Chamber of Auditors of Azerbaijan Republic

Member | Established: 1996 | Member since 2008

CAAR was established in accordance with the Law on Audit of 1994 as amended to regulate the audit profession. Membership in CAAR is mandatory for auditors and audit firms.

Under the Law, CAAR is responsible for (i) maintaining the register for auditors and audit firms; (ii) organizing and implementing a quality assurance review system; (iii) arranging and delivering the continuing professional development program for auditors; (iv) managing and conducting professional examinations for the certification of auditors; (v) establishing and conducting an investigation and disciplinary system; and (vi) monitoring compliance with the Code of Ethics.

In addition to being a member of IFAC, CAAR is a member of the Eurasian Council of Certified Accountants and Auditors, and the EFAA.

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Statements of Membership Obligation (SMO)

The Statements of Membership Obligations form the basis of the IFAC Member Compliance Program. They serve as a framework for credible and high-quality professional accountancy organizations focused on serving the public interest by adopting, or otherwise incorporating, and supporting implementation of international standards and maintaining adequate enforcement mechanisms to ensure the professional behavior of their individual members.

Methodology
Last updated: 01/2021
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SMO Action Plan

Status of Fulfillment by SMO

  • SMO 1: Quality Assurance

    In accordance with the Law on Audit of 1994 as amended in 2004, the CAAR is responsible for establishing and implementing quality assurance (QA) reviews of all auditors. The system was originally developed in 2008 and has subsequently been updated.

    In 2015, CAAR conducted a self-assessment of its QA review system against SMO 1 requirements and reported partial compliance, with gaps identified in several requirements related to the review cycle and consideration of public oversight. At the time, it was recommended that CAAR establish and implement specific plans aimed at bringing the system fully in line with SMO 1. In 2018, CAAR reported improved compliance with SMO 1, with differences persisting related to the review cycle and consideration of public oversight. In its 2020 SMO Action Plan, CAAR indicates that the system was brought overall in line with SMO 1, with the exception of adoption of the most recent version of ISQC 1 and ISA 220.

    The 2016 Rules on Quality Control of Auditing Services in the Republic of Azerbaijan and the Regulation on Quality Control Committee of the Chamber of Auditors of the Republic of Azerbaijan outline procedures for the implementation of QA reviews and establish the Quality Control Committee (QCC) as an executive body of the Council of CAAR, comprising CAAR members and non-members with expertise in conducting inspections. Regulations on QA reviews are available on CAAR’s website.

    The QCC oversees the QA review system and the work of the inspectors. Inspections are conducted at the firm and specific engagements level. Results of inspections may be forwarded to CAAR’s Ethics, Disputes, and Disciplinary Committee for disciplinary proceedings, where necessary. Inspections are carried out by CAAR at least once every three years, with 35 quality controls conducted in 2016, 47 in 2017, 24 in 2018, and 46 in 2019. As of 2020, 90 audit firms and 6 independent auditors are members of CAAR.

    At the beginning of each year, the QCC publishes a report on the results of the reviews, deficiencies identified, and measures taken during the past year.

    Inspections are carried out by professional auditors with at least 10 years of audit experience. Inspectors are required to take professional development courses as well as specialized annual trainings.

    ISQC 1 and ISA 220 (2016-2017 version) have been adopted as the quality control standards. The chamber reports to conduct ongoing activities to support its members in the process of QA reviews by providing updates and instructions on creating and maintaining an effective quality control system and offers continuing professional development programs and seminars based on review findings. This information is captured in the Report on the Results of the Activities of the Chamber of Auditors of Azerbaijan for 2019.

    In an effort to support its small and medium-sized members with quality control, the organization translated and disseminated the Guide to Quality Control for Small- and Medium-Sized Practices first in 2009 and later adopted Volume I and Volume II, 2018 Edition.

