Chamber of Auditors and Expert Accountants of Armenia

Under the Law on Regulation and Public Oversight of Accounting and Auditing that became effective on January 1, 2020, accredited public organizations (APOs) are now responsible for establishing and implementing a QA review system for their members under the oversight of the Public Oversight Board (POB). The POB approves annual review plans and has the right to conduct QA reviews. The new laws are still in the process of being implemented and the new regulatory framework is being established. Only CAAA has been recognized as an APO.

Prior to 2020, CAAA had no direct responsibility for the establishment of a QA review system; however, it used its best endeavors and was actively promoting the need for such a system to the regulator, the Ministry of Finance (MoF) of the Republic of Armenia and raising awareness of the need to establish a public oversight body. In 2013, with the support of international firms operating in Armenia, the CAAA launched a voluntary Audit Quality Review and Monitoring (AQM) program for its members. It created procedures, review questionnaires, an assessment methodology, and agreed on other terms for the AQM process. The CAAA required application of ISQC 1 (2009) and ISA 220 by its members.

Now, CAAA reports that a QA review system, in line with SMO 1 requirements, was developed with assistance from World Bank specialists in November 2022. The POB is formally adopting the quality assurance and a disciplinary procedure in 2023. Three planned and two unplanned external reviews have been completed, with two more scheduled for 2023. An audit software prototype has been developed, and training courses have been organized for its use with the support of the CFRR’s STAREP. The POB also plans to begin translations of the latest IAASB Handbook, which includes ISQM 1, 2, and ISA 220 (revised) – relevant standards for QA review systems.

CAAA indicates that it will soon start regular QA inspections in line with the requirements of the law and the process of ISQM implementation support. It also periodically organizes continuing professional development sessions for its members, including topics related to QA.

Since 2020, the CAAA and other key stakeholders have made commendable progress in the design and the initial implementation phase of QA reviews that align with the SMO 1 benchmark. As the QA review procedures become more formalized, significant implementation support is necessary to prepare and support auditors in the application of relevant standards (the POB’s translations will be especially important), in undergoing a QA review, and addressing the results and findings. CAAA should continue to report on progress made in these respective components of SMO 1.

Current Status: Execute

The Law on Accounting of 2019 and the Law on Audit Activity of 2019 that became effective in 2020 introduced changes to the educational framework for professional accountants in the Republic of Armenia. The laws establish initial professional development (IPD) and continuing professional development (CPD) requirements for the two protected designations in the Republic of Armenia: auditors and expert accountants, which are further implemented and enforced by accredited public organizations (APOs) under the oversight of the Public Oversight Board (POB). The law requires qualification and examination of auditors and expert accountants be in line with IES. To obtain a qualification of an auditor or an expert accountant, candidates must have a general university degree; pass respective qualification examinations; and satisfy practical experience requirement of minimum three years.

As the only recognized APO to date, CAAA has the authority to (i) certify auditors and expert accountants in line with IESs; (ii) develop and administer examinations for auditors and expert accountants in line with IES; and (iii) enforce CPD requirements for its members established by law.

The CAAA’s certification scheme for auditors has been historically based on the Association of Certified and Chartered Accountants’ program and on the IESs.

According to the CFRR / World Bank publication National Education Initiatives – Armenia (2019), there are improvements that can be made to the educational requirements to better align with the latest, competency-based IES requirements. For universities, the areas of Management and Ethics, Performance Management and Decision Making, Audit and Assurance Engagements, and Audit Testing and Reporting need strengthening as well as developing training in professional values, ethics, and attitudes. Monitoring and assessment of practical experience also needs to be revised from an input-approach (number of years - 3) to competency-based. The CAAA has previously reported on its advocacy efforts with universities. The association, the Yerevan State University, and the Armenian State Economic University together participate in the World Bank Strengthening Auditing and Reporting in the Countries of the Eastern Partnership (STAREP) program, aimed, among other objectives, at bringing accountancy education in line with international standards.

Through the CFRR’s STAREP program, the CAAA has received support in updating the accounting and audit educational materials and translating ACCA textbooks for the local accountancy qualification to progress alignment with the IES requirements.

