Armenia

The Law on Accounting of 2019 and the Law on Regulation and Public Oversight of Accounting and Auditing of 2019 establish financial reporting requirements for companies other than those regulated by the Central Bank of Armenia and authorize the Ministry of Finance to develop accounting policies. The Public Oversight Board (POB) is responsible for adoption and promulgation of accounting standards. Under the Law on Accounting, IFRS as promulgated by the POB are required for application in financial statements of (i) public interest entities (PIEs); (ii) large companies; and (iii) groups. The Law on Accounting defines PIEs as banks, credit organizations, payment and settlement organizations, investment fund managers, securities market reporting issuers, investment companies, regulated market operators, the Central Depositary, insurance companies, reinsurance companies, and insurance brokers. Small- and medium-sized entities (SMEs) must follow IFRS for SMEs while micro entities apply a simplified Chart of Accounts developed by the POB.

The Central Bank of Armenia establishes additional reporting requirements for the entities it regulates (banks, credit institutions, pawn shops, investment companies, insurance companies, among other). As mentioned above, these entities are of public interest and therefore must apply IFRS in preparation of their financial statements.

The Law on Accounting requires financial statements of PIEs, large companies, medium companies, and companies that are part of groups be audited. Provision of auditing services is regulated by the Law on Audit Activity of 2019 and the Law on Regulation and Public Oversight of Accounting and Auditing of 2019, which authorize the Ministry of Finance to develop auditing policies under the oversight of the POB.

Under the Law on Audit Activity, audits must be conducted in accordance with ISA and other IAASB pronouncements as promulgated by the POB. To date, the 2009 version of ISA translated in Armenian is being applied, with several subsequently issued ISA adopted for application in 2017.

Auditors and expert accountants in the Republic of Armenia are regulated at the state level under the Law on Regulation and Public Oversight of Accounting and Auditing of 2019, Law on Accounting of 2019, and the Law on Audit Activity of 2019. To date, the new laws are in the process of being implemented and the new regulatory framework is being established.

The laws contain requirements for practicing as an auditor and an expert accountant, including professional standards to be applied (auditing, reporting, ethics, continuing professional development (CPD), among others).

To obtain a qualification of an auditor, candidates must have a university degree; pass corresponding qualification examinations; and satisfy the practical experience requirement of a minimum of three years. To provide auditing services, qualified professionals must be members of an accredited public organization (APO) and be included in its register.

To obtain a qualification of an expert accountant, candidates must have a university degree; pass corresponding qualification examinations; and satisfy the practical experience requirement. Qualification of an expert accountants is required to provide certain services such as chief accountants of PIEs, large, and medium enterprises. The Central Bank of Armenia establishes additional requirements for chief accountants of institutions it oversees. Qualified expert accountants must be members of an APO and be included in the register to provide services.

Regulation of auditors and expert accountants is entrusted to APOs under the oversight of the Public Oversight Board (POB). Accreditation criteria for an APO include (i) having at least 100 individual members and at least 10 firms; (ii) application of international standards applicable to conduct of audit; and (iii) administering a certification scheme that is in line with the International Educational Standards. As of 2020, only the Chamber of Auditors and Expert Accountants of Armenia (CAA) has been accredited by the Ministry of Finance as an APO. Over the next few years, CAA is required to bring its practices in full compliance with the accreditation criteria.

An APO, under the oversight of the POB, (i) certifies auditors and expert accountants; (ii) develops and administers examinations for auditors and expert accountants; (iii) enforces CPD requirements for its members; (iv) conducts quality assurance (QA) reviews of its members who offer audit services; (v) oversees compliance of its accounting expert members with applicable laws and regulations; (vi) maintains a register of its members; and (vii) administers an I&D system for its members.

The POB is responsible, among other functions, for (i) translation and official publication of IFRS, ISA, IESBA Code of Ethics, including incorporating amendments to the international standards within one year since their effective date); (ii) oversight over APOs; (iii) approval of I&D processes and procedures of APOs; (iv) overseeing qualification examinations of auditors and expert accountants; (v) overseeing provision of CPD; (vi) overseeing QA review systems of auditors and expert accountants; and (vii) maintaining a unified register of auditors and expert accountants.

The Law on Regulation and Public Oversight of Accounting and Auditing of 2019 that became effective January 1, 2020 established the Public Oversight Board (POB) entrusted with the independent oversight of accounting and auditing activity.

The POB is responsible, among other functions, for (i) translation and official publication of IFRS, ISA, IESBA Code of Ethics, including incorporating amendments to the international standards within one year since their effective date); (ii) oversight over APOs; (iii) approval of I&D processes and procedures of APOs; (iv) overseeing qualification examinations of auditors and expert accountants; (v) overseeing provision of CPD; (vi) overseeing QA review systems of auditors and expert accountants; and (vii) maintaining a unified register of auditors and expert accountants. To date, the operations and procedures of the POB are being established.

