Kosovo

Accounting

The financial reporting framework in Kosovo is detailed in the Law No. 06/L–032 on Accounting, Financial Reporting and Auditing, which requires application of international standards on accounting and auditing for business entities, except for entities subject to the supervision of the Central Bank of Kosovo (CBK).

The Law No.6/L–032 requires all business organizations registered as limited liability companies or shareholder companies in Kosovo, depending on their size, to apply either IFRSs or IFRS for Small and Medium-sized Entities (SMEs) as translated into Albanian and approved by the Kosovo Council for Financial Reporting (KCFR). KCFR has an agreement with National Accounting Council of Albania (NACA) for using the Albanian translations of IFRS as published by IASB. As of the date of the assessment, the 17th Edition, 2022 IFRSs and 2015 IFRS for SMEs as translated into Albanian are required for application in Kosovo.

Provisions of this Law do not apply to organizations licensed by the CBK. Banks, insurance companies, pensions, and other entities conducting financial activities are regulated by the Law No. 03/L–209 on the Law on Central Bank of the Republic of Kosovo. The CBK mandates the use of full IFRSs for financial reporting of banks and insurance companies.

The Law No.6/L–032 establishes a differentiated financial reporting requirement for other entities depending on size criteria as follows. Large enterprises are organizations that exceed two of the following criteria—(i) net annual turnover greater than EUR 40 million, (ii) total assets greater than EUR 20 million, and (iii) average number of employees during the fiscal year of more than 250.

Medium-sized enterprises cannot exceed the limits of at least two of the aforementioned criteria. Small enterprises cannot exceed two of the following criteria (i) net annual turnover greater than EUR 8 million, total assets greater than EUR 4 million, and (ii) average number of employees during the year more than 8. Micro-enterprises are enterprises that do not exceed the limits of at least two of the following criteria (i) net annual turnover of EUR 700,000, (ii) total assets greater than EUR 350,000, and (iii) average number of employees during the year more than eight.

Large companies that meet two of the three size criteria must use full IFRSs as adopted by KCFR. Medium and small companies may use either full IFRSs or IFRS for SMEs as adopted by the KCFR. Micro-sized entities below the specified size criteria must follow simplified standards issued by the KCFR. Under the Law, all companies have an option to directly apply IASB-issued standards.

Auditing

All large and medium-size entities must have their financial statements audited in line with the requirements of the Law No.6/L–032. All statutory audits shall be carried out in accordance with ISA and related interpretations, guidance and pronouncements issued by the IAASB and approved by the KCFR. KCFR reviews ISA after they have been translated into Albanian and approves the standards for application in the jurisdiction. The Albanian translation of the 2018 IAASB Handbook is being applied; however, SCAAK indicates that ISA 315 will be translated & adopted by end of 2022 – cumulatively the 2020 IAASB Handbook.

Under the Law No. 06/L–032 on Accounting, Financial Reporting and Auditing, the Kosovo Council for Financial Reporting (KCFR) regulates the audit and accounting profession in the country. The KCFR is effectively part of the Ministry of Finance, funded by the Kosovo budget and income raised through licensing fees.

The mandate of the KCFR as defined under the Law No.6/L–032 includes (i) approving auditing, accounting, and ethical standards; (ii) establishing and issuing standards for the professional training of accountants and auditors; (iii) licensing individual auditors and audit firms and maintaining registers; and (iv) licensing and overseeing professional associations of accountants and auditors.

The Law No.06/L-032 defines the role of the certified accountant and requires financial statements of SMEs, large entities, and some other companies to be signed by a certified accountant.

Certification of accountants and auditors is delegated to the professional accounting and auditing associations, which are also responsible for adopting the IESBA Code of Ethics for their members and investigating and disciplining their members.

In order to be licensed by the KCFR, professional accounting and auditing associations must fulfill the requirements of the Law No. 06/L–032 and the KCFR Administrative Instruction NO. 012014, Criteria for Recognition of Professional Accounting and Auditing Associations: be a non-profit, non-governmental organization acting in public interest, be an associate member of IFAC within a period of three (3) years from the entry into force of the Law and a member of IFAC within five (5) years from the entry into force of the Law; act in the public interest; comply with IFAC SMOs; adopt IESBA Code of Ethics for application by its members; and have an investigative and discipline system in place.

To date, there are three professional associations licensed by the Kosovo Council for Financial Reporting (KCFR): the Society of Certified Accountants and Auditors of Kosovo (SCAAK), the Institute for Accounting, Auditing and Finance (IKAF), and the AAB Institute for Certified Accountants and Auditors (IAAB).