    CAAR has made significant progress in bringing its QA review system closer in line with the international best practices. CAAR is encouraged to consider establishing ongoing processes for the translation of ISA and other IAASB pronouncements to ensure that the latest available versions of international standards are applied in the jurisdiction. In addition, the new suite of Quality Management standards that will become effective in 2021-22 will require significant change management for regulators and firms. To prepare auditors in the jurisdiction for the implementation of the standards, CAAR is encouraged to closely follow the developments and publication of implementation support materials, raise awareness of its members about the forthcoming change, and update its educational programming to ensure that its members are sufficiently prepared for the application of the standards once they become effective.

    Current Status: Execute

  • SMO 2: International Education Standards

    The initial professional development and continuing professional development (CPD) requirements for auditors are established in the Law on Audit of 1994 as amended in 2004 and are implemented by universities, training centers, and the CAAR.

    CAAR administers a professional educational program for auditors, conducts examinations of prospective auditors, and offers a CPD program. Although in its 2018 SMO Action Plan, CAAR indicates that it regularly translates the IES and incorporates them in its educational programs, it appears that as of 2020, the 2010 version of IES has been translated and made available on the CAAR’s website. There is no indication that the currently effective IES have been made publicly available or incorporated either by the CAAR or other stakeholders.

    ?ARR reports that it is involved in the process of amending the existing law on auditing and is advocating to include a reference to IES in the law.

    CAAR indicates that it signed a Memorandum of Understanding with Azerbaijan State Economic University and the Association of Chartered Certified Accountants (ACCA) to conduct training activities. Report on the Results of the Activities of the Chamber of Auditors of Azerbaijan for 2019 details CAAR’s activities in IPD and CPD.

    IFAC reiterates its recommendation put forward in 2015 and again in 2018 that the CAAR conduct a comprehensive review of the existing educational requirements for auditors in the jurisdiction against those of IESs. For areas of less than full compliance, specific actions to close the gaps, if any, with a defined timeframe need to be developed and included in its SMO Action Plan. It is recommended that the review be conducted against the latest revised IES that address learning and development for information and communications technologies (ICT) and professional skepticism. Reviewing the requirements now and preparing a plan to incorporate them will help CAAR ensure that its educational programming is IES-complaint when the standards become effective in January 2021.

    The IES Checklist and the Accountancy Education E-Tool developed by IFAC may be used to conduct an assessment and to consider available implementation support materials. CAAR is also encouraged to proactively liaise with all relevant stakeholders in the jurisdiction to promote and facilitate the adoption and implementation of the IESs. CAAR is also encouraged to continue working with the Universities to ensure that the university accounting education curricula is updated on an ongoing basis to incorporate new international pronouncements. 

    Current Status: Consider

  • SMO 3: International Standards on Auditing

    Neither the Law on Audit of 1994 nor other rules and regulations specify auditing standards to be applied in the Republic of Azerbaijan. De facto, standards required by the CAAR used. There are proposed amendments to the Law on Audit that would legally authorize CAAR to establish auditing standards; however, as of 2020, the law has not been adopted.

    Since 2005, CAAR has required application of ISA and prior to the adoption of ISA was involved in the development of the national standards on auditing. In 2013, CAAR translated the 2013 version of the Handbook of International Quality Control, Auditing, Review, Other Assurance, and Related Services Pronouncements for use in the jurisdiction, and in 2018 translated and disseminated to practitioners the 2016–2017 Handbook. No plans to adopt the latest version (2018) of the standards have been reported as of 2020.

    CAAR organizes and delivers courses on ISA to enhance members’ understanding and implementation of the standards. According to its 2016 and 2017 annual reports, CAAR held a number of seminars and trainings on the subject. It is actively cooperating with other PAOs in the region to organize regional and international events and hosted roundtables. In 2017, two international conferences with 60 delegates from 15 countries, six round tables and numerous seminars were held. One conference was organized in 2018 and two in 2019.

