.
Regulation of Accountancy Profession
Only auditors are regulated in Serbia at the state level under the Law on Auditing of 2013. The profession is regulated by the Chamber of Authorized Auditors of Serbia (KoR) under oversight of the Ministry of Finance (MoF) and the Audit Public Oversight Board (APOB).
In order to practice as an auditor, an individual must obtain a bachelor’s degree, three years of work experience in an audit firm, complete a professional educational program administered by the KoR, pass KoR’s examination, and obtain a license form the MoF. Membership in KoR is mandatory for all practicing auditors.
Under the Law, KoR is responsible for (i) maintaining registers of certified statutory auditors, audit firms and independent auditors; (ii) organizing and implementing a quality assurance (QA) review system; (iii) arranging and delivering the continuous professional development program for statutory auditors along with other authorized providers; (iv) managing and conducting professional examinations for the certification of auditors; and (v) monitoring compliance with the Code of Ethics. The MoF, APOB, and KoR share responsibility for the system of investigation and discipline of auditors.
APOB was established in 2013 under the Law on Auditing of 2013 with a mandate to oversee the KoR, audit firms, independent advisers, and licensed certified auditors. Specifically, the APOB oversees professional examination arrangements for certification of auditors; establishment and implementation of continuous professional development for auditors; the granting of, renewal and withdrawal of licenses for statutory auditors and audit firms; application of ethical and professional standards; the quality assurance review system; and the implementation of the investigative and disciplinary system.
Accountancy professionals may also choose to join the Serbian Association of Accountant and Auditors (SAAA) and be subject to its regulation. The SAAA is comprised both of accountants and auditors. It regulates its members by requiring adherence to the Code of Ethics issued by the IESBA; developing and delivering professional trainings, examination, and certification as well as continuous professional development programs; monitoring members’ performance through a QA review system; and enforcing adherence to professional standards. The SAAA offers qualifications of Accountant, Certified Accountant, and Certified Public Accountant. The programs benefit from mutual recognition with other professional bodies in the region as well as exemptions from the Association of Chartered Certified Accountants (ACCA)’s program.
Audit Oversight Arrangements
The Audit Public Oversight Board (APOB), established in 2013 under the Law on Auditing of 2013, has responsibility for the supervision of the activities of the Chamber of Authorized Auditors of Serbia, audit firms, independent advisers, and licensed certified auditors.
The main functions of the APOB are to oversee: the professional examination arrangements for certification of auditors; the establishment and implementation of continuous professional development for auditors; the granting of, renewal and withdrawal of licenses for statutory auditors and audit firms; the application of ethical and professional standards; the quality assurance review system; and the implementation of the investigative and disciplinary system. The APOB is not a member of International Forum of Independent Audit Regulators.
Professional Accountancy Organizations
The Chamber of Authorized Auditors of Serbia (KoR)
The KoR was established in 2006 under the Law on Accounting and Auditing of 2006 as a mandatory membership organization for certified auditors, certified internal auditors and audit firms subject to oversight by the Ministry of Finance. In accordance with the 2006 Law (and subsequent amendments), the chamber’s main objectives are to (i) improve and develop the accounting and auditing profession, (ii) implement international accounting, auditing, and ethical standards, (iii) represent and advocate on behalf of the profession, and (iv) administer professional examinations for auditors. With the promulgation of the Law on Auditing of 2013, all licensed auditors as well as audit firms are required to be members of the chamber. In addition, the KoR’s responsibilities were expanded to include administration and delivery of the continuous professional development program for auditors along with other authorized providers, and implementation of a mandatory quality assurance review system for the audits of financial statements in Serbia.
The Serbian Association of Accountants and Auditors (SAAA)
The SAAA was established in 1955 and is comprised mainly of accountants and some auditors, who join the association on a voluntary basis. It has played a key role in the provision of Serbian translations of international standards such as IFRS, IFRS for SMEs, ISA, IPSAS, and the IESBA Code of Ethics for Professional Accountants. The main objectives of the association are to develop and strengthen the role of the accounting profession in Serbia; promote ethical behavior and adherence by its members to the IESBA Code of Ethics; develop and deliver professional training, examination, certification as well as continuous professional development programs for its members in accordance with IES; monitor its members performance, conduct and adherence to professional standards; represent members of the Serbian accounting profession globally; and promote cooperation between national PAOs.
