Bulgaria

As a member of the European Union (EU), the financial reporting requirements for commercial entities and financial institutions in Bulgaria are stipulated in EU Directives and Regulations, which are then transposed into Bulgarian national laws. The main applicable national laws are the Accountancy Act of 2015 and the Independent Financial Audit Act of 2016.

As of January 1, 2017, all public interest entities are required to apply the IFRS as endorsed by the EU. Public interest entities, regardless of their size, are (i) issuers of securities on a regulated market in an EU Member State; (ii) credit institutions; (iii) insurance companies; (iv) pension companies and funds managed by them; (v) state and national railways; and (vi) companies providing water and sewage services as a major activity.

All other entities are required to apply the National Accounting Standards set by the Ministry of Finance. Entities that were applying IFRS before and that are not considered public interest entities as of 2017 may choose to apply the National Accounting Standards. IFRS for SME has not been adopted and there are no immediate plans to adopt the standard for application in Bulgaria.

In terms of auditing requirements, the thresholds for statutory audit have increased as per the Accountancy Act of 2015. According to the Act, subject to audit are the financial statements of (i) small entities that exceed at least two of the following—total assets are equivalent to 2 million BGN, total revenue equivalent to 4 million BGN, and an average number of employees of 50; (ii) medium and large entities and PIEs; (iii) medium and large groups, and groups which include PIE; (iv) joint-stock companies and limited partnerships with shares, except for the cases when companies had not conducted any activities throughout the year; and (v) consolidated financial statements and the financial statements of the entities included in the consolidation.

Article 9 of the Independent Financial Audit Act of 2016 requires audits to be conducted in accordance with ISA and other pronouncements issued by the IAASB.

The accountancy profession—comprised of Certified Public Accountants (CPA) and Registered Auditors—in Bulgaria is regulated by the Institute of Certified Public Accountants in Bulgaria (ICPAB) under the oversight of the Commission for Public Oversight of Statutory Auditors (CPOSA) under the Independent Financial Audit Act of 2016.

The Independent Financial Audit Act of 2016 establishes the requirements for initial professional development and continuing professional education. Specifically, it establishes mandatory university education, the types of subjects, and a range of years of experience depending on the type of university degree that must be achieved to enter an accountancy education program and qualify for the certification exam.

To become a CPA, individuals must fulfill the following educational requirements:

• Academic degree (bachelor, master);
• Professional experience in the sphere of accountancy, audit, financial control, university teaching (between 4 and 10 years depending on the academic degree);
• Completing a program of professional accountancy education program;
• Exams – accounting, commercial law, tax and social security law, audit;
• 1 year of professional experience as assistant auditor before the independent financial audit exam

After completing all exams and at least three years of practical experience, a request to be registered as a Registered Auditor can be submitted to the CPOSA.

CPOSA’s main oversight responsibilities include: (i) acquisition and revocation (where necessary) of the right to practice as a registered auditor, and registration of registered auditors including third country auditors; (ii) oversight of ICPAB to which it delegates some of its oversight duties subject to appropriate supervision and approval mechanisms; (iii) review of adoption and compliance with standards of professional ethics, internal control quality in audit entities and during the performance of audits; (iv) approval of the rules and procedures for quality assurance reviews; and (v) operation of a system of investigation and discipline for registered auditors.

As part of the oversight arrangements set in law, ICPAB is responsible for maintenance and publication of the register of certified public accountants and conduct of the quality assurance review of audits of non-public interest entities. CPOSA is responsible for the maintenance and publication of the register of registered auditors. Additional functions and responsibilities of ICPAB include, but are not limited to: (i) maintaining and publishing the register of certified public accountants; (ii) organizing certification exams in accordance with CPOSA’s requirements; (iii) organizing a quality assurance system for its members and conducting reviews based on directives from CPOSA; (iv) monitoring compliance with relevant ethics requirements; (v) liaising with authorities on activities that support adoption of international standards and best practices in accounting and auditing, including providing comments on draft laws and regulations; (vi) supporting its members through delivery of training and dissemination of materials for certification exams and for continuing professional development, and adoption and implementation of professional guidance; and (vii) conducting research in audit, accountancy, financial analysis and other areas.

The Commission for Public Oversight of Statutory Auditors (CPOSA) carries out independent public oversight of the audit profession in Bulgaria according to the Independent Financial Audit Act of 2016. CPOSA is a member of the International Forum of Independent Audit Regulators.