Certified Accountant

Candidates for a certified accountant qualification must have a university degree, three (3) years of work experience in the field of accounting and pass the certification program offered by licensed professional associations. Educational programming for a certified accountant must be in accordance with the IFAC International Education Standards, according to the Law No.06/L-032. Certified accountants must be members of a professional association.

Certified Auditor

To be licensed as an auditor by the KCFR, candidates must be qualified as a certified accountant; have participated in vocational training and have passed auditor exams; have three (3) years of work experience under the supervision of a statutory auditor or an audit firm; and be a member of a licensed professional association; among other requirements. Educational programming for certified auditors must also be in accordance with the IFAC International Education Standards, according to the Law No.06/L-032

The Law No.6/L–032 that became effective in 2019 also provides for the establishment of a Public Oversight Board (POB). The POB functions as an executive branch of the KCFR and is responsible for overseeing continuing professional development, quality assurance, and investigative and disciplinary systems. The POB is mandated to implement quality assurance reviews of auditors and audit firms on the basis of a risk analysis.

The Law No. 06/L–032 on Accounting, Financial Reporting and Auditing, which became effective in 2019 and is modeled on the EU 8th Company Law Directive requirements that requires an independent public oversight mechanism to monitor audit quality of public interest entities, provides for the establishment of the Public Oversight Board (POB).

The POB functions as an executive branch of the Kosovo Council for Financial Reporting (KCFR), which regulates the audit profession, and is responsible for overseeing continuing professional development, quality assurance systems, and investigative and disciplinary systems. The POB is mandated to implement quality assurance reviews of auditors and audit firms on the basis of a risk analysis. The POB is responsible for the (i) development of inspection methodologies to be approved by the KCFR, (ii) preparation of inspection reports and accompanying reports to be approved by the KCFR; (iii) approval and appointment of inspectors; (iv) preparation and execution of semi-annual and annual inspection plans to be approved by the KCFR, among other tasks.

The mandate of the KCFR as defined under the Law No.6/L–032. includes (i) approving auditing, accounting, and ethical standards; (ii) establishing and issuing standards for the professional training of accountants and auditors; (iii) licensing individual auditors and audit firms and maintaining registers; and (iv) licensing and overseeing professional associations of accountants and auditors.

The Law No. 06/L–032 on Accounting, Financial Reporting and Auditing and the KCFR Administrative Instruction No. 012014, Criteria for Recognition of Professional Accounting and Auditing Associations define licensed professional associations of accountants and auditors, tasked with some regulatory functions.

In order to be licensed, a professional association must be a non-profit, non-governmental organization, be an associate member of IFAC within a period of three (3) years from the entry into force of the Law and a member of IFAC within five (5) years from the entry into force of the Law; act in the public interest; comply with IFAC SMOs; adopt IESBA Code of Ethics for application by its members; and have an investigative and discipline system in place. Membership in one of the associations is mandatory for all certified accountants and auditors.

To date, there are three professional associations licensed by the Kosovo Council for Financial Reporting (KCFR): the Society of Certified Accountants and Auditors of Kosovo (SCAAK), the Institute for Accounting, Auditing and Finance (IKAF), and the AAB Institute for Certified Accountants and Auditors (IAAB).

The Society of Certified Accountants and Auditors of Kosovo (SCAAK)

SCAAK is one of the oldest and well-recognized bodies in the region with a vast membership representing different sectors and institutions in Kosovo. SCAAK was established in May 2001 as an independent, self-regulated professional association of auditors, certified accountants, accounting technicians, and students. As the first professional accountancy organization licensed by the KCFR, SCAAK represents about seven thousand professionals, who are engaged in various sectors, in key institutions of the Republic of Kosovo, such as the Office of The Prime Minister, Ministries, Central Bank, National Audit Office, Kosovo Customs, Tax Administration of Kosovo, Municipalities as well as businesses and audit firms.

SCAAK is a member of the IFAC, the Federation of Mediterranean Accountants (FCM), and the European Federation of Accountants and Auditors (EFAA).

The Institute for Accounting, Auditing and Finance (IKAF)

IKAF was established in 2005 and has been recognized by the KCFR as a licensed professional association in 2013. The institute unites about 2000 auditors, accountants, internal auditors, and evaluators. IKAF offers trainings, certification, continuing education, technical support, and advocacy. 

AAB Institute for Certified Accountants and Auditors (IAAB)

IAAB was licensed by the KCFR as a licensed association of accountants and auditors in 2016. No further information is available.

The Road to Europe: Program of Accounting Reform and Institutional Strengthening (REPARIS) was a regional program aimed at creating a transparent policy environment and effective institutional framework for corporate reporting within South Central and Southeast Europe, implemented by the CFRR beginning in 2008. Since REPARIS started, Kosovo, and by extension SCAAK, has participated in the program and its iterations – EU-REPARIS (2015 – 2019) and REPARIS for SMEs (2019 – present).

