Croatian Audit Chamber

Associate | Established: 2006 | Associate since 2008

The CAC is a 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 CAC, which operates 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 audit examinations; and (iv) translate auditing standards and ethical requirements for certified auditors. In addition to being an IFAC Associate member, CAC is an associate 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.

Methodology
Last updated: 12/2022
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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. The CAC details its planning and execution process of the QA review system during this period in its SMO Action Plan and results of inspections remain available. 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. In 2019, the MoF established an independent unit to carry out inspections using the Committee of European Audit Oversight Bodies (CEAOB) methodology accepted at the EU-level and the SMO 1 requirements. The MoF has issued annual reports on the results of its QA work for 2019, 2020 and 2021.

  However, CAC indicates that there is a lack of personnel resources at the MoF to create a long-term, sustainable environment for the supervision of audits. As of 2022, there are currently discussions to amend the Audit Law which would split responsibilities of QA reviews between CAC (non-PIEs) and the MoF (PIEs) to leverage CAC’s experience & knowledge in carrying out QA reviews and further audit quality in the jurisdiction.

  For its members, CAC currently develops and presents training modules on QA topics including relevant quality control & audit standards. CAC has translated ISQM 1, 2 and ISA 220 (revised) and in August 2022, CAC adopted the standards in advance of the December 2022 effective date as issued by the IAASB. In 2022, CAC included QM in its annual conference and organized webinars to raise members’ awareness. Between September – November 2022, CAC intends to organize multiple CPD seminars on the standards.

  The CAC is encouraged to continue providing IFAC updates on the progress of its engagements with the MoF in ensuring the QA system continues to align with SMO 1 & considering the impacts of the new quality management standards on the QA procedures.

  Current Status: Sustain

• 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 provide IPD training courses for candidates preparing to take the audit examinations; conduct the audit examinations; as well as CPD – all supervised by the MoF.

  The IPD program and audit examination content are prescribed by an MoF Rulebook. CAC indicates that it continuously reviews & improves both components of the qualification process to assess candidates’ theoretical and practical knowledge and incorporate the latest versions of IES 2, 4, and 6.

  In 2022 – 2023, CAC indicates that it is proposing amendments to the Audit Law that would change the auditor’s qualification process and enhance incorporation of the IES requirements. Proposed changes include: (a) permitting candidates with three years’ experience and a university degree (300 credits) or five years’ experience and 180 credits to sit for the audit exam; (b) offering tailored exams based on years of practical experience and changing the structure and content of the audit exam to modules with a focus on problem solving questions and case analysis (demonstrating competencies) instead of written papers; (c) making the IPD program voluntary instead of mandatory; and (d) offering an aptitude test for foreign qualified candidates. CAC notes that it is collaborating with PAOs in Germany, Czech Republic, Slovenia, Slovakia, and has signed an MoU with the ACCA-UK to advance these changes. CAC also cooperates with the Faculty of Economics, University of Zagreb to support university alignment with the IES.

  CAC monitors candidates’ practical experience and verifies experience with employers prior to permitting candidates to sit for the exam consistent with IES 5.

  Auditors are required to fulfill 120 hours of CPD over a 3-year period – aligned with IES 7. CAC administers the CPD program and offers regular CPD seminars. In the 2019-2021 cycle, CAC organized a CPD program covering 28 topics relevant to the audit profession averaging 130 hours each year. Auditors must submit evidence of CPD fulfillment to the MoF or practicing licenses may be revoked. CAC also offers CPD for engagement partners in line with IES 8 and is promoting the formal adoption of IES 8 to the MoF’s CPD Rulebook. In November 2022, CAC introduced online CPD courses which have an obligatory assessment of competencies prior to awarding the CPD credit as part of its plans to transition away from relying on the input-method.

  The steps/plans that CAC has outlined to strengthen national accountancy education with the IES requirements are positive, especially around demonstrating competencies. The chamber should utilize & complete the IES Self-assessment developed by IFAC throughout its update process to ensure & document that the changes to education programming and examinations meet the IES benchmarks. The self-assessment may also be shared with others, such as universities & employers, so that all key stakeholders are aware of & understand how IES requirements can be incorporated into accountancy education & professional development.

