Institute of Accountants and Auditors of Montenegro

The Law on Auditing No. 001 of 2017 introduced the requirement to establish a mandatory quality assurance (QA) review system for all audits to be implemented by the Ministry of Finance under the oversight of the Council on Audit. The Council on Audit has carried out QA reviews since 2018.

IAAM has no direct responsibility for the establishment or operation of the system and its membership has very few auditors. Therefore, audit-related activities tend to fall outside the scope of IAAM’s priority. It sees its role as that of raising awareness of the Ministry of Finance and the Council on Audit about the requirements of SMO 1 and raising awareness of professional accountants of the importance of quality management, compliance with ISQM 1, ISAs, other related standards, and ethical requirements.

IAAM reports that as part of its best efforts it intends to engage with the Council on Audit regarding SMO 1 best practices, highlight implementation support that is available in Montenegrin or Bosnian from IFAC’s database, and share articles and information in the IAAM Magazine.

IAAM is also considering introducing a voluntary and educational QA system for its members to assess quality of accounting services. This is a longer-term initiative and includes collaborating with regional PAOs.

Previously, the IAAM reports to have organized a conference in 2018 on ISQC 1 and ISA 220 in cooperation with the State Audit Institution.

IAAM’s plans to support the QA review system operated by the Council on Audit and to raise awareness about the requirements of SMO 1 and other best practices around quality management and QA reviews reflect the best endeavors concept within the scope of IAAM’s authority. A voluntary & educational QA review process for its membership – mainly accountants – would be welcome in strengthening the quality of services in the jurisdiction and IAAM could focus efforts on this initiative as part of its strategic planning going forward.

Current Status: Review & Improve

IAAM is licensed by the Ministry of Education as a provider of educational programming for accountants and maintains a two-tiered certification scheme that offers voluntary qualifications of Accounting Technician and Authorized Accountant. Education of accountancy professionals must be conducted in accordance with the Montenegrin National Accounting Educational Standard (CORS-1) published in the Official Gazette of Montenegro in August 2014, which is based on 2009 IES and the IESBA Code of Ethics for Professional Accountants. IAAM reports that its educational programming is in line with the CORS and any changes to the program require approval by the MoF.

IAAM’s Accountant certification prepares the candidate to provide services to small and medium size enterprises. To enroll in the program, a candidate must have a secondary education (exemptions are offered if the candidate has a university degree) and pass five examinations. Meanwhile, the Authorized Accountant certification prepares professional accountants in business and to progress to the Certified Accountant if they choose. To enter the program (which lasts approximately 6 months), candidates must have a university degree and practical experience from three to five years, depending on the type of degree. Candidates must then pass final examinations. IAAM indicates that all candidates need to submit evidence of practical experience according to CORS-1 requirements. Holders of the Accounting Technician certification must take an additional five exams to obtain an Authorized Accountant certificate.

All IAAM’s members are subject to the continuing professional development (CPD) requirements as stipulated in the Rulebook on Continuous Education, which was updated in 2021 and effective January 2022. Members are obliged to complete 40 hours of education annually (120 hours over 3 years) through three forms of CPD: courses, seminars, and subscription to IAAM’s journals. Per the new Rulebook, members must now submit evidence of CPD compliance to IAAM and this is now published on IAAM’s website.

IAAM, as of 2021, is organizing trainings weekly for candidates to help improve computer and IT skills in response to the changing labor market expectations (especially as a result of the COVID-19 pandemic). It has also stated plans to upgrade the competencies and skills of its members in the area of tax consultancy. The institute also working with the Croation Chamber of Tax Advisers and Slovenian Chamber of Tax Advisers to enhance training of tax advisors.

In 2023, IAAM completed a self-assessment of the IPD and CPD requirements of its two certifications against the latest IES requirements. According to the self-assessment, IAAM’s requirements do incorporate some of the IES requirements to the extent permitted by CORS-1. There are some areas for improvement within IES 2, 3, 4, and 5 regarding prescribed competencies, learning outcomes, and vertification / demonstration of competencies.

IAAM has indicated it will endeavor to promote adoption of IESs to other stakeholders, in particular universities, the Ministry of Finance, and the Ministry of Education which must approve any national changes to the CORS-1 requirements.

Completing the IFAC IES Self-Assessment is an important first step to create a plan for advocacy and engagement with relevant accountancy regulators & stakeholders to address gaps in national education requirements. As indicated by IAAM, verification and demonstration of prescribed technical and professional/ethical competencies in initial education and practical experience could be strengthened. Engaging with other PAOs, particularly those with Accounting Technician qualifications, may help IAAM formulate feasible next steps.