The Law No. 06/L–032 on Accounting, Financial Reporting and Auditing of 2019 forms the legal foundation for the establishment of the quality assurance (QA) review system in Kosovo and requires application of ISQC 1 and other related IAASB pronouncements. To date, the Albanian translation of the 2018 IAASB Handbook is being applied. SCAAK reports that ISQM 1 has been translated into Albanian. For ISQM 1, 2, and ISA 220 (revised) to be adopted, however, there must be legislative amendments passed.

Under the Law, the Public Oversight Board (POB), an executive branch of the Kosovo Council for Financial Reporting (KCFR), is the competent authority for performing mandatory QA reviews for the licensed statutory auditors and firms. To date, the QA system has not been operationalized, primarily due to the pending of hiring QA inspectors.

In the absence of an operational QA review system, the Society of Certified Accountants and Auditors of Kosovo (SCAAK), a member of IFAC, has performed QA reviews of its members who provide auditing services since 2016. According to the self-assessment conducted by SCAAK in 2020, its system fully complies with the requirements of SMO 1.

Current Status: Partially Adopted

Under the Law No. 06/L–032 on Accounting, Financial Reporting and Auditing of 2019, educational programming for certified accountants and auditors, the two segments of the profession regulated at the state level, should be in compliance with IESs. The Kosovo Council for Financial Reporting (KCFR) is responsible for establishing and issuing standards for the professional training leading to the certification of accountants and the licensing of auditors and overseeing their implementation. Certification of accountants and auditors under law is performed by the licensed professional associations (three associations to date).

Continuing professional development (CPD) for certified auditors is prescribed by law and is subject to monitoring by the KCFR. Other professionals are not required to complete CPD under the law.

Candidates who apply for certified accountant must have a university degree, three (3) years of work experience in the field of accounting and have passed the certification program offered by licensed professional associations.

To be licensed as an auditor by the KCFR, candidates must be qualified as a certified accountant; have participated in vocational training and have passed auditor exams; have three (3) years of work experience under the supervision of a statutory auditor or an audit firm; and be a member of a licensed professional association; among other requirements.

The Society of Certified Accountants and Auditors of Kosovo (SCAAK), an IFAC Member and one of the licensed professional associations, developed certification and CPD programs that, according to SCAAK, have been continually updated to include international developments and the requirements of IESs. The 2019 IES Handbook (2019 Edition) and other supporting materials have been translated and disseminated. SCAAK has revised its curriculum to incorporate the revised IESs 2, 3, 4, and 8 that were effective in 2021 into its educational programming (e.g., new modules on ESG, IT, and mandatory training in accounting software for all students). Although not required by law, SCAAK also established CPD requirements for certified accountants and certified accounting technicians, who are its members.

Information on whether other professional accounting and auditing associations licensed by the KCFR have developed certification programs in line with IES is not available.

The university’s accountancy education program, according to the World Bank 2017 Accountancy Education: Benchmarking Study, falls short in some areas of the IES requirements.

Current Status: Partially Adopted

The Law No. 06/L–032 on Accounting, Financial Reporting and Auditing requires financial statements of large, medium-size, and small enterprises with an annual turnover of EUR 4 million to be audited. Audits must be conducted in accordance with the standards and pronouncements issued by the IAASB as adopted by the Kosovo Council for Financial Reporting (KCFR).

International standards are translated by the Society of Certified Accountants and Auditors of Kosovo (SCAAK) under formal agreements with the Albanian Institute of Certified Accountants (IEKA) and the Government of Kosovo. The Albanian translation of the 2018 IAASB Handbook is being applied; SCAAK is collaborating with IEKA to complete the translation of the 2021 IAASB Handbook.

Current Status: Partially Adopted

The Law No. 06/L–032 on Accounting, Financial Reporting and Auditing requires all licensed professional associations to adopt the IESBA Code of Ethics for application by their members. Membership in professional associations is mandatory for certified accountants and auditors. The Kosovo Council for Financial Reporting (KCFR) is ultimately responsible for approving the Codes of the associations and enforcing compliance of certified auditors with the requirements of the Codes.

To date, there are three professional associations licensed by the KCFR. International standards are translated by the Society of Certified Accountants and Auditors of Kosovo (SCAAK), an IFAC member, under formal agreements with the Albanian Institute of Certified Accountants (IEKA – also an IFAC member) and the Government of Kosovo. The 2021 International Code of Ethics for Professional Accountants has been translated and SCAAK has adopted it for application by its members. The translation and adoption 2022 International Code of Ethics is in progress.