The Chamber of Auditors and Expert Accountants of Armenia (CAA)

The CAA, formerly Armenian Association of Accountants and Auditors (AAAA), is a non-government public organization established in October 1997 as a Union of Certified Accountants, subsequently reestablished in 1999 as the AAAA under Resolution No. 659 of 1999. As part of the reform of regulation and oversight of the accountancy profession, in 2020, CAA was recognized by the Ministry of Finance as an accredited public organization (APO) entrusted with regulation of the accountancy profession under the Public Oversight Board (POB) following the adoption of the Law on Regulation and Public Oversight of Accounting and Auditing of 2019. The CAA is an Associate of IFAC.

In 2008, the World Bank published the Report on the Observance of Standards and Codes (ROSC)—Accounting and Auditing: Armenia, which made a number of recommendations for improving the legal and statutory framework for corporate financial reporting. In 2014, based on those recommendations, a comprehensive program for the short- to medium-term reform of corporate financial reporting in Armenia was set out in a Country Strategy and Action Plan for the period of 2014–2022. The plan focuses on: (i) strengthening accountancy and audit education; (ii) raising public awareness of the benefits of corporate financial reporting and audit; (iii) further developing an appropriate legislative framework for the regulation and oversight of financial reporting and auditing; and (iv) strengthening the implementation of the statutory framework.

Amendments to the Law on Accounting and Law on Auditing Activity, as well as a new Law on Regulation and Public Oversight of Accounting and Auditing of 2019 have been adopted as part of the reform process, bringing the corporate financial reporting framework in the jurisdiction closer to international best practices. To date, the new laws are in the process of being implemented and the new regulatory framework is being established.

The Law on Regulation and Public Oversight of Accounting and Auditing of 2019 that became effective on January 1, 2020, introduced mandatory quality assurance (QA) reviews of all statutory audits. Accredited public organizations (APOs) are now responsible for establishing and implementing a QA review system for their members under the oversight of the Public Oversight Board (POB). The POB approves the annual review plan and has the right to conduct QA reviews. To date, the new laws are in the process of being implemented and the new regulatory framework is being established.

Prior to 2020, the Ministry of Finance (MoF) was responsible for establishing and implementing a QA review system for auditors under the Law on Audit Activity of 2002, which generally referred to mandatory QA reviews, without specifying the requirements. The system never became operational.

As of the time of the writing of this report, only the Chamber of Auditors and Expert Accountants of Armenia (CAA) has been recognized as an APO. CAA reports that it is in the process of developing a QA review system that is in line with SMO 1 requirements. The new system is expected to be launched at the end of 2021. Previously, the CAA, with support of international firms, created procedures, review questionnaires, assessment methodology for a voluntary QA review and conducted one pilot review.

Current Status: Not Adopted

The Law on Accounting of 2019, the Law on Audit Activity of 2019, and Law on Regulation and Public Oversight of Accounting and Auditing of 2019 establish initial professional development (IPD) and continuing professional development (CPD) requirements for the two protected designations in the Republic of Armenia: auditors and expert accountants. To date, the new approach to education of professional accountants in the jurisdiction established by the laws is being implemented.

Accredited public organizations (APOs) under the oversight of the Public Oversight Board (POB) will (i) certify auditors and expert accountants in line with IES; (ii) develop and administer examinations for auditors and expert accountants in line with IES; and (iii) enforce CPD requirements for its members established by law. As of the time of the assessment, only the Chamber of Auditors and Expert Accountants of Armenia (CAA) has been recognized as an APO.

To obtain a qualification of an auditor or an expert accountant, candidates must have a general university degree; pass respective qualification examinations; and satisfy practical experience requirement of minimum three years. The CAA’s certification scheme for auditors has been historically based on the Association of Certified and Chartered Accountants’ program and on the IESs.

Auditors and expert accountants must register with CAA and are required to complete 40 hours of CPD annually, which fulfills the IES 7 input-based approach.

According to the CFRR / World Bank publication National Education Initiatives – Armenia (2019), there are improvements that can be made to the educational requirements to better align with the latest, competency-based IES requirements. For universities, the areas of Management and Ethics, Performance Management and Decision Making, Audit and Assurance Engagements, and Audit Testing and Reporting need strengthening as well as developing training in professional values, ethics, and attitudes. Monitoring and assessment of practical experience also needs to be revised from an input-approach (number of years - 3) to competency-based.

The CAA reports that it plans to review the qualification scheme to bring it in line with the IESs and new legislation and to promote and facilitate the adoption and implementation of the IES requirements across all stakeholders.

Current Status: Partially Adopted

The Law on Accounting of 2019 requires financial statements of public interest entities, large companies, medium companies, and companies that are part of groups be audited.

Under the Law on Audit Activity of 2019 that became effective in January 2020, audits must be conducted in accordance with ISA and other IAASB pronouncements as promulgated by the Public Oversight Board (POB). The operations and procedures of the POAB continue to be established.

