1. Main findings and recommendations of the Bulgaria A&A ROSC Update 12 December 2008 Luc Cardinal

2. 2 Presentation overview 1. A&A ROSC review process 2. Main findings 3. Policy recommendations 4. Moving forward Bulgaria A&A ROSC Update

3. 3 1. A&A ROSC update process Economic Context Legal & Institutional Framework Accounting in Practice Auditing in Practice RecommendationsFINDINGS Factual Assessment Perceptions Bulgaria A&A ROSC Update

4. 4 2. Main findings Statutory framework  Implementation of 2002 A&A ROSC recommendations  Adoption of international standards  Accession to the EU in 2007  Amendments to law for public oversight and quality control in 2008 – 8 th EU Directive  In some areas, Bulgaria has gone beyond the EU requirements and practices adopted by peer EU countries Bulgaria A&A ROSC Update

5. 5 2. Main findings Accounting profession  Fragmented with many associations  Low capacity  Almost no quality assurance, investigation, discipline process Bulgaria A&A ROSC Update

6. 6 2. Main findings Auditing profession  Better organised than accounting profession  Stagnant, with few new entrants  Need to improve training, quality assurance, public oversight, code of ethics, etc.. Bulgaria A&A ROSC Update

7. 7 2. Main findings Review of financial statements (F/S) and auditors’ reports  Most F/S non compliant with international and national accounting standards  Most F/S did not show recent changes to accounting standards  Need to improve training, quality assurance, public oversight, code of ethics, etc.. Bulgaria A&A ROSC Update

8. 8 2. Main findings In summary 1.Need better monitoring and enforcement of accounting and auditing standards 2.Need better education and training of accountants, external auditors, financial institutions supervisors and civil servants 3.Need to improve quality assurance, public oversight, code of ethics, etc.. 4.Need to update the statutory framework Bulgaria A&A ROSC Update

9. 9 The financial reporting infrastructure Statutory Framework Monitoring & Enforcement Education & Training Accounting Profession & Ethics Accounting Standards Auditing Standards 3. Policy recommendations Bulgaria A&A ROSC Update

10. 10 All supporting pillars need to be strengthened Statutory Framework Monitoring & Enforcement Education & Training Accounting Profession & Ethics Accounting Standards Auditing Standards 3. Policy recommendations Bulgaria A&A ROSC Update

11. 11 3. Policy recommendations A. Statutory framework  Amend the securities act to require half yearly reporting  Revise the legislation on the appointment of external auditors of financial institutions and access to their working papers by supervisors/regulators  Eliminate conflicting or ambiguous financial reporting requirements – IFRS/prudential reporting/SME  Fully reflect all aspects of the EU Eighth Directive  Enhance the consultation process for potential future changes to legislation Bulgaria A&A ROSC Update

12. 12 3. Policy recommendations B. Profession and ethics  Enhance the statutory audit quality and public trust in the external auditors  Enhance the capacity of the ICPAB to support the profession: oCreate a technical advice help desk service for members oPrepare a standard audit methodology and audit pack for small audit firms Bulgaria A&A ROSC Update

13. 13 3. Policy recommendations C. Professional training and education  Update the Institute of Certified Public Accountants syllabus by reference to the International Federation of Accountants education standards  Modernize the university syllabi for education on accounting and external audit  Enhance the university education:  International Financial Reporting Standards  International Standards on Auditing  Intensify regular IFRS training for civil servants Bulgaria A&A ROSC Update

14. 14 3. Policy recommendations C. Monitoring and enforcement  Make operational the public oversight system  Ensure greater transparency of external auditors of public interest entities  Improve the transparency of the quality assurance and disciplinary procedures of the Institute of Certified Public Accountants  Enhance the monitoring of financial reporting by the Financial Supervision Commission  Review the linkages between prudential reporting and endorsed IFRS Bulgaria A&A ROSC Update

15. 15 3. Policy recommendations D. Accounting and auditing standards  Participate actively and systematically in the European policy-making process Bulgaria A&A ROSC Update

16. 16 4. Moving forward  Build on success already achieved  Reunite all the key stakeholders and implement the recommendations with the help of international donors  The Centre for Financial Reporting Reform of the World Bank stands ready to provide assistance Bulgaria A&A ROSC Update

17. 17 Centre for Financial Reporting Reform »Office of the World Bank’s Europe and Central Asia Region, located in Vienna, supported by Government of Austria »Responsible for the regions corporate sector financial reporting activities, providing support to other Regions and external partnerships »20 staff: a comprehensive mix of skills and experience »Roster of consultants and experts »Network of international partners, donors and standard- setters »Global distance learning studio Bulgaria A&A ROSC Update 4. Moving forward

18. www.worldbank.org/cfrr Bulgaria A&A ROSC Update