Institute of Accountants and Auditors of Montenegro
Associate | Established: 2002 | Associate since 2003
There are two professional accountancy organizations in Montenegro.
IAAM is the older of the two organizations established under the Law on Accounting and Auditing of 2002. IAAM was responsible for the certification of auditors and regulation of the profession until 2005, when the Law on Accounting and Auditing of 2005 was passed. In 2007, the Ministry of Finance delegated the responsibility for the education, examination, and certification of auditors to the Institute of Certified Accountants of Montenegro. IAAM’s focus has become to: (i) promote the profession in Montenegro; and (ii) train and educate accounting professionals.
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.
SMO 1: Quality Assurance
The Law on Auditing No. 001 of 2017 introduced the requirement to establish a mandatory quality assurance (QA) review system for all audits to be implemented by the Ministry of Finance under the oversight of the Council on Audit. The Ministry of Finance established the Audit Oversight Directorate (AOD) to carry out the QA review system, which has been operational since 2018.
IAAM has no direct responsibility for the establishment or operation of the system and sees its role as that of raising awareness of the Ministry of Finance and the Council on Audit about the requirements of SMO 1 and raising awareness of professional accountants of the importance of quality control, compliance with ISQC1, ISAs, other related standards, and ethical requirements.
IAAM reports that in 2019–2020 it plans to organize meetings with the Council on Audit to offer their technical resources, to encourage a review of the system against SMO 1 and raise awareness about the new quality control standards to be issued by the IAASB. However, audit-related activities tend to fall outside the scope of IAAM’s priority focus as most of its members are accountants.
To raise awareness of the profession about the importance of quality control standards, IAAM reports to have organized a conference in 2018 on ISQC 1 and ISA 220 in cooperation with the State Audit Institution and publishes articles in professional journals. It also plans to work with auditors and audit firms to identify areas where support is needed and determine ways to address the need.
IAAM’s plans to offer its resources to the Ministry of Finance and the Council for Audit to assist with the establishment of QA review system and to raise their awareness about the requirements of SMO 1 and other best practices in QA reviews are commendable. With no direct authority for either establishment or implementation of a QA review system, IAAM is encouraged to consider its role in this area, and, if deemed feasible and necessary, develop a plan with a defined timeframe on how to assist the regulators and the profession as the new QA review system is being operationalized. Support activities may include assisting firms and auditors in understanding the objectives of quality control and implementing and maintaining appropriate support system for its members through organizing workshops and online courses, as well as translation and publication of implementation support materials on best practices, for example, quality control methodology.
SMO 2: International Education Standards
IAAM is licensed by the Ministry of Education as a provider of educational programming for accountants and maintains a two-tiered certification scheme that offers voluntary qualifications of Accounting Technician and Authorized Accountant. Education of accountancy professionals must be conducted in accordance with the Montenegrin National Accounting Educational Standard (CORS-1) published in the Official Gazette of Montenegro in August 2014, which is based on 2009 IES and the IESBA Code of Ethics for Professional Accountants. IAAM reports that its educational programming is in line with the CORS.
IAAM’s Accountant certification prepares the candidate to provide services to small and medium size enterprises. To enroll in the program, a candidate must have a secondary education (exemptions are offered if the candidate has a university degree). Meanwhile, the Authorized Accountant certification prepares professional accountants in business and to progress to the Certified Accountant if they choose. To enter the program, candidates must have a university degree and practical experience from three to five years, depending on the type of degree. IAAM indicates that all candidates need to submit evidence of practical experience according to CORS-1 requirements. Holders of the Accounting Technician certification must take an additional five exams to obtain an Authorized Accountant certificate.
All IAAM’s members are subject to the continuing professional development (CPD) requirements as stipulated in the Rulebook on Continuous Education, which was updated in 2021 and effective January 2022. Members are obliged to complete 40 hours of education annually through three forms of CPD: courses, seminars, and subscription to IAAM’s journals. Per the new Rulebook, members must now submit evidence of CPD compliance to IAAM.
The extent of alignment of IAAM’s educational programming with the IES needs to be established. To this effect, IAAM indicated plans to strengthen its programming by reviewing it against IES requirements and to promote adoption of IESs to other stakeholders, in particular universities and the Ministry of Finance. The institute also plans to review IFAC-issued An Illustrative Competency Framework for Accounting Technicians in order to enhance its Accounting Technician certification.
IAAM, as of 2021, is organizing trainings weekly for candidates to help improve computer and IT skills. It has also stated plans to upgrade the competencies and skills of its members in the area of tax consultancy. The institute is preparing the education program for training of tax advisers in collaboration with the Croation Chamber of Tax Advisers and Slovenian Chamber of Tax Advisers.
Staff reiterate that, as an IFAC member organization, IAAM continue to work to bring national and, at a minimum, its own educational programming in line with IES. In 2019, newly revised IES were issued that address learning and development for information and communications technologies (ICT) and professional skepticism. As market expectation increases for ICT skills and professional skepticism, the revised standards address the competencies, skills, and behaviors for both aspiring and professional accountants in these critical areas. The revisions are effective January 2021. IAAM is encouraged to work with other stakeholders in the jurisdiction to review the accountancy education against the revised IESs and jointly develop plans to address any gaps. 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. IAAM is also strongly encouraged to clarify its membership composition and requirements.
