Institute of Certified Accountants of Montenegro

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.

ICAM has no direct authority for quality assurance (QA) reviews yet it has actively promoted the importance of establishing a QA system amongst relevant authorities. Prior to the adoption of the Law on Auditing No. 001 of 2017 and in the absence of the legal requirement, ICAM proactively designed and operationalized a voluntary system of QA reviews for its members to ensure compliance with ISQC1. It continues to offer voluntary reviews for members who are Certified Accountants and now supports the Council in its oversight activities through its representation in the Council by one member from the ICAM Board of Directors.

ICAM developed a QA questionnaire designed to identify areas of weakness in quality control and audit practices of firms. Its tools were integrated into other manuals and guidelines developed for the AOD by World Bank under the Capacity Building for Effective Audit Oversight Project IDF Grant No. TF 013555.

ICAM continues to educate members on the importance of QA and liaises with the MoF regarding annual reports. It has offered multiple trainings and workshops on the QA process for its members and since 2017 has participated in a regional network of PAOs led by ICAEW with the objective of strengthening quality assurance. ICAM representatives have also attended several trainings organized by the CFRR. In 2021, ICAM plans to raise awareness and support members with understanding and implementation of new quality management standards.

Together with the Serbian Association of Accountants and Auditors and the Association of Accountants and Auditors of Republika Srpska, ICAM translated IFAC’s “Guide to Quality Control for Small-and Medium-Sized Practices.”

ICAM is 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. Given its experience with carrying out QA reviews, it is encouraged to continue supporting the AOD to conduct inspections in line with SMO 1.

Current Status: Review & Improve

Initial and continuing professional development (IPD and CPD, respectively) requirements for bookkeepers, Authorized Accountant, Certified Accountants, and Certified Auditors are established in the Montenegrin National Accounting Educational Standard (CORS-1), the Law on Accounting No. 052 of 2016 and the Law on Auditing No. 001 of 2017, and are implemented by the Ministry of Finance, the Institute of Certified Accountants of Montenegro (ICAM), and the Institute of Accountants and Auditors of Montenegro (IAAM). Tertiary education is provided by universities, and, according to the World Bank 2017 Accountancy Education: Benchmarking Study, master’s and undergraduate programs compare well against the revised 2015 IES requirements. ICAM indicates it continues to work towards better integration between academic and professional accountancy programs to enable students to find an efficient route to qualification.

The Law on Accounting No. 052 of 2016 and CORS-1 establish IPD requirements for Certified Accountants and authorize the Ministry of Finance to oversee the certification process implemented by ICAM. ICAM developed its professional education and training program in line with the Montenegrin National Accounting Educational Standard (CORS-1), which is based on 2009 IES requirements. CORS-1 was published in the Official Gazette of Montenegro in August 2014 and must be applied by accountancy education providers.

The Centre for Financial Reporting Reform (CFRR) of the World Bank provided support to the Government of Montenegro as well as ICAM (see 2017 Accountancy Education: Benchmarking Study) to enhance educational requirements. The World Bank determined that although ICAM’s program (which is based on ACCA’s syllabus and program) incorporates most of the IES requirements related to IPD, a structured review and update to the education program and the teaching resources of ICAM is needed. Specifically, greater alignment in areas such as governance, risk and ethics, and advanced financial and performance management would be beneficial. Practical experience requirements, as well as the enforcement of the requirements, also need to be further aligned with those of IES — i.e., introduce a system that would recognize practical experience based on a competency framework rather than just relying on the length of time employed under eligible supervisors.

ICAM reports that it is updating its IPD program to align with the latest revisions to the IES requirements, particularly revisions to IES 2, 3, 4, which became effective as of January 2021 (in the 2019 Handbook). The revisions to these standards reflect the need for competency-based approaches as well as the increasing demand for accountants skilled in information and communications technologies and place further emphasis on professional skepticism skills and behaviors. To this end, ICAM indicates it updates its education and training to include new IAASB and IESBA pronouncements. It is also striving to equip members with skills necessary for the new digital reality, intensified by COVID-19.

CPD for Certified Accountants is required according to the Law on Auditing No. 001 of 2017 as prescribed by the Competent Authority, which is ICAM. ICAM’s CPD requirements follow both an input and competency-based approach in line with the IES 7 requirements and compliance with CPD is monitored.

