International Federation of Accountants

Croatia

Member Organizations

Member Organization Associate

  Croatian Audit Chamber

Legal and Regulatory Environment

  • Overview of Statutory Framework for Accounting and Auditing

    As a member of the European Union (EU), the financial reporting requirements for commercial entities and financial institutions in Croatia are stipulated in EU Directives and Regulations, which are then transposed into Croatian national laws.

    The Companies Act regulates business activities in Croatia and sets basic financial reporting requirements. This Act is complemented by the Accounting Act (as amended in 2020) which establishes requirements for mandatory contents of bookkeeping documents and bookkeeping procedures. Under the Accounting Act, public interest entities (PIEs) are required to apply International Financial Reporting Standards (IFRS) as endorsed and published by the European Commission and translated into Croatian. PIEs include large entrepreneurs, listed companies, companies of specific national interest, banks and savings institutions, insurance and reinsurance companies, pension funds, leasing companies, and investment funds, among others. All other companies are classified as either “medium entrepreneurs” or “small entrepreneurs” and are required to prepare their standalone and consolidated financial statements in accordance with Croatian Financial Reporting Standards issued by the Financial Reporting Council (FRC) of the Ministry of Finance.

    The Audit Act (amended in 2017), and the Accounting Act regulate auditing activities and establishes mandatory audit requirements for the following types of companies: (1) large; (2) medium-sized; (3) PIEs; (4) limited partnerships and limited liability companies that exceed certain thresholds in terms of their size and number of employees; and (5) statements of entrepreneurs included in mergers or divisions. Under the Audit Act, audits must be conducted in accordance with ISA as promulgated by the International Auditing and Assurance Standards Board. The responsibility for translating ISA lies with the Croatian Audit Chamber, under the oversight of the MoF.

  • Regulation of Accountancy Profession

    In the Republic of Croatia, only certified auditors are regulated. The Audit Act (amended in 2017) regulates auditing activities in Croatia. It sets out the conditions of access to the profession, the main powers and responsibilities of the Ministry of Finance, the Croatian Audit Chamber (CAC), and general audit requirements.

    Certified auditor candidates must meet the following requirements: (i) a university or post-graduate degree (a minimum of 300 ECTS credits); (ii) five years of practical experience, of which three years must be conducting statutory audits under the supervision of a certified auditor; and (iii) fulfillment of a mandatory initial professional development (IPD) program before passing audit examinations. All certified auditors are required to become members of CAC and obtain a license from the Ministry of Finance.

    The amended Audit Act of 2017 resulted in a shift of certain regulatory responsibilities from the CAC to the Ministry of Finance (MoF). Effective January 1, 2018, the MoF became responsible for the following activities: (i) establishment of IPD requirements for certified auditors; (ii) establishment of continuous professional development (CPD) requirements for certified auditors; (iii) issuance of licenses for certified auditors and audit firms; (iv) maintenance of the register of certified auditors and audit firms; (v) conduct the aptitude test; (vi) establishment and operation of a QA review system for certified auditors and audit firms; (vii) establishment and operation of an investigation and discipline system for certified auditors and audit firms; and (viii) oversight of CAC’s activities.

    Under the MoF’s oversight, CAC has the authority to: (i) conduct mandatory IPD training with respect to the audit examinations as one of the IPD providers; (ii) conduct CPD courses for certified auditors along with other CPD providers; (iii) conduct the audit examinations; and (iv) translate auditing standards and ethical requirements for certified auditors.

    The accounting profession in Croatia is not regulated, with a degree in accounting being the only requirement for providing bookkeeping and other accounting services. Although the Croatian Association of Accountants and Financial Experts unites accountants in the jurisdiction through voluntary membership of individual practitioners in its regional branches, it does not establish entry, educational, ethical, or other requirements for its members.

  • Audit Oversight Arrangements

    The Audit Act was amended in 2017 and the Ministry of Finance assumed the role for the oversight of the audit profession with responsibility for the following activities: (i) establishment of initial professional development requirements for certified auditors; (ii) establishment of continuous professional development requirements for certified auditors; (iii) issuance of licenses for certified auditors and audit firms; (iv) maintenance of the register of certified auditors and audit firms; (v) establishment of a QA review system for certified auditors and audit firms; (vi) conduct the aptitude test; (vii) establishment of an investigation and discipline system for certified auditors and audit firms; and (viii) oversight of Croatian Audit Chamber’s activities. The Ministry of Finance is a member of the International Forum of Independent Audit Regulators.

  • Professional Accountancy Organizations

    The Croatian Audit Chamber (CAC)

    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.

  • Projects or Other Information

Adoption of International Standards

  • Quality Assurance

    The Audit Act in Croatia sets provisions for the establishment and implementation of a mandatory quality assurance (QA) review system for all audits. The Act was amended in 2017 and effective January 1, 2018, the QA review system is under the purview of the Ministry of Finance (MoF). According to the Act, audit firms carrying out audits of public interest entities are subject to a three-year review cycle. All other audit firms carrying out statutory audits are subject to a six-year review cycle.

    According to the Croatian Audit Chamber (CAC), 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.

    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).

    All relevant ISA and ISQCs have been adopted as quality control standards. In August 2022, CAC adopted ISQM 1 and 2 and ISA 220 (revised) in advance of the December 2022 effective date as issued by the IAASB.