Auditors and expert accountants must register with CAAA and are required to complete 80 hours of CPD per two years, but not less than 20 hours of CPD per year, which fulfills the IES 7 input-based approach. If these CPD requirements are not met, qualifications are subject to revocation. In 2022, the CAAA organized 44 CPD events, covering topics like international auditing standards, IFRS, tax legislation, quality control assessments, and economic law. The CAAA subsidizes its members' participation in CPD courses on the latest standards.

As noted by the CFRR’s publication, there are improvements that can be made to the educational requirements to better align with the latest, competency-based IES requirements although the efforts undertaken by the CAAA to date are positive. The CAAA should endeavor to complete the Self-Assessment Against Main Requirements of International Education Standards (SMO 2) — perhaps with the support of the CFRR — to clearly indicate how education requirements are currently meeting the IES requirements and/or where specific improvements are needed. Subsequently, CAAA should outline its plans to work with stakeholders, like universities, employers, and the POB, to address the identified gaps.

Current Status: Execute

With the adoption of the Law on Audit Activity of 2019 that became effective in January 2020, the responsibility for promulgation of ISA, which are adopted by law, resides with the Public Oversight Board (POB). The POB’s operational capacity is still being developed. To date, the 2018 IAASB Handbook is latest version translated and adopted with financing from the World Bank.

The CAAA’s activities in this area involve initial and continuing education of auditors. The CAAA is responsible for the certification of auditors and currently offers a certification scheme that is based on the Association of Certified and Chartered Accountants program. The association reports that it monitors ISA developments and updates its syllabus and examinations accordingly.

CAAA routinely updates its members on ISA amendments through technical bulletins. Furthermore, the CAAA organizes training sessions to introduce members to revisions and adapt them to the Armenian context. CAAA reports that it has hosted trainings addressing the modifications in ISA 315 and ISA 540. All CPD materials are revised to reflect these updates. Plans are underway to conduct sessions focusing on changes in ISA 600, effective in December 2023.

To further support CAAA member audit companies, a prototype audit software was developed with World Bank assistance. Training sessions were held to ensure the software's effective use. Alongside this, Continuing Professional Development (CPD) courses were introduced, updating members on the most recent standards.

The association is encouraged to extend its support to the POB in its promulgation activities to reduce a time lag in the translation of the most recent international standards – the 2018 Handbook is now becoming outdated. The 2022 IAASB Handbook is now effective, which includes new quality management standards and CAAA will need to update its educational programming accordingly. If deemed relevant and necessary, the association could consider participating in the international standard-setting process, together with the POB, by providing comments on Exposure Drafts and other IAASB pronouncements.

Current Status: Execute

CAAA is not directly involved in the establishment of ethical requirements in the Republic of Armenia. Nevertheless, over the years it has promoted the introduction of such requirements and since 2007 has required its members to abide by the IESBA Code of Ethics.

In 2020, the Law on Accounting of 2019 and the Law on Audit Activity of 2019 became effective that requires auditors and expert accountants, the two protected designations in the Republic of Armenia, to abide by the IESBA Code as promulgated by the Public Oversight Board (POB), which still being operationalized.

As of 2023, the CAAA has translated and made publicly available the 2016 version of the IESBA Code for application by its members. CAAA indicates that it will assist the POB with the translation of the 2022 IESBA Code.

The CAAA has reported that it works to ensure that the requirements of the IESBA Code are incorporated into its education and training programs. CAAA’s Membership Committee is charged with investigating violations of professional ethics and norms by its members, among other functions.

The CAAA also organizes seminars, publishes implementation materials, and raises awareness of its members and the public about ethics through its publications and website; however, no specific examples or initiatives have been indicated.

Recognizing a major contribution of the CAAA to the initial adoption of the IESBA Code in the Republic of Armenia, it is recommended that the association support the POB with the adoption of the 2022 International Code of Ethics, a completely restructured and rewritten Code as of 2018. It should also further review and enhance its existing activities to support implementation of the Code. Such activities may include translating the latest Code, establishing a hotline for confidential questions, among other activities. If not already doing so, CAAA should incorporate the new requirements into its educational programming. If deemed relevant and necessary, the association could also consider, together with the POB, participating in the international standard-setting process by providing comments on Exposure Drafts and other IESBA pronouncements, possibly in collaboration with other stakeholders.