It seems that educational requirements for Certified Accountants and Certified Auditors mostly incorporate the 2015 revised IES requirements; however, CORS-1 — which must be applied — is based on the 2009 IES. ICAM is encouraged to clarify if amendments to CORS-1 have been made to bring education providers’ programming in line with the latest IES. ICAM can utilize the IFAC Accountancy Education E-Tool to review the current version of IESs and share these requirements with relevant stakeholders such as universities and other professional accountancy organizations in Montenegro.

It is recommended that ICAM review and complete the IES Checklist developed by IFAC which may be useful in progressing with the adoption of the revised requirements of the IES, especially IES 2, 3, 4 and 8 that are effective as of January 2021 as well as recommendations from the CFRR’s 2017 benchmarking study.

Current Status: Execute

The Law on Auditing No. 001 of 2017 requires all mandatory audits to be conducted in accordance with ISA as issued by the IAASB and adopted and published by the Ministry of Finance or a competent authority entrusted by the Ministry — which in this case is the Institute of Certified Accountants of Montenegro.

ICAM has a formal agreement with the Serbian Association of Accountants and Auditors to access the Serbian translation of the standards for application in the jurisdiction. As of 2022, the Serbian translation of 2016–2017 ISA is available.

To support its members with the implementation of ISA, ICAM (i) develops and disseminates ISA implementation guidance; (ii) builds awareness of the adopted standards; (iii) builds awareness of recent updates and modifications to ISA via publications such as ICAM’s journal and seminars; and (iv) incorporates ISA into its education, examination programs, initial and continuing professional development programs while collaborating with other parties responsible for initial professional development requirements to ensure that up-to-date standard-related topics are being included in education and training programs. It also offers technical courses and organizes annual knowledge sharing and networking events to educate Certified Auditors on a range of audit-related topics.

Lastly, ICAM solicits members’ feedback on IAASB Exposure Drafts as part of its participation in international standard-setting processes.

The 2021 IAASB Handbook became effective in December 2022 and contains revisions such as ISA 540, ISA 315, and the quality management standards. Available translations of the latest standards are essential adoption and implementation support tools. ICAM is encouraged to continue strengthening the implementation support it provides to members.

Current Status: Review & Improve

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.

ICAM maintains several processes to support its members’ implementation by (i) developing and disseminating guidance on the Code; (ii) building awareness of the adopted standards through annual events and the distribution of publications; (iii) enhancing awareness of recent updates and modifications to the Code; (iv) adding the Code into its education and examination programs; and (v) incorporating the Code, including recent updates and modifications into initial and continuing professional development activities.

ICAM members who are non-compliant with the IESBA Code of Ethics are subject to formal reprimand, then a freezing of membership status, and in extreme cases, revocation of certification and license.

ICAM is concerned with raising members’ awareness of ethical requirements in the age of digitalization and cybersecurity. It has discussed confronting corruption in the jurisdiction and encouraging its members to rely on the IESBA Code of Ethics. It is planning to develop a survey to better understand ethical dilemmas the profession is facing.

Lastly, ICAM states it is active in international standard-setting processes and responds to IESBA Exposure Drafts.

The 2022 International Code of Ethics Handbook became effective in December 2022 and contains revisions such as 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); revisions to promote the role and mindset expected of all professional accountants; revisions to the non-assurance services (NAS) and fee-related provisions of the Code; revisions to address the objectivity of an engagement quality reviewer (EQR) and other appropriate reviewers; and the quality management-related conforming amendments to the Code that were issued as a result of the finalization of the IAASB’s suite of quality management standards.

ICAM is encouraged to continue timely updates and implementation support in this area to ensure that professionals can implement the revisions once effective.

Current Status: Review & Improve

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. Implementation is expected to begin in 2024. 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.

ICAM does not have any authority in the standard-setting area for public sector accounting. Nevertheless, ICAM promoted the adoption of accrual-basis IPSAS in Montenegro and engaged in raising awareness of its importance through events and media. ICAM participated in dialogues with the Ministry of Finance and the State Audit Institution on the importance of public financial management reform that contributed to the adoption of the new law that will require accrual accounting based on IPSAS. It indicates it will continue to have these dialogues.