SMO 3: International Standards on Auditing
To date, the Serbian translation of 2016–2017 ISA is in use in Montenegro. With no direct responsibility for the translation and/or publication of auditing standards, and having mostly accountants as members, audit-related activities tend to fall outside the scope of IAAM’s priority focus. IAAM reports that it strives to support implementation of ISA by monitoring new and amended standards issued by the IAASB and disseminating information on updates to the standards through workshops, seminars, conferences, and magazine articles. IAAM reports that it also notifies its members of exposure drafts issued by the IAASB to encourage those who have an interest in quality control, auditing, review, other assurance or related standards, to voice their opinions.
International standards are in general not available in Montenegrin, with Serbian translations in use in the jurisdiction, usually with a time lag between the issuance of new ISA and their translation into Serbian. IAAM indicates that it plans to raise awareness of the Institute of Certified Accountants of Montenegro (ICAM), which is responsible for the promulgation of the standards, of the need to reduce the time lag in translations.
It is not clear whether ISA are covered in IAAM’s initial and continuing professional development programming and whether IAAM maintains ongoing processes to incorporate the changes in the international standard-setting into its programming in a timely manner.
IAAM is encouraged to update its educational programming on a regular basis to include new and revised ISA, if applicable. It is recommended that IAAM also consider activities to support its members with the implementation of the 2018 Handbook now effective and which includes revised standards ISA 250 and 540. Such activities may include holding seminars, focused trainings, and disseminating information on the developments in the area through different communications means, among other activities. IAAM is also strongly encouraged to clarify its membership composition and requirements.
SMO 4: Code of Ethics for Professional Accountants
The Law on Accounting No. 052 of 2016 and the Law on Auditing No. 001 of 2017 require Certified Accountants and Certified Auditors, the two legally protected designations, to adhere to the Code of Ethics as issued by IESBA and adopted and published by the designated competent authority — the Ministry of Finance delegated this to the Institute of Certified Accountants of Montenegro (ICAM). ICAM has a formal agreement with the Serbian Association of Accountants and Auditors (SAAA) and the Association of Accountants and Auditors of Republic Srpska (AAARS) to access a common translation of the IESBA Code. SAAA has translated the 2018 version of the Code and revisions in the 2020 Handbook effective in 2021 (Part 4B and role and mindset) are available in Bosnian.
IAAM, as the organization uniting accountants who are not subject to ethical requirements at the jurisdiction level, reports that it requires its members to follow the code of ethics applicable to Certified Accountants and Auditors. Printed versions of the 2016 Code were distributed to IAAM’s members and it intends to distribute the 2018 Code translations. No further actions to support members with the implementation of the Code have been reported.
Ethics is also not included in IAAM’s educational programming. To address this gap, in 2020, IAAM reported that it is considering an Ethics Education Toolkit and other ways to incorporate ethics and support members with adhering to ethical requirements.
It also indicates plans to encourage ICAM to adopt the most recent version of the Code and to disseminate information on international developments to its members.
Staff reiterate its previous recommendation to consider HYPERLINK "https://www.ifac.org/knowledge-gateway/building-trust-ethics/discussion/paying-professional-ethics-more-lip-service" activities to support its members with the implementation of the Code and to enforce its requirements. Implementation support 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. IAAM is also encouraged to work with ICAM and other relevant stakeholders in the jurisdiction to consider ways to raise awareness of its members as well as the wider profession about the ethical requirements.
SMO 5: International Public Sector Accounting Standards
The Law on State Property of 2009 and the Law on Financing of Local Self-Government of 2010 prescribe accounting standards for the public sector in Montenegro, with the Ministry of Finance responsible for their adoption. The Rulebook on the Method of Making and Submitting of Financial Statements of the Budget, State Funds and Units of Local Self-Government of 2010 prescribes the application of accounting standards that use a modified cash-basis of accounting.
In November 2019, the Government of Montenegro adopted the Law on Accounting in Public Sector. The new law, which will come into effect in 2022, introduces accrual accounting with national standards that reference IPSAS. This is also reflected in the 2020 IFAC/CIPFA Public Sector Financial Accountability Index and the World Bank/CFRR’s 2020 Stocktaking of Public Sector Accounting and Reporting Environment in PULSAR Beneficiary Countries: Montenegro.
IAAM indicates that public sector activities fall within the scope of the MoF, and the area is not among its priority focuses. IAAM sees its role around public sector accounting as that of promoting full adoption of IPSAS to the government and engaging with public institutions in educating public sector accounting professionals.
In 2016, IAAM signed a memorandum of cooperation with the Montenegro State Audit Institution. As part of the Memorandum IAAM holds seminars for public sector employees tailored for state auditors.
Montenegro is in the process of implementing FATF recommendations and IAAM contributes to this process by organizing continuous seminars in cooperation with Administration for Prevention of Money Laundering and Terrorism Financing for its members on annual basis.
