Croatian Audit Chamber

Associate | Established: 2006 | Associate since 2008

The CAC is the professional accountancy organization that unites all certified auditors in Croatia; membership in the PAO is mandatory. The Audit Act, as amended in 2017 regulates the functions of CAC under the oversight of the Ministry of Finance. According to the Audit Act, CAC’s responsibilities include the following: (i) conduct IPD training with respect to the audit examinations; (ii) conduct continuing professional development courses for certified auditors; (iii) conduct the audit examinations; and (iv) authority to translate auditing standards and ethical requirements for certified auditors.

The CAC is a member of Accountancy Europe.

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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: 09/2021
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SMO Action Plan

Status of Fulfillment by SMO

  • SMO 1: Quality Assurance

    The CAC was responsible for the quality assurance (QA) review system in Croatia from 2010–2017, under the supervision of the Audit Public Oversight Committee. During this time, the CAC established a QA system that fulfilled the requirements of SMO 1 and developed processes to ensure that compliance was maintained.

    In 2010, the CAC completed the first initial assessment reviews (IAR) of all audit firms in the CAC Registry. This exercise was based on an initial assessment questionnaire (IAQ) which the CAC sent to all audit firms to get an overview of size, range of activities and to assess the quality of the firms. From 2011, the CAC began with six-year plans and detailed annual monitoring plans for each year. In selection of the audit firms for QA reviews, the CAC used a combination of cycle-based and risk-based approaches.

    At the end of June 2017, the CAC finished with its sixth annual QA plan and with the second three-year QA review cycle of audit firms which perform audits of PIEs as well as the first six-year review cycle of audit firms for non-PIEs. During these six years, the CAC QA team had carried out 428 QA reviews (approx. 70 QA reviews per one year). Of that total number, about 149 were QA reviews of audit firms with PIEs.

    The overall results of each inspection year were published in the CAC’s annual reports and are publicly available on CAC’s website.

    In addition, the CAC had established ongoing processes to review the effectiveness of the implementation of the QA review system. In its SMO Action Plan update, the CAC reports that, during the six-year period of active QA work, it conducted a detailed analysis of the strengths and weaknesses of the current QA system in order to enhance its QA methodology.

    In 2017, the Audit Act was amended to transpose the requirements of the EU Audit Reform and the MoF took over the responsibility of the QA review system, effective on January 1, 2018. CAC reports that it took an active role in collaborating with the MoF by providing proposals for an adequate QA system that meets SMO 1 requirements as well as the EU reform. CAC based its proposal from the lessons learned from its experience implementing the QA system in Croatia as well as from best practices from other PAOs in the EU. As of this time, the MoF’s QA system is still in transition and is expected to be operational before the end of 2019. The CAC assessed the MoF’s QA system against the requirements of SMO 1 and it aligns against a majority of the requirements.

    For its members, CAC currently develops and presents training modules on QA topics including ISQC 1 and ISA.

    Staff commend and acknowledge CAC’s best efforts in implementing a QA review system in accordance with SMO 1 requirements from 2010–2017. Staff recognize that while CAC does not have direct responsibility for the QA review system under the amended Audit Act, it has accumulated a wealth of knowledge and expertise that can benefit the MoF as it operationalizes the new system for Croatia. As there are identified gaps in the MoF’s QA system, the CAC is to consider what actions it can take to promote the elimination of the gaps to the MoF. The CAC is encouraged to continue providing IFAC updates on the progress of its dialogue and cooperation with the MoF in ensuring the QA system continues to align with SMO 1 and to advocate that the CAC plays a role in the reviews of non-PIE audits.

    Importantly, CAC is also encouraged to continue to monitor and support the implementation of ISQM1 among members when it becomes effective as of December 15, 2022. Resources on the quality management standards are available on the IAASB website.

    Current Status: Review & Improve

  • SMO 2: International Education Standards

    The Audit Act was amended in 2017 and stipulates that the Ministry of Finance (MoF) is responsible for setting initial professional development (IPD) requirements and continuous professional development (CPD) requirements for certified auditors. The CAC, subject to MoF oversight, is empowered to conduct CPD trainings and provide IPD training courses for candidates preparing to take the audit examinations. CAC is also given the authority to conduct the audit examinations. With respect to the IPD and CPD requirements set in the amended Audit Act of 2017, CAC conducted an assessment against IES and reports that the revised IES 1–7 have been adopted, while CAC is in the process of incorporating IES 8 in its 2019 CPD program for its members.