    Current Status: Adopted

  • International Education Standards

    Only auditors in Croatia are subject to professional education requirements.

    Under the Audit Act (amended in 2017), the Ministry of Finance (MoF) is responsible for establishing initial professional development requirements (IPD) for certified auditors and for continuous professional development (CPD) requirements for certified auditors. The Croatian Audit Chamber (CAC), subject to MoF oversight, is empowered to provide IPD training courses for candidates preparing to take the audit examinations and conduct the audit examinations supervised by the MoF. The CAC also conducts CPD for auditors.

    Certified auditor candidates must meet the following requirements: (i) a university or post-graduate degree (a minimum of 300 ECTS credits); (ii) five years of practical experience, of which three years must be conducting statutory audits under the supervision of a certified auditor; and (iii) fulfillment of a mandatory IPD program before passing audit examinations.

    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. CAC also notes that it 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 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. CAC is also preparing to conduct post-CPD assessments for members to assess competencies instead of just relying on the input-method.

    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 (CAC’s SMO Action Plan & SMO 2 note contain details). 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.

    Current Status: Partially Adopted

  • International Standards on Auditing

    The Audit Act (amended in 2017) and the Accounting Act regulate auditing activities and establish mandatory audit requirements for the following types of companies: (1) large; (2) medium-sized; (3) PIEs; (4) limited partnerships and limited liability companies that exceed certain thresholds in terms of their size and number of employees; and (5) statements of entrepreneurs included in mergers or divisions. Under the Audit Act, audits must be conducted in accordance with ISA as promulgated by the IAASB and translated into Croatian. The responsibility of translating ISA lies with the Croatian Audit Chamber (CAC), under the oversight of the Ministry of Finance.

    The CAC has established processes to translate, gazette, and adopt new and revised ISA on an ongoing basis. To date, CAC has completed the translation of the 2020 Handbook of International Standards on Auditing and Quality Control along with several other IAASB pronouncements. In August 2022, CAC adopted ISQM 1 and 2 and ISA 220 (revised) in advance of the December 2022 effective date as issued by the IAASB.

    Current Status: Adopted

  • Code of Ethics for Professional Accountants

    Under the Audit Act, all auditors, the only regulated segment in the country, are required to abide by the IESBA Code of Ethics as translated by the Croatian Audit Chamber (CAC), under the oversight of the Ministry of Finance. In line with this mandate, the CAC will translate and adopt the 2022 International Code of Ethics for Professional Accountants (including International Independence Standards).

    Current Status: Adopted

  • International Public Sector Accounting Standards

    The Ministry of Finance is responsible for setting public sector accounting standards and has not adopted IPSAS. According to the IFAC/CIPFA International Public Sector Financial Accountability Index (2020) and the CFRR / World Bank’s Stocktaking of Public Sector Accounting and Reporting Environment in PULSAR Beneficiary Countries: Croatia (2020), the current standards are national standards on an accrual-basis. No plans on the adoption of IPSAS had been indicated.

    Current Status: Not Adopted

  • Investigation and Discipline

    The Audit Act in Croatia (amended in 2017) sets provisions for the establishment and implementation of a mandatory investigation and discipline (I&D) system for all certified auditors and audit firms. Previously, the Audit Act empowered the Croatian Audit Chamber (CAC) to implement the I&D system for the profession. The Act was amended in 2017 and effective January 1, 2018, the I&D system is under the purview of the Ministry of Finance. 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.

    In accordance with the amended Audit Act, the CAC has 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.

    Current Status: Partially Adopted

  • International Financial Reporting Standards

    As a member of the European Union (EU), the financial reporting requirements for commercial entities and financial institutions in Croatia are stipulated in EU Directives and Regulations, which are then transposed into Croatian national laws.

    The Companies Act regulates business activities in Croatia and sets basic financial reporting requirements for companies. This Act is complemented by the Accounting Act (as amended in 2020) which establishes requirements for mandatory contents of bookkeeping documents and bookkeeping procedures. Under the Accounting Act, public interest entities (PIEs) are required to apply International Financial Reporting Standards (IFRS) as endorsed and published by the European Commission translated into Croatian. PIEs include large entrepreneurs, listed companies, companies of specific national interest, banks and savings institutions, insurance and reinsurance companies, pension funds, leasing companies, and investment funds, among others.

    As per the IFRS Foundation, IFRS Standards as adopted by the European Union, which are IFRS Standards as issued by the IASB Board with some limited modifications such as the temporary 'carve-out' from IAS 39 Financial Instrument: Recognition and Measurement and a temporary extension of the scope of applying IFRS 9 Financial Instruments with IFRS 4 Insurance Contracts. The modifications affect a limited number of companies; most companies that do not apply the modifications can still state full compliance with IFRS Standards.

    All other companies are classified as either “medium entrepreneurs” or “small entrepreneurs” and are required to prepare their standalone and consolidated financial statements in accordance with Croatian Financial Reporting Standards issued by the Financial Reporting Council (FRC) of the Ministry of Finance. IFRS for SMEs has not been adopted.

    Current Status: Adopted

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.

 

Methodology

Methodology
Last updated: 12/2022
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