Additionally, ICAM, as part of the Consortium that includes the University of Podgorica Faculty of Economics of Montenegro and the Serbian Association of Accountants and Auditors, has translated the 2013 version of IPSAS and has shared it with the Ministry of Finance and used it in its CPD programs.

From 2016 — 2020, ICAM, in cooperation with the Government of Montenegro, the Chartered Institute of Public Finance and Accountancy (CIPFA) and the Center of Excellence in Finance, offered training for public sector accountants. This is part of a three-module system with module one focusing on national laws related to taxation and budget, module two on financial reporting in accordance with IPSAS, and module three on management accounting in accordance with IPSAS. ICAM indicates its staff were trainers during modules two and three.

Lastly, ICAM reports that with CIPFA it is considering the possibility of offering CIPFA certificates for its members.

ICAM is encouraged to continue its advocacy and support toward accrual-basis IPSAS implementation. Several revisions to IPSAS have been issued since 2013 and translation of the 2022 IPSASB Handbook may be beneficial. ICAM may also find IFAC’s Train the Trainers: Introduction to IPSAS resource helpful for training and educational activities it offers.

Current Status: Sustain

The Law on Auditing No. 001 of 2017 establishes investigation and disciplinary provisions for Certified Accountants and Certified Auditors, the two protected designations in the jurisdiction.

ICAM reports that it operates its own system for its members (Certified Accountants and Certified Auditors must be members of ICAM) that is in line with SMO 6 requirements. It has a three-tiered I&D system for its members, encompassing investigation, disciplinary, and appeals processes, and provides ICAM with the power to enforce sanctions. To date, roughly 3% of ICAM members have reportedly been investigated by ICAM’s Investigation Committee, and only three cases progressed further since violations were found.

ICAM has strived to bring its system in line with the requirements of SMO 6. In 2011, the institute reviewed the system existing at the time and adopted a new Rulebook on I&D procedures, which was subsequently updated in 2014 to better comply with the revised SMO 6 requirements. The Rulebook was updated again in 2018 to allow for substitution of members on the committees in case of any conflict of interest. It has also established links between quality assurance reviews and its Education Committee, which monitors members’ compliance with CPD. ICAM has collaborated with other professional accountancy organizations in the region to share experiences and knowledge on disciplinary procedures.

ICAM submits annual reports on I&D to the Ministry of Finance and ICAM Assembly. It also has signed agreements with the national entity for anti-money laundering and CFT and the national security agency.

ICAM indicates it raises awareness amongst its members and the public about the I&D system through initial and continuing professional development training, ICAM publications, seminars, and other media to encourage adherence to the rules of professional conduct and educate individuals on how to report violations of the rules.

ICAM has made progress in aligning its I&D procedures with the global best practices of SMO 6. It is encouraged to continue to review its procedures to ensure the effectiveness and efficiency of the enforcement system. Given its experience in this area, it may consider working with the other accountancy organization and regulators in the jurisdiction to ensure that all professional accountants working in Montenegro are subject to I&D procedures that meet SMO 6. This is essential to public trust and confidence in the profession.

Current Status: Review & Improve

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 2022, IFRS 9 and IFRS 15 are not adopted although IFRS 9 is encouraged for the banking sector.

ICAM indicates it has processes in place to support its members’ implementation of the standards, which include (i) developing and disseminating IFRS implementation guidance in the form of a manual on the practical application of IFRS; (ii) raising awareness of the adopted standards as well as any amendments; (iii) raising awareness of recent updates and modifications to IFRS—for example, ICAM offers periodic seminars on amendments to the standards; (iv) including IFRS into its education and examination programs; (v) incorporating IFRS into initial professional development activities; and (vi) adding recent updates and modifications to IFRS into continuing professional development activities.

Lastly, ICAM responds to exposure drafts of the IASB as part of its participation in the international standard-setting process.

As of the date of the assessment, not all IFRS Standards are adopted and available in the national language. Efforts to adopt and translate remaining IFRS Standards are strongly encouraged as part of bringing transparency, accountability, and efficiency to national, regional, and global markets. ICAM may consider including challenges with adoption and implementation of these standards within its SMO Action Plan and indicating the plans, resources, and support needed to advance adoption and support professionals with properly applying the latest standards.

Current Status: Execute