Prior to 2020, the Ministry of Finance of the Republic of Armenia was responsible for adoption of ISA and has translated and adopted for application the 2009 version of ISA. Several subsequently issued ISA were also adopted for application in 2017. In 2021, the POB is translating the 2018 IAASB Handbook with financing from the World Bank.

Current Status: Partially Adopted

Law on Accounting of 2019 and the Law on Audit Activity of 2019 require auditors and expert accountants, the two protected designations in the Republic of Armenia, to abide by the Code of Ethics for Professional Accountants issued by the IESBA and promulgated in the Republic of Armenia by the Public Oversight Board (POB), which is still establishing its operations and procedures.

The Chamber of Auditors and Expert Accountants of Armenia (CAA) has translated and made publicly available the 2016 version of the IESBA Code for application. It indicates that it will now communicate the need to translate the 2018 Code to the POB.

Current Status: Partially Adopted

Under the Law on Public Sector Accounting, the Ministry of Finance (MoF) has the responsibility for establishing public sector accounting standards. According to the World Bank/CFRR’s 2020 Stocktaking of Public Sector Accounting and Reporting Environment in PULSAR Beneficiary Countries: Armenia the currently effective standards are national standards that are accrual-based and use IPSAS as a reference point.

Current Status: Partially Adopted

The Law on Regulation and Public Oversight of Accounting and Auditing of 2019, the Law on Audit Activity of 2019, and the Law on Accounting of 2019 contain provisions related to investigation and discipline (I&D) of auditors and expert accountants, the two designations regulated at the state level. The laws authorize accredited public organizations (APOs) to establish and implement their I&D systems under the oversight of the Public Oversight Board (POB). As of 2021, the new laws are in the process of being implemented and the new regulatory framework is being established.

As of the time of the writing of this report, only the Chamber of Auditors and Expert Accountants of Armenia (CAA) has been recognized as an APO. CAA reports that it is in the process of establishing a new I&D mechanism that is in line with the new laws and SMO 6.

Previously, the Law on Audit Activity of 2002 authorized the Ministry of Finance to administer an I&D system for auditors. There is no indication that the Ministry of Finance had an operational I&D system in place.

Current Status: Not Adopted

The Law on Accounting of 2019 and the Law on Regulation and Public Oversight of Accounting and Auditing establish financial reporting requirements for companies in Armenia and authorize the Ministry of Finance to regulate accounting practices. IFRS as translated and officially promulgated by the Public Oversight Board (POB) are required for application in financial statements of (i) public interest entities (PIEs); (ii) large companies; and (iii) groups.

The Law on Accounting defines PIEs as banks, credit organizations, payment and settlement organizations, investment fund managers, securities market reporting issuers, investment companies, regulated market operators, the Central Depositary, insurance companies, reinsurance companies, and insurance brokers. Small- and medium-sized entities must follow IFRS for SMEs while micro entities apply a simplified Chart of Accounts developed by the POB. As of 2021, the POB is being established and has not so far translated any new standards. The 2018 version of IFRS and 2015 IFRS for SMEs are the most recent standards to be translated by the Ministry.

Current Status: Partially Adopted

Relevant Organizations

• Chamber of Auditors and Expert Accountants of Armenia (CAA)
• Central Bank of America (CBA)
• Ministry of Finance of the Republic of Armenia
• Public Oversight Board (POB)

Relevant Legislation

• Law on Accounting No. 9228, 2002
• Law on Audit Activity, 2002

Relevant Publications

• Chamber of Auditors and Expert Accountants of Armenia (CAA), SMO Action Plan, 2020.
• Asian Development Bank, Enhancing Financial Disclosure Standards in Transitional Economies II, October 2010.
• IFAC, CIPFA, International Public Sector Financial Accountability Index: Country Data, 2020.
• IFAC, CIPFA, International Public Sector Financial Accountability Index: 2018 Status Report, 2018.
• IFRS Foundation, “IFRS Application Around the World—Jurisdictional Profile: Armenia,” June 2017.
• World Bank, STAREP, Accounting and Auditing Community of Practice (A&A CoP): Public Oversight and Quality Assurance in Armenia: Current Status, April 2014.
• World Bank, STAREP, Accounting and Auditing Community of Practice (A&A CoP): Financial reporting requirements applicable to different types of entities in the Republic of Armenia, April 2014.
• Work Bank, STAREP, National Education Initiatives – Armenia (2019)
• World Bank, PULSAR, Stocktaking of Public Sector Accounting and Reporting Environment in PULSAR Beneficiary Countries: Armenia, 2020.
• World Bank, The Country Strategy and Action Plan (CSAP) for Enhancing Corporate Financial Reporting in the Republic of Armenia, 2014.
• World Bank, Report on the Observance of Standards and Codes (ROSC)—Accounting and Auditing: Armenia, June 2008.