Estonian Auditors’ Association

The 2017 Auditors Activities Act authorizes the Auditors Activities Oversight Council (AAOC) the mission of public oversight of the audit profession and the AAOC is responsible for carrying out QA reviews of all audits in the jurisdiction.

EAA reports that the QA review system in place meets the SMO 1 best practices, and the consistency and effectiveness of QA system is under continuous monitoring and review. The EAA cooperates with AAOC in this regard. The association provides members with a variety of guidelines, sample forms, manuals, and checklists that are updated annually to prepare for QA reviews along with offering voluntary inspections to support auditors in advance of formal reviews. Based on the results of the AAOC’s QA reviews — available on EAA’s website—EAA will organize trainings for members within the CPD calendar. EAA also notes that QA reviewers receive additional training to carry out their function.

In 2022, the relevant standards — ISQM 1, 2, and ISA 220 (revised) — were translated by EAA and formally adopted by the AAOC. EAA has provided training and examples of risk and responses to its members, especially SMPs. EAA expects that the AAOC QA reviewers will still look at documentation and manuals but will not utilize a checklist as done prior.

Previously, the EAA carried out all QA reviews under the direction and supervision of the AAOC. When EAA did carry out QA reviews, it maintained two full-time QA specialists to develop a high quality, standardized QA inspection program that met the SMO 1 best practices.

The EAA has demonstrated an ongoing process to maintain its level of fulfillment with the SMO 1 obligations and is committed to continuous review & improvement.

Current Status: Sustain

The Auditors Activities Act stipulates the initial and continuing professional development (IPD and CPD) requirements to practice as an auditor in Estonia, which include a Bachelor’s degree or other equivalent higher education, three year’s practical experience, and passing professional examinations. Professional examinations for auditors are organized by the Auditors Activities Oversight Council (AAOC) with the examination program & questions ultimately approved by the Ministry of Finance (MoF).

The EAA states that it uses its best endeavors to ensure the national requirements incorporate the IES. It supports the MoF in creating exam questions (there are eight exams that candidates must pass on varying topics) as well as with the continuous monitoring and feedback of examination results. Candidates for EAA membership must fulfill their practical experience under the supervision of another EAA member firm.

The EAA states that the Estonian university education system and curricula provide the technical competence, professional skills and practical experience needed for the entry into the profession – in line with the IES requirements. EAA has actively engaged with the four largest universities to promote accounting curricula and support accounting students. Auditing courses have been added to Master programs and at the end of 2022, a new master’s program will launch on Risk Management at the University of Tartu. Lecturers will be EAA members.

With regards to IES 7—8, EAA is responsible for organizing and monitoring CPD of auditors in Estonia which is aligned with the IES requirements at 120 credits over three years. Members must submit an annual activity report detailing the fulfillment of their CPD obligations. EAA reports that it is continuously evaluating and updating its training program for the auditors to reflect the changing local regulations and expectations of the society.

EAA has demonstrated its best efforts to review & improve its actions as related to the SMO 2 obligations. As part of continuing to promote the IES to all relevant stakeholders, EAA could utilize the IFAC Accountancy Education E-Tool and may considering completing the IES Checklist developed by IFAC as part of its efforts.

Current Status: Review & Improve

The Auditors Activities Act specifies the basis of auditing as international standards (IAASB standards). The Auditors Activities Oversight Council has legal responsibility for auditing standard-setting in Estonia. However, for any regulation to have legal effect in Estonia it must be translated into Estonian.

In 2016, the Estonian Association of Auditors (EAA) was delegated the responsibility of standards’ translation. The association has an annual screening process of IAASB pronouncements and has developed a process for timely translations of standards. The EAA is translating all standards that are applicable for audits on or after December 15, 2023 for adoption (i.e., within the 2022 Handbook Of International Quality Management, Auditing, Review, Other Assurance, And Related Services Pronouncements).

To further implementation, EAA’s Methodology Committee provides members with the latest standards on its website along with guides and examples of best practice. It also works to ensure inclusion of changes and developments to the ISA in the auditors’ final examination and initial professional development program. Additionally, as the entity responsible for provision of continuing professional development (CPD), the EAA strives to update CPD programs and seminars appropriately to embody standards’ updates and address any emerging themes / issues.