IAAM’s support to public sector professionals through cooperation with the State Audit Institution is commendable. IAAM is encouraged to consider other opportunities presented by the newly adopted law, especially in providing a newly adopted public sector qualification. Also, if deemed feasible and relevant, the institute could consider offering its technical resources to the Ministry of Finance as the country transitions to the accrual-based public sector accounting standards.
SMO 6: Investigation and Discipline
IAAM is not involved in operation of an I&D system in the jurisdiction for Certified Accountants and Certified Auditors, the two legally protected designation in the jurisdiction. It is in a position, however, to investigate and discipline its members and reports to have established an I&D system. It indicates that it has procedures in place but only has a small number of complaints.
IAAM reports in its SMO Action Plan that the I&D system is maintained and overseen by an Investigations Committee, Disciplinary Committee, and Appeals Committee. IAAM indicates that upon receipt of a complaint or knowledge of non-compliance through a news report, the Investigations Committee would assemble a three-person panel which includes persons who are independent of both the situation and the individual(s) in question. The Investigation Committee would receive the complaint, analyze it, determine the complexity of the complaint, ask for the additional information from the member regarding the complaint, and if the Investigations Committee finds that there is a case to pursue it refers it to the Disciplinary Committee. The Discipline Committee may determine the sanction to impose, which could include expulsion from membership in cases of serious breaches of professional and ethical rules.
As compared to the SMO 6 benchmark, IAAM reported that the members of the IAAM Disciplinary Committee only comprise professional accountants and there is no linkage with QA review results for any members that might be auditors. IAAM indicates that it is in the process of re-assessing its I&D system which it expects to complete by December 2020.
Through its webpage and publications, IAAM reports that members and the public are informed of the I&D procedures and how to initiate a complaint. However, as of the date of the assessment, this information does not appear on its webpage.
IAAM also reports that it provides training sessions on the I&D system to ensure that members are aware of its purpose, function, and outcomes. As of the date of the assessment, specific examples have not been provided.
IAAM also states plans to initiate dialogue with other Montenegrin PAOs regarding the need for coordination and communication in the area of I&D and establish communication with the regional PAOs to exchange experiences. An event with the stakholders is expected to be held in December 2020.
Although staff’s previous recommendation to assess the existing I&D system against the requirements of the revised SMO 6 has been met, no plans have been indicated to bring the system fully in line with the SMO 6 requirements. It is therefore recommended that IAAM review the results of the self-assessment and develop plans, specific and with a defined timeframe, to bring the system fully in line with the international best practices formulated in SMO 6. In addition, IAAM is encouraged to cooperate with ICAM and the Ministry of with a view to establish an I&D system for all professional accountants in the jurisdiction and, to the extent possible and feasible, cooperate with the regulators to effectively and efficiently implement I&D procedures, which are foundational to maintaining public trust and confidence in the profession.
SMO 7: International Financial Reporting Standards
The Law on Accounting No. 052 of 2016 requires that all legal entities prepare financial statements in accordance with IAS/IFRS as issued by the IASB and adopted and published by the designated competent authority — in this case, the Ministry of Finance delegated this to the Institute of Certified Accountants of Montenegro. ICAM has published a list of adopted IFRS here. As of 2021, IFRS 9 and IFRS 15 are not adopted although IFRS 9 is encouraged for the banking sector.
Since September 2019, IAAM states it has been cooperating with the Russian professional organization National Institute of Professional Accountants, Financial Managers and Economists (NIPA), and the Chamber of Auditors of Azerbaijan, for knowledge-sharing purposes, as well as to exchange experiences and articles regarding IFRS implementation. In 2020, IAAM reported endeavors to exchange experts for seminars with other professional accountancy organizations (PAOs) in the region.
To support its members with IFRS implementation, IAAM indicates in its SMO Action Plan that it offers CPD seminars, presentations, and workshops on new or amended IFRS and IFRIC interpretations. For example, between 2017 and 2019, IAAM held the following seminars tailored to its members—some examples include: (i) Making and Submitting Annual Financial Statements and VAT Return for Legal Entities; (ii) On IFRS 15 and IFRS 16, in Cooperation with the State Audit Institution of Montenegro; (iii) Making and Submitting of Annual Financial Statements and VAT Return for Legal entities for 2017; and (iv) Accounting and Tax Regulations. In 2021, it has offered CPD on IFRS 16 which is now applicable in the jurisdiction.
IAAM further supports its members by providing them with information on any new or revised IFRS through its website, the quarterly magazine Racunovodstvo, revizija i finansije, and other publications which are targeted to the IAAM membership and other accountancy and finance professionals.
However, it is not clear whether IFRS are covered in IAAM’s initial professional development courses and whether IAAM maintains ongoing processes to incorporate the changes in the international standard-setting into its exams in a timely manner.
IAAM is encouraged to update its educational programming on a regular basis to include new and revised IFRS. If already so, this should be noted in its Action Plan. Efforts to adopt and translate remaining IFRS Standards are also strongly encouraged as part of bringing transparency, accountability, and efficiency to national, regional, and global markets. If deemed feasible, IAAM is encouraged to work with other stakeholders in the jurisdiction to develop an approach to translating international standards that would minimize the time lag in available translations.
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