  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 translate, gazette, and adopt 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.

  As of August 2022, CAC has completed the translation of the 2020 Handbook of International Standards on Auditing and Quality Control along with several other IAASB pronouncements, including quality management standards and standards for agreed-upon procedures effective throughout 2022. CAC publishes these translations on its website for its members and is considering how to better unify & present the translated standards for its members’ online usage.

  The CAC assists its members with the implementation of auditing standards by regularly organizing courses and workshops to educate certified auditors about ISA and new auditing requirements. 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 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 has demonstrated that it maintains a timely translation and implementation support process to fulfill its obligations under SMO 3.

  Current Status: Sustain

• 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, under the oversight of the Ministry of Finance. The CAC adopted and translated the 2010 IESBA Code of Ethics with a process to adopt and translate revisions on an ongoing basis. As of December 2022, the CAC is translating and will adopt the 2022 International Code of Ethics for Professional Accountants (including International Independence Standards). 

  The CAC reports that it works with auditors to assist them in the consistent application of the Code and to promote ethical conduct in all aspects of business and management levels. The CAC organizes panels on the implementation of EU requirements (e.g., independence, conflict of interest, non-audit services for PIE and rotation matters), 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.

  CAC maintains timely translation efforts in this area to ensure professionals can apply upcoming revisions to the International Code of Ethics. 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.

  Current Status: Sustain

• SMO 5: International Public Sector Accounting Standards

  The CAC notes that the adoption & implementation of public sector accounting standards are not within the scope or function of the association. The CAC will use its best endeavours to promote the adoption of IPSAS to the government through presentations and meetings with the Ministry of Finance and the State Audit Office. Previously, several meetings and consultations were held with the relevant stakeholders, but no activities have been reported since 2016 in this area.

  As part of applying its best endeavors, CAC may develop plans & report on how it is promoting the adoption of IPSAS and participating in other initiatives related to the public sector where feasible.

  Current Status: Sustain

• 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). The CAC has assessed the 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.

  CAC finished all I&D procedures that were initiated based on the previous Audit Act and on the SMO 6 requirements – the details of which are elaborated on in its SMO Action Plan. Subsequently, in 2019, the CAC established a Court of Honor to serve as a supplementary enforcement mechanism. The Court of Honor will conduct proceedings for settling disputes arising between a member and CAC concerning any violation of obligations towards the organization (e.g., financial obligations; violations of the CAC Statue and other acts) as well as disputes between members. External parties may also refer to the Court of Honor regarding any conflicts with CAC members.

  The Court of Honor has three members elected by CAC membership. CAC will coordinate a reconciliation process where parties may reach a settlement before proceeding to the Court of Honor. If this does not work, the matter will go before a Court of Honor hearing. Any disciplinary measures will be published on the CAC’s website.

  The CAC reviewed its system and notes that it aligns with most SMO 6 best practices, except that the Court of Honor individuals are involved in both the reconciliation process and possibly the disciplinary hearing and it does not include non-auditors amongst its composition.

  IFAC commends CAC for the implementation of an I&D system in accordance with SMO 6 requirements from 2011–2017. 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. SMO 6 supports both professional accountants and non-accountants serving on the independent disciplinary committee and CAC is encouraged to continue engaging with the MoF and participating where possible in the enforcement procedures.

  Additionally, although the CAC’s Court of Honor is a supplementary enforcement mechanism, it is encouraged to consider how it can retain the best of practices of SMO 6 that it had adopted previously (i.e., different individuals involved in investigations & sanctioning and including a non-professional accountant).

  Current Status: Review & Improve

• SMO 7: International Financial Reporting Standards

  The CAC actively participates in the public consultations on corporate financial reporting standards at the jurisdictional level and collaborates with the Ministry of Finance (MoF) and the Financial Reporting Standards Board (FRSB) to review any changes to EU directives and make 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 with the implementation of accounting standards, the CAC organizes 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 other financial & tax experts, 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

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.