The EAA has demonstrated an ongoing process to maintain its level of fulfillment with the SMO 3 obligations and is committed to continuous review & improvement.

Current Status: Sustain

The Auditors Activities Act specifies that auditors must comply with the requirements in the IESBA Code of Ethics. The Auditors Activities Oversight Council has legal responsibility for ethical standard-setting in Estonia. However, for any regulation to have legal effect in Estonia it must be translated into Estonian. In 2016, the Estonian Association of Auditors (EAA) was delegated the responsibility of standards’ translation. As of 2024, EAA has translated and published the 2023 International Code of Ethics for Professional Accountants – including independence standards.

The EAA’s Methodology Committee monitors developments to the IESBA Code and will determine the necessary amendments to the Estonian translation to maintain alignment with the IESBA Code on an ongoing basis.

In addition to supporting translations and monitoring amendments, the EAA reports that it conducts trainings on the Code of Ethics and has incorporated these into its formal CPD program, other seminars, and will issue written communications as needed regarding ethic topics.

EAA is encouraged to continue efforts to include updated ethical questions and issues in the development of the professional examination as well as to encourage university programs to cover ethical subjects as part of their curricula.

Current Status: Sustain

Government entities utilize national standards — General Rules for State Accounting (GRSA) — which are issued by the Ministry of Finance and based on the Estonian GAAP and the IPSAS. Since 2004, a full accrual accounting and reporting system has been implemented in Estonia although the Estonian Association of Auditors indicates that there are some areas where simplified application or non-application of the IPSAS has been opted for. According to the Accrual Practices and Reform Experiences in OECD Countries, accrual budgeting was set to be implemented in 2017.

EAA reports that it has evaluated ways to comply with the requirements of SMO 5 and, apart from its general intention to promote IPSAS, does not deem further involvement in public sector accounting matters to be feasible at this time.

Current Status: Sustain

The 2017 Auditors Activities Act establishes an investigation and disciplinary system (I&D) system for auditors, which is handled by the Auditors Activities Oversight Council (AAOC).

Effective 2021, the AAOC has issued updated procedures regarding investigations of complaints and disciplinary proceedings. The Estonian Association of Auditors (EAA) indicates that the AAOC’s procedures are aligned with the SMO 6 best practices. For some components (i.e., timeframe targets for handling cases; monitoring progress with cases; and independent review of complaints with no follow-up), the EAA notes that there are no specific written policies, but the AAOC can carry out these functions as needed.

Previously, most case proceedings were carried out by the EAA, and the decision (including the chosen disciplinary punishment) was approved by the AAOC. The EAA indicates it monitored the efficiency and effectiveness of the system on an ongoing basis. In addition, the association states that it incorporated the relevant topics in relation with auditors’ and auditing firms’ rights and obligations into training programs, lectures and written communications and provides the necessary counseling for its members.

The association may encourage the AAOC to formalize certain administrative procedures & public interest considerations related to its I&D system as outlined in the SMO 6 best practices.

Current Status: Sustain

IFRS as adopted by the EU are required for the consolidated financial statements of all European companies whose debt or equity securities trade in a regulated market in Estonia.  In addition to listed companies, IFRS as adopted by the EU are required to be applied by credit institutions, insurance undertakings, financial holding companies, mixed financial holding companies, and investment firms – which are considered public interest entities in the jurisdiction. All other Estonian companies can choose whether to prepare their consolidated and annual accounts in accordance with IFRS as adopted by the EU or in accordance with the Estonian Accounting Standards (Estonian Generally Accepted Accounting Principles — Estonian GAAP) as promulgated by the Estonian Accounting Standards Board (EASB). Estonian GAAP (effective from 2013) is based on IFRS for Small and Medium-sized Entities (IFRS for SMEs) with limited differences from IFRS for SMEs regarding accounting policies as well as disclosure requirements.

EAA reports that it supports its members in understanding and implementing IFRS and Estonian GAAP through training, lectures, and written communications. EAA has at least one training on IFRS updates per year.

The EAA has demonstrated an ongoing process to maintain its level of fulfillment with the SMO 7 obligations and is committed to continuous review & improvement.

Current Status: Sustain