World Bank Report finds that Croatia has improved Financial Reporting Practices
22 April 2008, Zagreb
The Ministry of Finance and the World Bank hosted a conference on 22 April 2008 to present the findings of the World Bank Accounting and Auditing Report on the Observance of Standards and Codes (A&A ROSC). The team at the World Bank Centre for Financial Reporting Reform (CFRR) reviewed corporate financial reporting in Croatia in relation to internationally recognized standards. The ROSC conference informed the public and market participants about the significant progress which Croatia had made since the previous ROSC in 2002 and recommended policy measures to overcome the remaining challenges.
Conference participants included senior government officials, international experts from the World Bank, from the International Federation of Accountants (IFAC), and from the International Finance Corporation (IFC), as well as representatives of private and financial sector companies, the accounting and auditing profession, academia, and the donor community.
Main Findings of the Accounting & Auditing ROSCs:
Since the publication of the first A&A ROSC in 2002, Croatia has made considerable progress in developing its regulatory and institutional framework for corporate sector financial reporting and auditing:
The alignment of the revised regulatory framework with the acquis communautaire has been significantly improved and lays the basis for reinforcing the institutional capacity for financial reporting and auditing;
The Financial Reporting Council and the new Chamber of Auditors were established in 2006 on the basis of the new Accounting and Audit Acts.
Remaining challenges in Accounting & Auditing;
The legal framework still has room for improvement, especially in regard to possible conflicts of interest;
Many companies are not meeting legal requirements for disclosing financial and other information, including related party transactions and disclosure of their ultimate (beneficial) ownership;
Supervisory boards play a secondary role in the companies they are supposed to oversee;
Further capacity building relating to monitoring, enforcement and supervision is needed to ensure proper application of International Financial Reporting Standards (IFRS) and national accounting standards;
The public availability of the full legally mandated financial statements (including the audit report and notes) for companies in Croatia -other than banks - is very limited;
Except for banks, there is no systematic enforcement of the quality of financial statements other than through the statutory audit function;
There is no system of external quality assurance to ensure the quality of statutory audits in practice.
"It is important to emphasize that the World Bank and its experts have always cooperated closely with the representatives of the Government of the Republic of Croatia, the line ministries, domestic experts, the business community and stakeholders on the reports and that the results of the Bank’s studies and publications gave a realistic assessment of a particular situation. They have also offered recommendations and guidelines for improvement”, said Vladimira Ivandi?, Assistant Minister of Finance.
"A strengthened corporate financial reporting framework in Croatia will foster private and financial sector development as well as help mitigate the risk of potential financial disturbances,” explained David Nagy of the World Bank’s Centre for Financial Reporting Reform, co-author of the A&A ROSC report.
The World Bank has approved an Institutional Development Fund (IDF) grant in the amount of US$ 350,000 to follow-up on the A&A ROSC. The IDF grant will help Croatia to implement the ROSC recommendations to become fully compliant with the best international practices and the relevant portions of the EU’s acquis communautaire.
"Croatia has already made tremendous political and economic progress over the past fifteen years: incomes have doubled, economic and social opportunities have dramatically improved, and Croatia’s EU membership is within reach,” concluded Andras Horvai, World Bank’s Country Manager for Croatia. "The World Bank is proud to have accompanied Croatia throughout its reforms and will continue to remain actively engaged through the World Bank’s IDF grant on corporate financial reporting,”