CPOSA’s main oversight responsibilities include: (i) acquisition and revocation (where necessary) of the right to practice as a registered auditor, and registration of registered auditors including third country auditors; (ii) oversight of the Institute of Certified Public Accountants in Bulgaria (ICPAB) to which it delegates some of its oversight duties subject to appropriate supervision and approval mechanisms; (iii) review of adoption and compliance with standards of professional ethics, internal control quality in audit entities and during the performance of audits; (iv) approval of the rules and procedures for quality assurance reviews; and (v) operation of a system of investigation and discipline for registered auditors.

The Institute of Certified Public Accountants in Bulgaria (ICPAB)

The ICPAB was established by the Accountancy Act of 1996. Membership in ICPAB is mandatory for Certified Public Accountants and Registered Auditors.

The main functions and responsibilities of ICPAB under the Independent Financial Audit Act of 2016 include, but are not limited to: (i) maintaining and publishing the register of certified public accountants; (ii) organizing certification exams in accordance with the Commission for Public Oversight of Statutory Auditors’ (CPOSA) requirements; (iii) organizing a quality assurance system for its members and conducting reviews based on directives from CPOSA; (iv) monitoring compliance with relevant ethics requirements; (v) liaising with authorities on activities that support adoption of international standards and best practices in accounting and auditing, including providing comments on draft laws and regulations; (vi) supporting its members through delivery of training and dissemination of materials for certification exams and for continuing professional development, and adoption and implementation of professional guidance; and (vii) conducting research in audit, accountancy, financial analysis and other areas.

In addition to being an IFAC Member, ICPAB is also a member of Accountancy Europe.

According to Chapter 9 of the Independent Financial Audit Act of 2016, all registered auditors and audit firms are subject to a mandatory system of quality assurance (QA) reviews. The Commission for Public Oversight of Statutory Auditors (CPOSA) has a legal mandate, clearly outlined in the Independent Financial Audit Act of 2016, to implement the QA review mechanisms through its rules, regulations, and activities. CPOSA’s system of quality assurance, initially developed by the Institute of Certified Public Accountants in Bulgaria (ICPAB), distinguishes between the audit of public interest entities (PIEs) and non-PIEs with respect to frequency of reviews and whether the reviews are conducted by CPOSA or ICPAB. PIEs are expected to undergo reviews of their internal control procedures and practices once every three years by CPOSA inspectors, whereas controllers of ICPAB conduct quality assurance reviews of auditors of non-PIEs at least once in six years.

According to the self-assessment conducted by ICPAB, the QA review system incorporates the main requirements of SMO 1, including the adoption of relevant standards—ISQM 1, 2, and ISA 220 (revised).

Current Status: Adopted

The Independent Financial Audit Act of 2016 outlines the requirements for initial professional development (IPD) and continuing professional education (CPD) for certified public accountants and registered auditors. Specifically, it establishes mandatory university education, the types of subjects, and a range of years of experience depending on the type of university degree that must be achieved to enter the certified public accountant education program and qualify for the certification exam. Responsibility for conducting IPD is shared between Bulgarian universities (IES 1), as stipulated in the Higher Education Act, and the Institute of Certified Public Accountants in Bulgaria (ICPAB) (IES 2–6).

To become a CPA, individuals must fulfill the following educational requirements:

• Academic degree (bachelor, master);
• Professional experience in the sphere of accountancy, audit, financial control, university teaching (between 4 and 10 years depending on the academic degree);
• Completing a program of professional accountancy education program;
• Exams – accounting, commercial law, tax and social security law, audit — organized and held by the ICPAB subject to oversight arrangements by the Commission for Public Oversight of Statutory Auditors (CPOSA);
• 1 year of professional experience as assistant auditor before the independent financial audit exam

After completing all exams and at least three years of practical experience, a request to be registered as a Registered Auditor can be submitted to the CPOSA.

CPOSA also oversees ICPAB in organizing and conducting CPD for certified public accountant candidates and registered auditors. ICPAB has set CPD requirements of 40 hours of CPD per year and has CPD Rules and Procedures that are in accordance with IES 7 as effective 2015.

ICPAB reports that it strives to ensure that the national standards and requirements comply with all IES, EU Directives, and national legislation. Additional information is needed to affirm if national standards have taken into consideration latest revisions to the IES requirements, particularly revisions to IES 2, 3, 4, and 8 which became effective as of January 2021 (in the 2019 Handbook). The revisions to these standards reflect the need for competency-based approaches as well as the increasing demand for accountants skilled in information and communications technologies and place further emphasis on professional skepticism skills and behaviors.

Current Status: Partially Adopted

According to Article 9 of the Independent Financial Audit Act of 2016, audits must be conducted in accordance with ISA and other pronouncements as issued by the IAASB. The 2022 Handbook of International Quality Management, Auditing, Review, Other Assurance, And Related Services Pronouncements is translated and published for application.

