Armenia

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 other than those regulated by the Central Bank of Armenia 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. The Central Bank of Armenia establishes additional reporting requirements for the entities it regulates (e.g., banks, credit institutions, pawn shops, investment companies, insurance companies, among other).

The Law on Accounting and Auditing Act requires mandatory audits for public interest entities and large and medium-sized entities if they meet certain thresholds. Provision of auditing services is regulated by the Law on Audit Activity of 2019 and the Law on Regulation and Public Oversight of Accounting and Auditing of 2019, which authorize the Ministry of Finance to develop auditing policies under the oversight of the POB. Under the Law on Audit Activity, audits must be conducted in accordance with ISA and other IAASB pronouncements as promulgated by the POB.

Auditors and expert accountants in the Republic of Armenia are regulated at the state level under the Law on Regulation and Public Oversight of Accounting and Auditing of 2019, Law on Accounting of 2019, and the Law on Audit Activity of 2019. These laws have been in force since January 2020.

The laws contain requirements for practicing as an auditor and an expert accountant, including professional standards to be applied (auditing, reporting, ethics, continuing professional development (CPD), among others).

To obtain a qualification of an auditor, candidates must have a university degree; pass corresponding qualification examinations; and satisfy the practical experience requirement of a minimum of three years. To provide auditing services, qualified professionals must be members of an accredited public organization (APO) and be included in its register.

To obtain a qualification of an expert accountant, candidates must have a university degree; pass corresponding qualification examinations; and satisfy the practical experience requirement. Qualification of an expert accountants is required to provide certain services such as chief accountants of PIEs, large, and medium enterprises. The Central Bank of Armenia also establishes additional requirements for chief accountants of institutions it oversees. Qualified expert accountants must be members of an APO and be included in the register to provide services.

Regulation of auditors and expert accountants is entrusted to APOs under the oversight of the Public Oversight Board (POB). Accreditation criteria for an APO includes (i) having at least 100 individual members and at least 10 firms; (ii) application of international standards applicable to conduct of audit; and (iii) administering a certification scheme that is in line with the International Educational Standards. To date, only the Chamber of Auditors and Expert Accountants of Armenia (CAAA) has been accredited by the Ministry of Finance as an APO. Over the next few years, CAAA is required to bring its practices in full compliance with the accreditation criteria.

An APO, under the oversight of the POB, undertakes the following: (i) certifies auditors and expert accountants; (ii) develops and administers examinations for auditors and expert accountants; (iii) enforces CPD requirements for its members; (iv) conducts quality assurance (QA) reviews of its members who offer audit services; (v) oversees compliance of its accounting expert members with applicable laws and regulations; (vi) maintains a register of its members; and (vii) administers an I&D system for its members.

The POB is responsible, among other functions, for (i) translation and official publication of IFRS, ISA, IESBA Code of Ethics, including incorporating amendments to the international standards within one year from their effective date; (ii) oversight over APOs; (iii) approval of I&D processes and procedures of APOs; (iv) overseeing qualification examinations of auditors and expert accountants; (v) overseeing provision of CPD; (vi) overseeing QA review systems of auditors and expert accountants; and (vii) maintaining a unified register of auditors and expert accountants.

The Law on Regulation and Public Oversight of Accounting and Auditing of 2019 that became effective January 1, 2020 established the Public Oversight Board (POB) entrusted with the independent oversight of accounting and auditing activity. To date, the operations and procedures of the POB are being established. Its responsibilities are outlined in the Regulation section.

The Chamber of Auditors and Expert Accountants of Armenia (CAAA)

The CAAA, formerly the Association of Accountants and Auditors of Armenia (AAAA), is a non-government public organization first established in October 1997. As part of the reform of regulation and oversight of the accountancy profession, in 2020, CAAA was recognized by the Ministry of Finance as an accredited public organization (APO) entrusted with regulation of the accountancy profession under the Public Oversight Board (POB) following the adoption of the Law on Regulation and Public Oversight of Accounting and Auditing of 2019. The CAAA is an Associate of IFAC.

In 2008, the World Bank published the Report on the Observance of Standards and Codes (ROSC)—Accounting and Auditing: Armenia, which made a number of recommendations for improving the legal and statutory framework for corporate financial reporting. In 2014, based on those recommendations, a comprehensive program for the short- to medium-term reform of corporate financial reporting in Armenia was set out in a Country Strategy and Action Plan for the period of 2014–2022. The plan focuses on: (i) strengthening accountancy and audit education; (ii) raising public awareness of the benefits of corporate financial reporting and audit; (iii) further developing an appropriate legislative framework for the regulation and oversight of financial reporting and auditing; and (iv) strengthening the implementation of the statutory framework.