    With the legislative amendments now effective, at present, CAC’s responsibility is to offer preparatory courses for candidates seeking to take the audit exam that is under the MoF supervision. CAC reports that it will use this opportunity to ensure that the designed program will be in line with IES based on its past experience in incorporating the IES into its IPD requirements for auditors which included exams and practical experience. The CAC had already launched activities to create the appropriate structure and content of the syllabus by signing a memorandum of understanding with the Association of Chartered Certified Accountants (ACCA) in 2014. However, the implementation of the plan has been delayed due to activities surrounding the implementation of the EU Audit Reform.

    With regards to CPD, CAC continues to administer its program to its members. Since 2013, CAC has been providing workshops for its members on a wide range of topics including the implementation of ISQC 1, ISA, and IFRS, as well as seminars on topics of interest for certified auditors. CAC reports that it has updated its CPD program for 2019 in accordance with the new Audit Law.

    In the next update of its SMO Action Plan, the CAC is encouraged to report on the progress to adopt and implement IES 8 into its CPD program for its members. For example, it would be helpful to understand any progress with respect to designing a preparatory course for the exam and how this may be aligned with the revised IES.

    Current Status: Execute

  • SMO 3: International Standards on Auditing

    ISA are adopted by law in Croatia, with the overall responsibility of translating the standards resting with the CAC, under the oversight of the Ministry of Finance. CAC has established processes to incorporate new and revised ISA on an ongoing basis, including a partnership with the Union of Accountants, Auditors, and Financial Workers of Federation of Bosnia and Herzegovina to perform translations of the standards for application in Croatia. To date, CAC has completed the translation of the 2018 Handbook of International Standards on Auditing and Quality Control along with several other IAASB pronouncements.

    The CAC proactively assists its members with the implementation of auditing standards by organizing courses and workshops to educate certified auditors about ISA and new auditing requirements. In addition, since 2010, the CAC has been holding annual symposiums on ISA to promote proper understanding of how to use ISA in practice. It also provides its audit firm members practical guidance and expert opinions on audit matters.

    The CAC also ensures that initial and continuing professional development programs incorporate the most recent amendments to the international pronouncements and that the implementation of ISA is a subject of quality assurance reviews.

    CAC seems to maintain a timely translation and implementation support process to fulfill obligations under SMO 3. The IAASB has issued an exposure draft of the proposed separate standard for audits of Less Complex Entities. CAC is encouraged to participate in the public consultation process for this landmark new draft standard.

    Current Status: Review & Improve

  • SMO 4: Code of Ethics for Professional Accountants

    Under the Audit Act, all auditors in Croatia are required to abide by the IESBA Code of Ethics as translated by the CAC. The CAC adopted and translated the 2010 IESBA Code of Ethics with a process to adopt and translate revisions on an ongoing basis. In 2020, CAC completed the translation of the 2018 IESBA Code of Ethics which is available on their website.

    The CAC reports that it works with auditors to assist them in the consistent application of the Code to promote ethical conduct in all aspects of business and management levels. The CAC reports that it organizes panels on the implementation of European Union requirements, initiates discussions with representatives of the accountancy profession and relevant institutions on ethical issues, and ensures that initial and continuing professional development programs incorporate the most recent amendments to the international pronouncements. Additionally, compliance with ethical requirements has been a subject of quality assurance reviews and a consideration when investigating complaints.

    There upcoming revisions to the Code in the 2020 Handbook – also available in the IESBA eCode — including revisions to Part 4B of the Code?to reflect terms and concepts used in the IAASB's International Standard on Assurance Engagements (ISAE) 3000 (Revised), which are effective June 2021 and revisions to promote the role and mindset expected of all professional accountants which are effective in December 2021. CAC is encouraged to maintain its timely translation efforts in this area to ensure professionals can apply the revisions once effective. also encouraged to consider what awareness raising activities it will undertake to promote the updated Code. The CAC is encouraged to consider increasing its involvement in the international standard-setting process by participating in the public consultations initiated by the IESBA and providing comments on IESBA Exposure Drafts.