Current Status: Execute

To date, the Serbian translation of 2016–2017 ISA is in use in Montenegro through an agreement with the Institute of Certified Accountants of Montenegro and the Serbian Association of Accountants and Auditors. With no direct responsibility for the translation and/or publication of auditing standards, and having mostly accountants as members, audit-related activities tend to fall outside the scope of IAAM’s priority focus.

As part of fulfilling the best endeavors concept, IAAM reports that it strives to support implementation of ISA by monitoring new and amended standards issued by the IAASB and disseminating information on updates to the standards through workshops, seminars, conferences, and magazine articles. It recently shared information about new and revised standards in the 2021 IAASB Handbook in its magazine.

IAAM reports that it also notifies its members of exposure drafts issued by the IAASB to encourage those who may be involved with quality management, auditing, review, other assurance or related standards, to voice their opinions.

As might be relevant, IAAM is encouraged to update its educational programming and CPD to include new and revised standards from the IAASB Handbook that might affect its membership.

Current Status: Review & Improve

The Law on Accounting No. 052 of 2016 and the Law on Auditing No. 001 of 2017 require Certified Accountants and Certified Auditors, the two legally protected designations, to adhere to the Code of Ethics as issued by IESBA and adopted and published by the designated competent authority — the Ministry of Finance delegated this to the Institute of Certified Accountants of Montenegro (ICAM). ICAM with the Serbian Association of Accountants and Auditors (SAAA) has translated the 2018 version of the Code.

IAAM, as the organization uniting accountants who are not subject to ethical requirements at the jurisdiction level, reports that it requires its members to follow the code of ethics prescribed by the IESBA. IAAM has reproduced and published the 2022 Handbook translated in Serbian on its website.

IAAM has included one ethics training as part of its qualification and one annual webinar on anti-corruption. IAAM will also publish information in its quarterly magazine, website, and via e-mail about developments to the IESBA Code.

Previously, IAAM reported that it is considering an Ethics Education Toolkit and other ways to support members such as workshops with practical examples of ethical dilemmas and applying appropriate professional and ethical behavior.

IAAM is encouraged to collaborate with other stakeholders in the region to contribute to the translation of applicable international standards that would minimize the time lag in availability of the latest. The inclusion of one ethics training in its qualification and CPD education are improvements; however, IFAC continues to recommend that IAAM consider additional HYPERLINK "https://www.ifac.org/knowledge-gateway/building-trust-ethics/discussion/paying-professional-ethics-more-lip-service" activities to support its members with the implementation of the Code given that adhering to the Code of Ethics is important to preserving trust and confidence in the work and outputs of the accountancy profession.

Current Status: Plan

The Law on State Property of 2009 and the Law on Financing of Local Self-Government of 2010 prescribe accounting standards for the public sector in Montenegro, with the Ministry of Finance responsible for their adoption. The Rulebook on the Method of Making and Submitting of Financial Statements of the Budget, State Funds and Units of Local Self-Government of 2010 prescribes the application of accounting standards that use a modified cash-basis of accounting.

In November 2019, the Government of Montenegro adopted the Law on Accounting in Public Sector. The Law, came into effect in 2022, introduces accrual accounting with national standards that reference IPSAS. The transition to accrual-basis standards is expected to begin in 2027. IAAM notes that a few ministries have begun using accrual-accounting, but overall, the public sector has to build more capacity to apply such standards.

IAAM indicates that it is trying to become more involved in supporting a program for public sector accountants but this all is within the scope of the MoF. The MoF is the only authorized trainer for public sector accountants, and it has started a training program and has plans to translate IPSAS 33. IAAM has consultants that support public sector subjects and awareness raising but IAAM is only authorized to provide training on private sector accounting. Therefore, IAAM sees its role around public sector accounting as that of promoting full adoption of IPSAS to the government and supporting public institutions, when possible, in educating public sector accounting professionals.

In 2016, IAAM signed a memorandum of cooperation with the Montenegro State Audit Institution. As part of the Memorandum IAAM holds seminars for public sector employees tailored for state auditors, including on specific IPSAS standards and basics of accrual accounting.

IAAM indicates it is using its best endeavors to support to public sector professionals. IAAM may consider other opportunities presented by the transition to accrual accounting – such as sharing IFAC resources with the MoF like Illustrative Example: Designing Learning Outcomes for Curricula That Meet Public Sector Accountancy; Implementation Guidance: Illustrative Learning Outcomes for The Public Sector Accountancy Curricula; Train the Trainer: Introduction to IPSAS; and Pathways to Accrual — and continue to engage with the MoF regarding IAAM’s ability to offer technical training, education, and qualification.