Current Status: Adopted

Article 10 of the Independent Financial Audit Act of 2016 requires application of the IESBA Code of Ethics for registered auditors as issued by IESBA and adopted by the Institute of Certified Public Accountants in Bulgaria (ICPAB) under the oversight of the Commission for Public Oversight of Statutory Auditors (CPOSA). Furthermore, ICPAB requires its members, both registered auditors and certified public accountants, to comply with the IESBA Code of Ethics.

ICPAB has established an ongoing process for reviewing and translating new and revised pronouncements of the IESBA. As of the date of the assessment, the 2023 Handbook of The International Code Of Ethics For Professional Accountants has been translated and adopted for all professional accountants in the jurisdiction.

Current Status: Adopted

The Ministry of Finance is responsible for establishing public sector accounting standards and has adopted partial accrual, national accounting standards for application in the public sector. According to the CIPFA/IFAC 2020 International Public Sector Financial Accountability Index, there are plans to utilize partial-accrual IPSAS by 2025.

Current Status: Not Adopted

The Commission for Public Oversight of Statutory Auditors (CPOSA) is required under the Independent Financial Audit Act of 2016 to have a system of investigation and discipline in place for registered auditors.

CPOSA’s I&D process adopts both a complaints and information-based approach for initiating proceedings. Based on CPOSA’s annual report on its activities, identified features of the system include: (i) an investigation by staff of CPOSA; (ii) communication of findings to investigated individual or entity; (iii) application of sanctions ranging from increased quality control inspections to revocation of the right to conduct audits for a specified period; and (iv) an appeals process, which allows for suspension of I&D enforcement of activities. ICPAB indicates that CPOSA’s existing I&D system incorporates the main requirements of SMO 6.

ICPAB also established an I&D system for its members, which include registered auditors and certified public accountants. Any violations found by the Ethics Council, the Quality Control Committee or the Supervisory Board, the relevant files are submitted to the Disciplinary Council, notifying accordingly ICPAB’s Board. Disciplinary sanctions are outlined in Article 41 of the Independent Financial Audit Act of 2016, and chapter seven of ICPAB’s By-laws. ICPAB’s I&D system incorporates most of the requirements of the revised SMO 6. As of the date of the assessment, the only gap pertains to the composition of the disciplinary committee since it only includes professional accountants.

Current Status: Partially Adopted

The Accountancy Act of 2015 stipulates the accounting standards that are applicable in Bulgaria and prescribes application of IFRS as endorsed in the European Union (EU) and published in the EU Official Journal.

EU-endorsed IFRS have slight modifications from IFRS (e.g., temporary 'carve-out' from IAS 39 Financial Instrument: Recognition and Measurement and a temporary extension of the scope of applying IFRS 9 Financial Instruments with IFRS 4 Insurance Contracts) but according to the IFRS Foundation, the majority of companies can state full compliance with the IFRS.

As of January 1, 2017, all public interest entities are required to apply the IFRS as adopted by the EU. Public interest entities, regardless of their size, are (i) issuers of securities on a regulated market in an EU Member State; (ii) credit institutions; (iii) insurance companies; (iv) pension companies and funds managed by them; (v) state and national railways; and (vi) companies providing water and sewage services as a major activity.

All other entities are required to apply the National Accounting Standards set by the Ministry of Finance although the entities may choose to use IFRS, provided the accounting basis has not changed. IFRS for SME has not been adopted and there are no immediate plans to adopt the standard for application in Bulgaria.

Current Status: Adopted

Relevant Organizations

• Commission for Public Oversight of Statutory Auditors (CPOSA)
• Institute of Certified Public Accountants of Bulgaria

Relevant Legislation

• Accountancy Act, 2016
• ICPAB By-Laws
• Independent Financial Audit Act, 2016
• ICPAB Reports, Rules & Procedures – all available in Bulgarian

Relevant Publications

• Accountancy Europe, Member State Implementation of Directive 2014/95/EU, 2017.
• --, Organization of the Public Oversight of the Audit Profession in Europe, a Survey, March 2018.
• --, Definition of Public Interest Entities in Europe, March 2019.
• --, Structure and organisation of the profession – key feature update – Bulgaria, 2020.
• Deloitte and Touche, IPSAS in Your Pocket, 2015.
• EY, New Accountancy Act, 2016.
• ICPAB, SMO Action Plan, 2021.
• IFIAR, Member Profile: CPOSA.
• IFRS Foundation, IFRS Application Around the World, Jurisdictional Profile: Bulgaria, 2016.
• --, IFRS Application around the World – Jurisdictional Profile: European Union, April 2021
• KPMG, New Independent Financial Audit Act, 2016.
• World Bank, Report on the Observance of Standards and Codes (ROSC), Accounting and Auditing: Bulgaria, June 2008.