    Current Status: Review & Improve

  • SMO 5: International Public Sector Accounting Standards

    Although it has no responsibility for the adoption of public sector accounting standards, the CAC’s stated objective is to promote the adoption of IPSAS to the government through presentations and meetings with the Ministry of Finance and the State Audit Office. In 2011–2012, several meetings and consultations were held with the relevant stakeholders. No information on subsequent actions is available.

    Although it is not directly involved in the adoption of public sector standards, in the next update of its SMO Action Plan, the CAC is encouraged to consider developing more specific and corresponding plans to demonstrate how it is promoting the adoption of IPSAS and participating in other initiatives related to the public sector where feasible.

    Current Status: Execute

  • SMO 6: Investigation and Discipline

    Amendments to the Audit Act of 2017 became effective as of January 2018 and formally transitioned the responsibility of the investigative and disciplinary (I&D) system for auditors from the CAC to the Ministry of Finance (MoF). CAC has finished all I&D procedures that were initiated based on the previous Audit Act and it reports that it is collaborating with the MoF to promote the incorporation of the SMO 6 best practices as it establishes the new I&D system. The CAC assessed the current I&D system of the MoF and reports that it aligns with a majority of SMO 6 requirements except that the composition of the various committees do not include professional accountants or non-accountants.

    The I&D procedures that the CAC had previously established were based on the requirements of SMO 6. The system was operational during 2011–2017 with around 20 cases reviewed per year. All final disciplinary decisions were published on the CAC website. The CAC reports the legally effective sentence which was imposed on an audit firm or certified auditor is recorded in the register and is also publicly available.

    Despite the shift of its regulatory responsibility in 2018, CAC has established its own I&D mechanism for its members, known as the Court of Honour. The Court of Honour will conduct proceedings for settling disputes arising between a member and CAC concerning any violation of obligations towards the organization as well as disputes between members. External parties may also refer to the Court of Honour regarding any conflicts with CAC members. CAC reports that the Court of Honour’s rules of procedures will be adopted in April 2019. The CAC assessed its system and reports that it aligns with most SMO 6 requirements, except that while the Court of Honor is an independent entity, both the investigative and disciplinary functions are carried out by the same committee and it does not include non-auditors amongst its composition.

    Staff commend and acknowledge CAC’s best efforts in implementing an I&D system in accordance with SMO 6 requirements from 2011–2017. Staff recognize that while CAC does not have direct responsibility for the I&D system under the amended Audit Act, it has accumulated a wealth of knowledge and expertise that can benefit the MoF as it operationalizes the new system. As the CAC has assessed the MoF’s system against the requirements of SMO 6, it is encouraged to consider how it will promote the elimination of the gap to the MoF to ensure that the system is fully aligned with the requirements. In addition, the CAC is encouraged to undertake the same efforts for its Court of Honor to eliminate gaps and ensure that the system is aligned with SMO 6 requirements.

    Current Status: Execute

  • SMO 7: International Financial Reporting Standards

    Having no direct responsibility for the adoption of accounting standards, the CAC nevertheless actively participates in the public consultations at the jurisdictional level and collaborates with the Ministry of Finance (MoF), the Financial Reporting Standards Board (FRSB), and the Croatian Association of Accountants and Financial Experts (CAAFE) on reviewing changes to EU legislation and making consequent changes to the national legislation. The CAC provided technical inputs to the amended Accounting Act of 2015. The Accounting Act adopts IFRS for public interest entities (PIEs) and the amendments in 2015 expanded the PIE definition.

    To support its members and the accountancy profession as a whole with the implementation of accounting standards, the CAC organizes (in collaboration with CAAFE) roundtables, workshops, and conferences on current IFRS-related topics. Since 2010, the CAC has been annually updating its guidance on the public disclosure of financial statements. This guidance is intended to provide auditors with technical assistance in the implementation of the Accounting Act and regulations regarding the content of financial statements. In cooperation with the MoF, FRSB, and CAAFE, the CAC is also involved in conducting studies that examine the effect of the implementation of particular standards and interpretations for use in the EU. Additionally, CAC includes IFRS and IFRS-related topics in the curricula for continuing professional development courses.

    Current Status: Sustain


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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