    CAAR indicates that since 2014 it has been improving its IPD and CPD programming, however, it remains to be established what version of ISA have been incorporated into CAAR’s materials and whether all requirements as they relate to professional competencies of auditors are complied with.

    To support its members providing services for SMEs, CAAR translated and made publicly available the HYPERLINK "http://audit.gov.az/uploads/Kicik_ve_orta_muessiselerin_auditinde_beynelxalq_audit_standartlarinin_tetbiqine_dair_Telimat_2017_I_cild.pdf" Guide to Using International Standards on Auditing in the Audits of Small- and Medium-Sized Entities, Third Edition and the Guide to Using International Standards on Auditing in the Audits of Small- and Medium-Sized Entities, Volume I&II of 2018.

    CAAR indicates in its SMO Action Plan that it continues to monitor and review its plans and work program to ensure that adequate support with the implementation of ISA is provided to its members.

    CAAR is encouraged to continue working with the regulators to provide legal backing to the application of ISA in the jurisdiction and to identify opportunities to reduce the time lag in translating the latest IAASB pronouncements. The 2018 Handbook became fully effective in December 2019, and includes revised standards ISA 250 and 540. CAAR is also encouraged to clarify how often its educational programming is updated to incorporate changes in the standards. If possible, CAAR may wish to consider participating in the IAASB exposure drafts consultations.

    Current Status: Execute

  • SMO 4: Code of Ethics for Professional Accountants

    The Law on Audit of 1994 as amended in 2004 does not directly require application of the IESBA Code. Nevertheless, CAAR reports that it requires its members, effectively all practicing auditors, to adhere to the IESBA Code of Ethics and has translated the 2018 version into Azerbaijani.

    CAAR indicates that the new Law on Audit that is being considered for adoption as of 2020 will directly require adherence to the IESBA Code of Ethics for all auditors in the jurisdiction.

    Compliance with the Code is monitored, according to the CAAR, and the results are made publicly available in the annual reports of the Ethics, Disputes, and Disciplinary Committee. Complaints and other information received by the chamber regarding non-compliance with ethical requirements are carefully investigated and when non-compliance is identified, appropriate administrative and disciplinary actions are taken by the Board based on referrals of the Committee.

    CAAR reports that it supports its members with the implementation of the Code by including ethics-related topics in its initial and continuing professional development courses and other trainings. According to its 2016 and 2017 annual reports, CAAR offered a number of continuing professional development courses on ethics. It also organizes seminars and roundtable events on the subject and reportedly provides materials, resources, and examples on practical application of the Code. It remains to be established what version of the Code has been incorporated into CAAR’s educational programming.

    Additionally, members are informed about the developments in the area at the international and national levels and information on the IESBA exposure drafts is provided via its website and its journal entitled Economy and Audit.

    Recognizing a major contribution of CAAR to the adoption of the IESBA Code in the Republic of Azerbaijan, CAAR is encouraged to continue working with the regulators to provide legal backing to the IESBA Code and to ensure that all professional accountants in the jurisdiction, not only auditors, are subject to ethical requirements. It is also recommended to consider establishing ongoing processes to ensure that all new and revised requirements of the IESBA Code of Ethics are translated and incorporated into national requirements in a timely manner and with the necessary permissions of IFAC. CAAR is also encouraged to ensure that the latest ethical requirements are incorporated into its educational programming and to enhance dissemination of information on international developments in the area. It should also consider enhancing its activities to support implementation of the Code. Such activities may include holding seminars and focused trainings, establishing a hotline for confidential questions, and disseminating information on the developments in the area through different communications means, among other activities.

    Current Status: Execute

  • SMO 5: International Public Sector Accounting Standards

    CAAR has no direct responsibility for the adoption of public sector standards in the Republic of Azerbaijan, which is within the mandate of the Ministry of Finance. Nevertheless, CAAR reports to have promoted the adoption of IPSAS by engaging in discussions with, and providing technical support to, relevant government agencies, including the translation of IPSAS in 2011 as part of a World Bank project. In 2014, CAAR indicated that it prepared an action plan to foster relationships with the executive bodies of the government that have responsibility for adoption of IPSAS in Azerbaijan.