Amendments to the Law on Accounting and Law on Auditing Activity, as well as a new Law on Regulation and Public Oversight of Accounting and Auditing of 2019 have been adopted as part of the reform process, bringing the corporate financial reporting framework in the jurisdiction closer to international best practices. The Law on Regulation and Public Oversight of Accounting and Auditing of 2019, Law on Accounting of 2019, and the Law on Audit Activity of 2019 have been in force since January 2020. These initiatives, in part, are due to the assistance of the World Bank / Centre for Financial Reporting Reform’s Strengthening Auditing and Reporting in Countries of the Eastern Partnership (STAREP). STAREP was launched in October 2013 and closed in December 2022.

The Law on Regulation and Public Oversight of Accounting and Auditing of 2019 that became effective on January 1, 2020, introduced mandatory quality assurance (QA) reviews of all statutory audits. 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 the annual review plan and has the right to conduct QA reviews.

To date, only the Chamber of Auditors and Expert Accountants of Armenia (CAAA) has been recognized as an APO. 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. Previously, the CAAA, with support of international firms, created procedures, review questionnaires, and assessment methodology for a voluntary QA review scheme and conducted one pilot review.

Current regulations assign the POB the role of translating and integrating international standards in Armenia—this includes standards relevant to QA reviews such as ISQM 1, 2, and ISA 220 (revised). POB plans to begin translations in 2023.

Current Status: Partially Adopted

The Law on Accounting of 2019, the Law on Audit Activity of 2019, and Law on Regulation and Public Oversight of Accounting and Auditing of 2019 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. To date, the new approach to education established by the laws is being implemented.

Accredited public organizations (APOs) under the oversight of the Public Oversight Board (POB) will (i) certify auditors and expert accountants in line with IES; (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. As of the time of the assessment, only the Chamber of Auditors and Expert Accountants of Armenia (CAAA) has been recognized as an APO.

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

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.

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

Current Status: Partially Adopted

The Law on Accounting and Auditing Act requires mandatory audits for public interest entities and large and medium-sized entities if they meet certain thresholds. Provision of auditing services is regulated by the Law on Audit Activity of 2019 and the Law on Regulation and Public Oversight of Accounting and Auditing of 2019, which authorize the Ministry of Finance to develop auditing policies under the oversight of the Public Oversight Board (POB). Under the Law on Audit Activity, audits must be conducted in accordance with ISA and other IAASB pronouncements The operations and procedures of the POB continue to be established.

Prior to 2020, the Ministry of Finance of the Republic of Armenia was responsible for adoption of ISA and had translated and adopted for application the 2018 version of ISA.

Current Status: Partially Adopted

Law on Accounting of 2019 and the Law on Audit Activity of 2019 require auditors and expert accountants, the two protected designations in the Republic of Armenia, to abide by the Code of Ethics for Professional Accountants issued by the IESBA and promulgated in the Republic of Armenia by the Public Oversight Board (POB), which is still establishing its operations and procedures.

The Chamber of Auditors and Expert Accountants of Armenia (CAAA) has translated and made publicly available the 2016 version of the IESBA Code for application. It indicates that it will communicate the need to translate the 2022 International Code to the POB.

Current Status: Partially Adopted

Under the Law on Public Sector Accounting, the Ministry of Finance (MoF) has the responsibility for establishing public sector accounting standards. According to the World Bank/CFRR’s Stocktaking of Public Sector Accounting and Reporting Environment in PULSAR Beneficiary Countries: Armenia (2020) and Book on Public Sector Accounting Reforms Implementation Status in PULSAR Countries (2022), the currently effective standards are national standards that are accrual-based and use IPSAS as a reference point.

Current Status: Partially Adopted

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 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.

Current Status: Partially Adopted

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 other than those regulated by the Central Bank of Armenia 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. Micro entities apply a simplified Chart of Accounts developed by the POB.

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.

Current Status: Partially Adopted

Relevant Organizations

• Chamber of Auditors and Expert Accountants of Armenia (CAAA)
• Central Bank of Armenia (CBA)
• Ministry of Finance of the Republic of Armenia
• Public Oversight Board (POB)

Relevant Legislation

• Law on Accounting No. 9228, 2002
• Law on Audit Activity, 2002

Relevant Publications

• Chamber of Auditors and Expert Accountants of Armenia (CAAA), SMO Action Plan, 203.
• Asian Development Bank, Enhancing Financial Disclosure Standards in Transitional Economies II, October 2010.
• IFRS Foundation, “IFRS Application Around the World—Jurisdictional Profile: Armenia,” June 2017.
• Work Bank, National Education Initiatives – Armenia (2019)
• --, Stocktaking of Public Sector Accounting and Reporting Environment in PULSAR Beneficiary Countries: Armenia, 2020.
• --, Book on Public Sector Accounting Reforms Implementation Status in PULSAR Countries, 2022.
• --, The Country Strategy and Action Plan (CSAP) for Enhancing Corporate Financial Reporting in the Republic of Armenia, 2014.
• --, Report on the Observance of Standards and Codes (ROSC)—Accounting and Auditing: Armenia, June 2008.