In 2016, the SAAA signed a mutual recognition agreement with the Chartered Institute of Public Finance and Accountancy (CIPFA), which includes full recognition and CIPFA membership for SAAA members as well as development of specialized stream for Public Sector Accountants designation.
SAAA is a Member of IFAC and the Fédération des Experts-Comptables Europeéns.
Projects or Other Information
In 2016, a four-year project Serbia Technical Assistance for Reform of Corporate Financial Reporting was launched by the World Bank that aims to establish and implement a sound institutional framework for corporate financial reporting, drawing on good international practices, and to build capacity for preparing, teaching, regulating, auditing and using reliable financial reporting. The project closing date is December 2019.
Adoption of International Standards
In accordance with the Law on Auditing of 2013, audit firms are obliged to established and maintain a quality control system that is in line with ISQC 1. The Chamber of Authorized Auditors of Serbia (KoR) is responsible for the implementation of a quality assurance (QA) review system for the performance of statutory audits of financial statements by audit firms. Audit firms providing services to public interest entities are subject to a three year visit cycle; other audit firms are reviewed every six years. The QA review system operated by the KoR is subject to oversight by the Audit Public Oversight Board (APOB) and Ministry of Finance (MoF). The MoF has final authority to approve QA review reports prepared by KoR inspectors, which are submitted to APOB for review and approval and then forwarded by the APOB to the MoF. Based on proposals put forth by the KoR and cleared by the APOB, the MoF reviews and issues a decree for appropriate corrective and disciplinary measures.
The KoR reports that the established QA review system complies with most, but not all, of the requirements of SMO 1 (revised 2012). The World Bank in its 2015 report also points out to the need to enhance the existing system by introducing a risk-based approach to reviews and enhancing internal controls, among other issues.
The Serbian Association of Accountants and Auditors (SAAA) operates a voluntary QA review system for non-audit accounting services provided by its members. The system is in the early stages of development and the extent of its compliance with the requirements of SMO 1 needs to be clarified. During 2015, SAAA initiated a joint project with the Institute of Chartered Accountants in England and Wales focused on the establishment of a QA system for accounting services providers.
Current Status: Partially Adopted
International Education Standards
The initial professional development and continuing professional development (CPD) requirements are established only for auditors in the Law on Auditing of 2013 and are implemented by universities and the Chamber of Authorized Auditors of Serbia (KoR) under the oversight of the Audit Public Oversight Board and Ministry of Finance (MoF).
In order to practice as an auditor, an individual must obtain a bachelor’s degree, three years of work experience in an audit firm, complete the professional educational program administered by the KoR, pass KoR’s examination, obtain a license form the MoF, and fulfill mandatory CPD requirements.
Universities are responsible for the defining the university accounting education curricula, which, according to the World Bank 2017 Accountancy Education: Benchmarking Study, scores well against the revised IES. Programs could benefit from a structured and more frequent process for curricula review and from inclusion of courses on public sector financial reporting.
KoR administers a professional educational program, conducts examinations of prospective auditors, and offers a CPD program. According to the World Bank, the professional education program should be further brought in line with the revised IES by specifying competencies to be achieved through practical experience and prescribing learning outcomes and proficiency levels. The CPD program would benefit from an output-based CPD measurement system.
The Serbian Association of Accountants and Auditors, which unites accountants and auditors on a voluntary basis, offers qualifications of Accountant, Certified Accountant, and Certified Public Accountant and has established the requirements for a final assessment, practical experience, and continuing professional development for its members. According to the World Bank, the Certified Public Accountant program is fully aligned with the revised 2015 IES requirements, while the Certified Accountant program could be improved in areas such as governance, risk, ethics and corporate reporting.
Current Status: Partially Adopted
International Standards on Auditing
The Law on Auditing of 2013 requires application of ISA for the performance of audits in Serbia as translated into Serbian and promulgated by the Ministry of Finance. As of 2020, the 2016-2017 IAASB Handbook has been promulgated by the Ministry.
Current Status: Partially Adopted
Code of Ethics for Professional Accountants
Auditors and members of the Serbian Association of Accountants and Auditors (SAAA), which unites accountants and auditors on a voluntary basis, are subject to ethical requirements.
The Law on Auditing of 2013 requires auditors to abide by a Code of Ethics as adopted by the Chamber of Authorized Auditors of Serbia (KoR). The KoR adopted, without modification, the IESBA Code. SAAA performs translation of the IESBA Code and as of 2020 has translated the 2016 version of the Code, which is being applied in the jurisdiction.