Current Status: Execute

With no direct responsibility for adoption of IPSAS, the CAAA, reports that, since 2012, it has participated in discussions with government officials on the adoption of IPSAS and continues to use its best endeavors to identify opportunities to assist the Ministry of Finance with the implementation of the Armenian Public Sector Accounting Standards (APSASs), which use accrual-IPSAS as a reference point.

CAAA, together with the representatives of Ministry of Finance, and some universities, participates in the World Bank’s Public Sector Accounting and Reporting (PULSAR) program to support the development of strong public sector accounting and financial reporting frameworks in the jurisdiction.

CAAA has demonstrated that, within the scope of its authority, it is committed to meet the SMO 5 obligations. The association is encouraged to further consider opportunities in the area of public sector accounting.

Current Status: Sustain

The Law on Regulation and Public Oversight of Accounting and Auditing of 2019, the Law on Audit Activity of 2019, and the Law on Accounting of 2019 contain provisions related to investigation and discipline (I&D) of auditors and expert accountants, the two designations regulated at the state level. The laws authorize accredited public organizations (APOs) to establish and implement their I&D systems under the oversight of the Public Oversight Board (POB). The new legislation and regulatory framework continue to be established.

To date, only the Chamber of Auditors and Expert Accountants of Armenia (CAAA) has been recognized as an APO. CAAA reports that it has a formal and documented investigation and discipline policy as of Q3 2023 that largely meets the SMO 6 benchmark and new legislative requirements. CAAA members can face various disciplinary actions, including warnings; fines; suspension; expulsion; and qualification revocation. The CAAA reports that in 2022, 23 individuals were expelled from the CAAA for failure to meet CPD requirements.

CAAA established a committee on membership and professional ethics which along with other issues is charged with addressing the violations of professional ethics and norms. CAAA also has an External Quality Assurance and Disciplinary Committee to address any disciplinary actions resulting from QA inspections. CAAA is continuing to implement and refine its new enforcement mechanism – regular reviews of the procedures have not yet been performed.

Effective and efficient I&D procedures are foundational to maintaining public trust and confidence in the profession. Since 2020, the CAAA and other key stakeholders have made commendable progress in the design and the initial implementation phase of an enforcement mechanism that aligns with the SMO 6 benchmark. As the enforcement procedures become more formalized, significant implementation and awareness raising work is necessary to ensure the staffing resources to conduct investigations, arrange disciplinary hearings, prepare CAAA members for consequences of non-compliance in the application of standards, and informing the public about recourse options. CAAA should continue to report on progress made in these respective components of SMO 6.

Current Status: Execute

The Law on Accounting of 2019 and the Law on Regulation and Public Oversight of Accounting and Auditing of 2019 establish financial reporting requirements for companies and authorize the Ministry of Finance to develop accounting policies. The Public Oversight Board (POB) is responsible for adoption and promulgation of accounting standards. Under the Law on Accounting, IFRS as promulgated by the POB are required for application in financial statements of all companies, except for micro-sized entities. Companies that meet the definition of a small or medium-sized entity in the IFRS for SMEs Standard are permitted to use the IFRS for SMEs Standard or full IFRS Standards.

A new or amended IFRS Standards becomes ‘endorsed’ for use in the Republic of Armenia when an official translation is issued by Government Decree and the translation is published in the official bulletin. The POB’s operations are being established and has not, so far, translated any new standards. The 2018 version of IFRS and 2015 IFRS for SMEs are the most recent standards to be translated and published.

The CAAA has no direct responsibility for the adoption of IFRS and IFRS for SMEs in the jurisdiction. It has previously been involved in the translation process, assisting the Ministry of Finance, and used its best endeavors to support its membership with the implementation of the standards by providing training, certification, and workshops on the standards, as well as publications.

The CAAA has offers a certification scheme that is based on the Association of Certified and Chartered Accountants program. The association reports that it monitors IFRS developments and updates its syllabus and examinations accordingly. The CAAA indicates that it also offers CPD programming for its members.

Recognizing the CAAA’s contribution to the adoption and implementation of IFRS in the jurisdiction, it is recommended that the association extend its support to the POB in its promulgation activities to reduce a time lag in the translation of the most recent international standards. The CAAA is also encouraged to further indicate specific actions it undertakes to support its members with the implementation of IFRS, for example, issuing implementation guidance, and disseminating information on developments in the international standard-setting area, among others.

Current Status: Execute