Current Status: Review & Improve

IAAM may investigate and discipline its members and reports to have established an I&D system. It indicates that it has procedures in place but only has a small number of complaints. In 2022, IAAM created a new registry system to register members and keep track of their CPD compliance. IAAM expects that I&D procedures may be used and improved upon now that it will have potential data on non-compliance.

IAAM reports in its SMO Action Plan that the I&D system is comprised of an Investigations Committee, Disciplinary Committee, and Appeals Committee. Upon receipt of a complaint or knowledge of non-compliance through a news report, the Investigations Committee would assemble a three-person panel which includes persons who are independent of both the situation and the individual(s) in question. The Investigation Committee would receive the complaint, analyze it, determine the complexity of the complaint, ask for the additional information from the member regarding the complaint, and if the Investigations Committee finds that there is a case to pursue it refers it to the Disciplinary Committee. The Discipline Committee may determine the sanction to impose, which could include expulsion from membership in cases of serious breaches of professional and ethical rules. IAAM reports that it provides training sessions on the I&D system to ensure that members are aware of its purpose, function, and outcomes.

As compared to the SMO 6 benchmark, IAAM reported that the members of the IAAM Disciplinary Committee only comprise professional accountants and results of the proceedings may not be fully available to the public. IAAM indicates that it will continue to assess its I&D system.

Through its webpage and publications, IAAM reports that members and the public are informed of the I&D procedures and how to initiate a complaint. However, as of the date of the assessment, this information does not appear on its webpage.

IAAM also states plans to initiate dialogue with the regional PAOs to exchange experiences.

In its Action Plan, IAAM has outlined how the enforcement process would work but it seems that such a process has not actually been operational to date. With the update to its CPD Rulebook and membership registry, IAAM will need to build capacity & be prepared to implement such procedures. The public will need to know how to submit any complaints to IAAM and be informed of potential sanctions, such as expulsion from IAAM membership. IFAC continues to recommend that IAAM engage with regional PAOs to understand how effective enforcement mechanisms have been implemented.

Current Status: Plan

The Law on Accounting No. 052 of 2016 requires that all legal entities prepare financial statements in accordance with IAS/IFRS as issued by the IASB and adopted and published by the designated competent authority — in this case, the Ministry of Finance delegated this to the Institute of Certified Accountants of Montenegro. Per the IFRS Foundation, there is often a time delay between the IASB issuing a new or amended IFRS Accounting Standard and obligatory adoption in Montenegro, due to translation, harmonization with tax laws and other processes in the local jurisdiction. Additionally, some specific standards will have a further delayed application date. The latest translation of IFRS Accounting Standards officially applied in Montenegro is IFRS Accounting Standards as issued in 2020; application of IFRS 9 and 15 became effective in 2024 and IFRS 14, 16, and 22 were effective as of 2021.

Since September 2019, IAAM states it has been cooperating with the Chamber of Auditors of Azerbaijan for knowledge-sharing purposes as well as to exchange experiences and articles regarding IFRS implementation. In 2020, IAAM reported endeavors to exchange experts for seminars with other professional accountancy organizations (PAOs) in the region such as the UAAFWFBH. In cooperation with a Serbian organization, the IAAM has published a manual for the application of the chart of accounts for companies, cooperatives and entrepreneurs in accordance with IAS/IFRS and a manual on IFRS 9, 15, and 16 for its membership.

IAAM’s initial professional development training and exam include financial accounting and reporting and are updated to reference new standards. IAAM has also reported on several CPD seminars, presentations, and workshops on new or amended IFRS and IFRIC interpretations that it has held in cooperation with the national tax administration and the State Audit Institution. With IFRS 9 and 15 effective in 2024, IAAM indicates that it was organized several webinars on the practical implementation of IFRS 15.

IAAM further supports its members by providing them with information on any new or revised IFRS through its website, the quarterly magazine Racunovodstvo, revizija i finansije, and other publications which are targeted to the IAAM membership and other accountancy and finance professionals.

Efforts to adopt and translate the remaining IFRS Standards are also strongly encouraged as part of bringing transparency, accountability, and efficiency to national, regional, and global markets. If possible, as one of the education providers for accountants, IAAM is encouraged to work with other stakeholders in the jurisdiction to develop an approach to translating international standards that would minimize the time lag in available translations.

Current Status: Review & Improve