Current Status: Partially Adopted
International Public Sector Accounting Standards
The Serbian Association of Accountants and Auditors (SAAA) reports in its 2016 SMO Action Plan that cash-basis IPSAS was adopted in Serbia in 2003 and that the Government is in the process of transition to accrual–based IPSAS. The SAAA has translated the 2013 version of IPSAS in accordance with IFAC’s Translation Policy.
Apart from this information, no details are available on the law(s) that stipulate public sector accounting standards, the bodies that are responsible for their adoption and implementation, and a timeline for full adoption of IPSAS.
Current Status: Partially Adopted
Investigation and Discipline
Under the Law on Auditing of 2013, investigation and discipline (I&D) of auditors, the only formally regulated category of professional accountants, is performed by the Chamber of Authorized Auditors of Serbia (KoR), the Ministry of Finance (MoF), and the Audit Public Oversight Board (APOB). The law requires KoR to inform the APOB, the MoF, Police, Public Prosecutor, and the Ministry of Justice about involvement of its members in crimes and offenses. The Ethics Board of KoR and its Quality Assurance Committee propose disciplinary measures. No separate disciplinary or investigative committee has been established. The MoF has final authority to impose corrective and disciplinary measures on licensed certified auditors and audit firms. KoR reports that its I&D system commenced in January 2013 and as of 2018 is not fully compliant with the requirements of SMO 6 (revised 2012). It is not clear whether the I&D system for auditors overall is aligned with the best practices outlined in SMO 6. The World Bank in its 2015 report also points out to the need to bolster the disciplinary process for auditors.
Accountants are self-regulated through voluntary membership in the Serbian Association of Accountants and Auditors (SAAA), which reports that it has incorporated most of the SMO 6 requirements in the I&D system it operates to address non-compliance by its member with applicable laws, regulations, and the Code of Ethics. SAAA indicates that it does have recourse to the Serbian legal system to sanction members for non-compliance, if necessary.
Current Status: Partially Adopted
International Financial Reporting Standards
The Ministry of Finance (MoF) is responsible for the adoption and promulgation of accounting standards in the Republic of Serbia in accordance with the Law on Accounting No. 62/13.
The MoF adopts IFRS as translated into Serbian and published in the Official Gazette for the preparation of the financial statements of large companies and Public Interest Entities as defined in the Law on Accounting. It also adopted IFRS for SMEs for application by small- and medium-sized entities, and grants medium-sized entities the option to use IFRS. Micro entities may choose to use IFRS for SMEs or the requirements in the National Rulebook for Accounting and Financial Reporting, which the MoF is in the process of redrafting. IFRS and IFRS for SMEs become effective upon their publication in the Official Gazette.
As of 2020, the 2020 version of IFRS and the 2015 version of IFRS for SMEs have been translated into Serbian and are required for application.
Current Status: Adopted
- Chamber of Authorized Auditors of Serbia (KoR)
- Republic of Serbia Ministry of Finance (MoF)
- Republic of Serbia Securities Commission: Audit Public Oversight Board (APOB)
- Serbian Association of Accountants and Auditors (SAAA)
- Law on Accounting, 2013 (in Serbian)
- Law on Auditing, 2013 (in Serbian)
- Law on Banks, 2005
- Law on Capital Markets, 2011
- Borgonovo, A., Serbia - Serbia Technical Assistance to Reform Corporate Financial Reporting: P154862 - Implementation Status Results Report: Sequence 01. Washington, D.C.: World Bank Group, 2017.
- Global Accountancy Development Institute (GADI), GAE Serbia 2012, 2012.
- IFRS Foundation, “IFRS Application Around the World, Jurisdictional Profile: Serbia,” February 2017.
- KoR, SMO Action Plan, April 2018.
- Ministry of Finance and Economy, “Latest Developments in Audit Regulation in Serbia,” May 2013.
- Ministry of Finance of Republic of Serbia, “Experience and Challenges in Implementation of the Acquis Communautaire’s Accounting Requirement,” April 2014.
- SAAA, SMO Action Plan, August 2016.
- TPA Horwath, “Adoption of Two New Laws: Law on Accounting and Auditing and Law on Auditing,” July 2013.
- World Bank, Accountancy Education: Benchmarking Study, 2017.
- World Bank, Accountancy Education: A Collection of Good Practices, 2017.
- World Bank, Serbia: Report on the Observance of Standards and Codes (ROSC), Accounting & Auditing, 2015.
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