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 in 2004 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 European Federation of Accountants and Auditors for SMEs.

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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.

Last updated: 12/2018
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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 conducting quality assurance (QA) reviews of all auditors.

    The system was developed in 2008 and subsequently updated, with the latest known changes introduced in 2013. Inspections are carried out by CAAR at least once every three years, with 35 quality controls conducted in 2016 and 47 in 2017.

    In 2015, CAAR conducted a self-assessment of its QA review system against SMO 1 and reported partial compliance, with gaps identified in a number of requirements related to the review cycle and consideration of public oversight. At that time it was recommended that CAAR establish and implement specific plans aimed at bring the system fully in line with SMO 1.

    As of 2018, the gaps in compliance still exist, and the CAAR continues to indicate plans to align its system with SMO 1, including through proposed amendments to the Law on Audit and a related QA regulation. The proposals are aimed at clarifying the scope of entities subject to mandatory QA reviews, independence of inspectors with respect to their engagement in audit activities, and independence of the Quality Control Committee of CAAR in regards to the funding and management of its work. As of 2018, the expected date of adoption of the law and the regulations is not clear.

    The Regulations on Auditing Service Quality Control in Azerbaijan Republic (Decision No. 190/2 of 2008) and the Regulation on Quality Control Committee of the Chamber of Auditors of the Republic of Azerbaijan (Decision No. 210/2 of 2010), 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 Committee for disciplinary proceedings, where necessary.

    At the beginning of each year, the Quality Control Department 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.

    CAAR reports that it conducts reviews based on International Standards on Quality Control 1 (ISQC 1), ISA 220 Quality Control for an Audit of Financial Statements, and the requirements of SMO 1. CACR reports to be executing plans to enforce implementation of ISQC 1 by its members, establish controls to monitor adherence to ethical principles, and initiate institutional and legal measures to ensure external oversight of audit quality.

    Additionally, 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. For example, according to the Report on the Results of the Activities of the Chamber of Auditors of Azerbaijan for 2017, CAAR conducts workshops on quality control such as the one held on March 6, 2017 informing auditors about the results of audits carried out in 2016. It also offered several seminars to provide guidance on the procedures of internal quality control—for example, on October 26, 2016, CAAR organized a seminar called “Instruction on the Implementation of Internal Quality Control of Audit.”

    In an effort to support its small and medium-sized entities members with quality control, the organization translated and disseminated the Guide to Quality Control for Small- and Medium-Sized Practices in 2009 and conducted training seminars on the material produced.

    CAAR is encouraged to continue undertaking actions to bring the QA review system fully in line with the requirements of SMO 1 and report on progress, if any, in 2019–2020. Organizing information in its SMO Action Plan in a more user-friendly way is also recommended.

    Current Status: Plan

  • 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 institutes, and the CAAR.

    CAAR administers a professional educational program, 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, there is no indication that the revised IES of 2015 have been made publicly available or incorporated either by the CAAR or other stakeholders.

    CAAR included the following long-term plans in its SMO Action Plan covering the period 2014–2020: (i) increase the range and rigor of courses offered; (ii) revise and enhance examination requirements for licensing auditors; (iii) increase the number of learning events (for example, thematic lectures, seminars, round tables, and scientific-practical conferences) to improve auditors’ skill level; and (iv) include various standard-related topics and content on the Code of Ethics of Professional Accountants in training courses and material.

    In an effort to support members, CAAR signed a Memorandum of Understanding with Azerbaijan State Economic University and the Association of Chartered Certified Accountants (ACCA) to conduct high quality training activities. According to a report published by CAAR, it prepared several training programs (60 hours) for auditors between September and December 2016.

    Although activities in the area of education of auditors appear to be undertaken, the CAAR is encouraged to update its SMO Action Plan to indicate specific recent and planned activities aimed at achieving compliance with SMO 2. As the first step, CAAR is encouraged to review the national requirements against those of the 2015 IES (a recommendation of the 2015 assessment) and, if gaps exist, consider working with other stakeholders to bring the national requirements in line with those of the revised standards. At a minimum, the chamber should bring its professional educational program and CPD requirements fully in line with the revised IES and to work with universities to ensure that the university accounting education curricula is updated on an ongoing basis to incorporate new international pronouncements. 

    Current Status: Plan

  • SMO 3: International Standards on Auditing

    Neither the Law on Audit nor other rules and regulations specify auditing standards to be applied in the Republic of Azerbaijan. De facto, standards required by the CAAR are to be used. The proposed amendments to the Law on Audit are expected to legally authorize CAAR to establish auditing standards in the Republic of Azerbaijan.

    Since 2005, CAAR has required application of ISA. As of 2018, 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 is in the process of translating the 2017 ISA.

    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 and participated in regional and international events such as those hosted by the Center for Financial Reporting Reform of the World Bank and other international counterparts. To support its members providing services for SMEs, CAAR translated and made publicly available the Guide to Using International Standards on Auditing in the Audits of Small- and Medium-Sized Entities, Third Edition.

    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. For more information please refer to the Report on the provision of practical assistance to audit organizations and independent auditors on the use of International Standards on Auditing available on the CAAR website.