    In 2019, a new Law on Accounting became effective that adopted IPSAS for application in the Republic of Azerbaijan. With this advancement, CAAR indicates that it keeps members aware of developments in the public sector and organizes roundtables to raise its members’ awareness and understanding of the international standards. It also includes public sector-related matters into its continuing professional development programming and seminars.

    CAAR remains generally committed to fulfilling its obligations under SMO 5. The chamber is encouraged to consider further opportunities in the area of public sector accounting  and, if deemed relevant and necessary, develop a strategy outlining its involvement in public sector accounting issues and support it can provide to regulators and public sector accountants in the jurisdiction with the implementation of IPSAS. During ongoing engagements with IFAC, CAAR is also encouraged to report on the progress made on the implementation of IPSAS and the related chamber’s activities.

    Current Status: Review & Improve

  • SMO 6: Investigation and Discipline

    As mandated by the Law on Audit of 1994, the CAAR is responsible for establishing an investigative and disciplinary (I&D) mechanism for its members, which effectively include all auditors and audit firms in the jurisdiction.

    The system is operated by the Ethics, Disputes, and Disciplinary Committee. The CAAR Board makes disciplinary decisions based on recommendations of the Committee.

    The objectives of the system, according to CAAR, are to ensure transparency of audit and rotation and selection of auditors; compliance with ethical requirements and quality control standards; preventing unfair competition, and compliance with the Anti-Money Laundering (AML) and Terrorist Financing Law of the Republic of Azerbaijan, among other objectives.

    As far as alignment with the SMO 6 requirements is concerned, in 2014, CAAR conducted a self-assessment of its I&D system against the SMO 6 requirements and identified gaps in (i) the range of sanctions; (ii) activities undertaken to ensure that the public is aware of the I&D system; and (iii) publicizing the results of I&D proceedings. As of 2020, the gaps persist and no specific plan to address the gaps has been outlined.

    Lastly, CAAR reports that it includes the I&D procedures and consequences of non-compliance as part of initial and continuing professional development courses to inform its members.

    IFAC reiterates its recommendation that CAAR update the results of the 2014 self-assessment, which it reconfirmed in 2018, and develop a realistic, specific, integrated plan to bring its I&D system in compliance with the SMO 6 requirements. It could also consider working with regulators and PAOs for accountants to establish an I&D system for all professional accountants in the jurisdiction that is foundational to maintaining public trust and confidence in the profession.

    Current Status: Consider

  • SMO 7: International Financial Reporting Standards

    As a professional association of and the regulator of auditors, the CAAR has no direct responsibility for the adoption of corporate accounting standards. The standards to be applied are defined in law and enacted by the Ministry of Finance. As of 2020, based on the information on the Ministry of Finance website, the 2018 version of IFRS has been translated and is mandatory for application.

    CAAR is a member of the Ministry of Finance’s Advisory Board and reports to be involved in IFRS implementation discussions and drafting legislation to enhance the statutory framework for the profession.

    CAAR administers a professional educational program for auditors as well as continuing professional educational programming. According to its 2016 and 2017 annual reports, CAAR held a number of seminars and trainings on IFRS and participated in regional and international events.

    Recognizing that translation and endorsement of IFRS is not within the direct responsibilities of CAAR, the chamber is nevertheless encouraged to offer its support to the regulators with developing ongoing processes that will ensure timely adoption of new and revised IFRSs as they become effective. The association is also encouraged to ensure that its programming is continuously updated to include new and revised standards.  

    Current Status: Review & Improve

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.

 

Contact

S.Y.Bakuvi Street, 35
Baku, Az 1072
Azerbaijan
Tel: +99412-498-2855
Fax: +99412-498-2855
audit-azerbaijan@audit.gov.az
http://www.audit.gov.az

 

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