Reports on the Observance of Standards and Codes (ROSC) Frédéric Gielen Lead Financial Management Specialist Europe and Central Asia Region SERBIA THE WORLD BANK

Background: The Need for a Strengthened International Financial Architecture 1990s – Emerging Market Crises and contagion effects East Asia (Thailand) Philippines Malaysia Hong Kong Indonesia Taiwan South Korea ROSC - SERBIA

Background: The Need for a Strengthened International Financial Architecture Shift from ex-post crisis resolution Ex-ante crisis prevention ROSC - SERBIA

Background: Origins of the ROSC program The G-22 Reports: focus on crisis prevention - Transparency and Accountability (Led to ROSC program) - Strengthening National Financial Systems - Government guarantees to the private sector ROSC - SERBIA

The ROSC program: Comprises 12 Fundamental Standards Securities Regulation Banking Supervision Accounting & Auditing Corporate Governance Insurance Supervision Insolvency & Creditor Rights ROSC - SERBIA

Importance of High Quality Accounting and Auditing Accounting and Auditing Development of Capital Markets Job Creation Financial Stability Private Sector Growth Financial Sector Development Improved Access to Credit Financial Information ECONOMIC GROWTH ROSC - SERBIA

A&A ROSC: Assessing the Quality of the A&A Framework Economic Context Legal & Institutional Framework Accounting in Practice Auditing in Practice Recommendations FINDINGS Factual Assessment Perceptions ROSC - SERBIA

A&A ROSC: Assessing the Quality of the A&A Framework Benchmarks: International Financial Reporting Standards International Standards on Auditing Acquis communautaireGood international practice ROSC - SERBIA

A&A ROSC: Global Coverage Latin America and the Caribbean Europe and Central Asia Middle East and North Africa Africa South Asia East Asia ROSC - SERBIA

A&A ROSC: in Europe and Central Asia (August 5, 2005) ROSC - SERBIA

The Case of Serbia: Economic Goals - Access to credit, particulary for SMEs - Development of capital markets - Development of the private sector - European Union Integration Promote: Avoid: ROSC - SERBIA

How can A&A help? Accounting and Auditing Development of Capital Markets Job Creation Financial Stability Private Sector Growth Financial Sector Development Improved Access to Credit ECONOMIC GROWTH ROSC - SERBIA

ROSC is a the first step in the process of reform Statutory Framework Monitoring & Enforcement Education & Training Accounting Profession & Ethics Accounting Standards Auditing Standards ROSC - SERBIA

All supporting pillars need to be strengthened Statutory Framework Monitoring & Enforcement Education & Training Accounting Profession & Ethics Accounting Standards Auditing Standards ROSC - SERBIA

A&A ROSC Findings Standards claim compliance with IFRS but actually diverge in some instances IFRS ISA Acquis Communautaire Good International Practice (+) (-) ROSC - SERBIA Accounting Standards

A&A ROSC Findings Inappropriate scope of application of IFRS IFRS ISA Acquis Communautaire Good International Practice (+) (-) ROSC - SERBIA Statutory Framework

A&A ROSC Findings New Law on Business Companies IFRS ISA Acquis Communautaire Good International Practice (+) (-) ROSC - SERBIA Statutory Framework

A&A ROSC Findings Lack of consolidated accounts IFRS ISA Acquis Communautaire Good International Practice (+) (-) ROSC - SERBIA Statutory Framework

A&A ROSC Findings Underpinning of the audit profession yet to be established IFRS ISA Acquis Communautaire Good International Practice (+) (-) ROSC - SERBIA Statutory Framework

A&A ROSC Findings No requirement for audit practice quality review IFRS ISA Acquis Communautaire Good International Practice (+) (-) ROSC - SERBIA Monitoring and Enforcement

A&A ROSC Findings No effective accounting standard enforcement mechanisms IFRS ISA Acquis Communautaire Good International Practice (+) (-) ROSC - SERBIA Monitoring and Enforcement

A&A ROSC Findings No professional qualification that can lead to auditor status IFRS ISA Acquis Communautaire Good International Practice (+) (-) ROSC - SERBIA Education and Training

A&A ROSC Findings Supportive of IFAC Statements of Membership Obligations (SMOs) IFRS ISA Acquis Communautaire Good International Practice (+) (-) ROSC - SERBIA Accounting Profession and Ethics

A&A ROSC Findings Use of International Standards on Auditing and the IFAC Code of Ethics IFRS ISA Acquis Communautaire Good International Practice (+) (-) ROSC - SERBIA Auditing Standards

ROSC Recommendations: Promoting Confidence in Serbian Markets Statutory Framework Accounting and Auditing Standards Academic and Professional Education Monitoring & Enforcement ROSC - SERBIA

Statutory Framework Sound framework conducive to reliable financial reporting -Phased-in transposition of acquis communautaire -Statutory audit requirements -Improve financial transparency requirements ROSC - SERBIA

Accounting and Auditing Standards Robust and internationally accepted accounting and auditing standards -Application of IFRS by public interest entities but not SMEs -Adopt current ISA in their entirety ROSC - SERBIA

Academic and Professional Education Underpins de facto compliance with legal and regulatory requirements -Enhance academic education -Implement professional examination -Implement and monitor CPD requirements ROSC - SERBIA

Monitoring and Enforcement Essential to guarantee the quality of financial information -Establish a well governed audit profession, incl. quality assurance and public oversight -Establish institutionalized financial information mechanisms ROSC - SERBIA

Implementing the ROSC Recommendations National Steering Committee IAIS IFAC IASB Development Partners Basel Committee European Commission & Committees World Bank ROSC - SERBIA