    CAAR is encouraged to identify opportunities to reduce the time lag in translating the latest IAASB pronouncements for application in the jurisdiction. The CAAR is also encouraged to update its SMO Action Plan to indicate specific recent and planned activities aimed at achieving compliance with SMO 3. CAAR may wish to consider how it may participate in the submission of comments on IAASB exposure drafts in order to contribute its experiences and perspective.

    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 2014 version into Azerbaijani. Although the chamber made its members aware about the requirements of the NOCLAR standard, no plans to translate the most recent of the Code have been reported.

    CAAR indicates that the new Law on Audit that is being considered for adoption as of 2018 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 Committee. Complaints and other information received from the various sources by the chamber regarding non-compliance with ethical requirements are carefully investigated and when non-compliance with ethical requirements is identified, appropriate administrative and disciplinary actions are taken by the Board based on referrals of the Ethics Committee.

    CAAR reports that it supports its members with the implementation of the Code through inclusion of ethics-related topics in its continuing professional development course offerings and other trainings. According to its 2016 and 2017 annual reports, CAAR offered a number of continuing professional development courses on the topic of ethical requirements such as amendments introduced to the Code by the IESBA. It also organizes seminars and roundtable events on the subject and reportedly provides materials, resources, and examples on practical application of the Code.

    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 journal Economy and Audit.

    CAAR is encouraged to establish ongoing processes to ensure that all new and revised requirements of the IESBA Code of Ethics are translated and incorporated into national requirements on an ongoing basis and work with other stakeholders to ensure that all professional accountants in the jurisdiction, not only auditors, are subject to ethical requirements. The CAAR is also encouraged to update its SMO Action Plan to indicate specific recent and planned activities aimed at achieving compliance with SMO 4.

    Current Status: Plan

  • SMO 5: International Public Sector Accounting Standards

    CAAR has no direct responsibility for the adoption of public sector standards in Azerbaijan since it is under the mandate of the Ministry of Finance. Nevertheless, CAAR reports to have been working to promote adoption of IPSAS by engaging in discussions with, and providing technical support to, relevant government agencies, including the translation of IPSAS as part of a World Bank project. In 2014, CAAR indicated that it prepared an action plan to foster relationship with the executive bodies of the government that have responsibility for adoption of IPSAS in Azerbaijan. However, no progress on this initiative has been reported.

    To keep members aware of developments in the public sector, CAAR reportedly informs its members of new, proposed, and revised IPSAS and other pronouncements issued by IPSASB 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.

    With the adoption of IPSAS becoming effective in 2019, CAAR is encouraged to consider, if deemed relevant and necessary, developing a strategy outlining its involvement in public sector accounting issues and support it can provide to public sector accountants in the jurisdiction.

    Current Status: Execute

  • 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 independent auditors and audit firms.

    CAAR reports to have established investigations, disciplinary, and appeals committees to carry out its I&D functions since 2015, using SMO 6 as a benchmark. The Investigations Committee is responsible for investigating complaints while the Disciplinary Committee is responsible for conducting hearings and imposing sanctions.

    In 2014, CAAR conducted a self-assessment of its I&D system against 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 2018, no progress in closing these gaps has been reported.

    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.

    Staff reiterate CAAR has been proactive in reviewing its I&D system to align it with SMO 6 requirements. The chamber is now encouraged to outline steps it will take to consider, execute, and implement changes to enhance its I&D system. As a starting point, CAAR is strongly encouraged to revisit the results of the 2014 self-assessment, reconfirmed in 2018, and to develop a realistic, specific, integrated plan to bring its I&D system in compliance with the SMO 6 requirements. This plan should have concrete timelines for their execution—for example, a timeline for when the review will be completed—to enable the chamber to track its progress against its plans and make strategic adjustments as needed.

    CAAR is also encouraged to update its SMO Action Plan to indicate specific recent and planned activities aimed at achieving compliance with SMO 6 and to organize the information in a user-friendly way.

    Current Status: Plan

  • 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. IFRS and IFRS for Small- and Medium-sized Entities (SMEs) are adopted by the Ministry of Finance in accordance with the Law on Accounting of 2004.

    CAAR is an active member of the Ministry of Finance’s Advisory Board and reports to be involved as its member in setting the national accounting standards and participating in drafting legislation to enhance the statutory framework for the profession.

    CAAR indicates that it provides support to its members with the implementation of IFRS through educational programs and continuing professional development trainings. According to its 2016 and 2017 annual reports, CAAR held a number of seminars and trainings on the subject and participated in regional and international events such as those hosted by the European Federation of Accountants and Auditors and the Center for Financial Reporting Reform of the World Bank.

    If deemed feasible and relevant, with the new requirement to apply IFRS for SMEs instead of the national accounting standards effective 2019, CAAR could consider its role in ensuring that (i) the latest version of the international standards are being applied in the jurisdiction and (ii) providing or facilitating further support to the profession with the implementation of the international requirements. In the next round of update of its SMO Action Plan, CAAR is encouraged to provide specific examples of the actions it undertakes to fulfill the requirements of SMO 7.

    Current Status: Review & Improve


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.



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