Presentation of main results of A&A ROSC for Ukraine
10 March 2010, Kiev
On March 10 2010, Andrei Busuioc from the World Bank’s Centre for Financial Reporting Reform (CFRR) presented a summary of the recently published Accounting and Auditing Report on the Observance of Standards and Codes (A&A ROSC) for Ukraine. The presentation formed part of a conference organized by the Vadym Hetman Kyiv National Economic University and the Ukraine Federation of Professional Accountants and Auditors (UFPAA).
Mr. Busuioc’s presentation informed the audience, which was mainly made up of professional accountants and auditors and university lecturers and professors, of the Report’s main results and recommendations for improving the framework for accounting and auditing in Ukraine.
The ROSC report assesses accounting and auditing practices in Ukraine and, more broadly, also attempts to evaluate the ability of the country’s professional and regulatory institutions to ensure that the quality of financial reporting is high. Since its independence in 1991, Ukraine has made commendable progress in improving the quality of accounting and auditing, especially in the banking sector.
However, the report found several gaps between Ukrainian and International Financial Reporting Standards (IFRS) and, as a result, compliance with Ukrainian accounting standards does not result in the same level of transparency and comparability in financial statements as IFRS mandates. The divergence between national accounting standards and IFRS is most serious for commercial and industrial enterprises (especially disclosure requirements) and insurance companies, and is less significant for credit institutions. In addition, the team which drew up the ROSC found several instances of non-compliance in the application of Ukrainian Accounting Standards. These deficiencies were compounded by weak mechanisms for enforcing compliance. As a result, there are still opportunities for accounts to be manipulated without being detected, financial statements to misrepresent the real position of the enterprise, and for deviation from established accounting principles. The ROSC found compliance gaps in all sectors, although compliance by large credit institutions appeared to be better than average.
Although the ROSC team found that Ukrainian Standards on Auditing were largely consistent with International Standards on Auditing (ISA), they found some important differences between the two sets of standards. The legal framework for auditing is also unclear and sometimes conflicts with auditing standards. In addition, the assessment detected instances of non-compliance with Ukrainian Standards on Auditing; in this regard, the existing enforcement mechanisms require improvement. The Report recommends several reforms which can be implemented quickly to ensure effective enforcement of established statutory requirements and auditing standards.
The report provides a list of concrete policy recommendations, with a specific focus on the need to strengthen enforcement mechanisms in order to ensure compliance with established accounting and auditing requirements. In addition, the report contains suggestions for reform of the regulatory framework for the auditing profession in order to give it an effective and publicly accountable governance structure.