Information on the adoption of the IESBA Code by the Institute for Accounting, Auditing and Finance, and the Institute for Certified Accountants and Auditors (IAAB), which are not member organizations of IFAC, is not available.

Current Status: Partially Adopted

The Ministry of Finance is responsible for setting public sector accounting standards in Kosovo. Financial Management and Control Rules are consistent with the EU requirements, IPSAS, and local laws. According to the World Bank/CFRR 2020 Stocktaking of Public Sector Accounting and Reporting Environment in PULSAR Beneficiary Countries: Kosovo, cash-basis IPSAS are applicable. It is envisaged that a transition to accrual-basis standards will occur over the long-term (10+ years).

Current Status: Partially Adopted

The Law No. 06/L–032 on Accounting, Financial Reporting and Auditing of 2019 authorizes the Kosovo Council for Financial Reporting (KCFR) to impose sanctions and penalties for non-compliance of auditors and audit firms with the requirements outlined in the Law. To this effect, under the KCFR Administrative Instruction No. 2012/06 on the Investigation and Discipline Procedures, the Commission for Investigation and Discipline of KCFR conducts investigations, and subsequently disciplines licensed associations, audit firms, and statutory auditors. It is not clear whether the system operated by KCFR is aligned with the requirements of SMO 6.

In addition, KCFR–licensed professional associations are responsible for establishing and maintaining an I&D system of their members as well as reporting to the KCFR on their I&D results. To date, there are three professional associations licensed by the KCFR.

The Society of Certified Accountants and Auditors of Kosovo, an IFAC member, established an I&D system for its members, which include certified accountants. The system, according to SCAAK, is aligned with the requirements of SMO 6.

The Institute for Accounting, Auditing and Finance, which is not an IFAC member organization, appears to have a policy on I&D for its members; however, it is not clear whether the system is operational and is aligned with the requirements of SMO 6. Lastly, information on the AAB Institute for Certified Accountants and Auditors (IAAB), which is also not a member organization of IFAC, is unavailable.

Current Status: Partially Adopted

The Law No. 06/L–032 on Accounting, Financial Reporting and Auditing requires all business organizations registered as limited liability companies or shareholder companies in Kosovo, depending on their size, to apply either IFRSs or IFRS for Small and Medium-sized Entities (SMEs) as translated into Albanian and approved by the Kosovo Council for Financial Reporting (KCFR).

Large companies that meet two of the three size criteria must use full IFRSs; medium and small companies may use either full IFRS or IFRS for SMEs. Micro-sized entities below the specified size criteria must follow simplified standards issued by the KCFR that are based on IAS as they existed in 2001. Under the Law, all companies may elect to directly apply IASB-issued standards. The Central Bank of Kosovo mandates the use of full IFRSs for financial reporting of banks and insurance companies.

KCFR has an agreement with National Accounting Council of Albania for using the Albanian translated version of official IFRSs as published by the IASB. To date, the 2023 version of IFRSs and 2015 IFRS for SMEs as translated in Albanian are being applied.

Current Status: Adopted

Relevant Organizations

• Central Bank of the Republic of Kosovo (CBK)
• Kosovo Council for Financial Reporting (KCFR)
• Society of Certified Accountants and Auditors of Kosovo (SCAAK)

Relevant Legislation

• Law No.06/L-032 on Accounting, Financial Reporting and Audit, 2018
• Law No.04/L-014 on Accounting, Financial Reporting and Audit, 2011
• Law No. 05/L-055 on the Auditor General and the National Audit Office of the Republic of Kosovo
• KCFR Administrative Instruction NO. 012014, Criteria for Recognition of Professional Accounting and Auditing Associations
• KCFR Administrative Instruction on Procedures for Supervision and Quality Control of the Work of the Licensed Associations, Audit Firms and Statutory Auditors No. 3, 2014
• Ministry of Finance Administrative Instruction on Structure and Content of the Financial Reporting No. 2, 2013
• KCFR Administrative Instruction Administrative Instruction On Licensing Statutory Auditors and Local and Foreign Statutory Audit Firms No.02/2019
• Ministry of Finance Administrative Instruction No. 07/ 2019 on the Structure, Content and Submission of the Annual Financial Reporting
• HYPERLINK "https://www.scaak.org/uploads/files/2020/November/16/Statuti_i_SHKAK1605531785.pdf" SCAAK Statue, 2020 (in Albanian)

Relevant Publications

• IFRS Foundation, “IFRS Application Around the World?Jurisdictional Profile: Kosovo,” June 2016.
• SCAAK, SMO Action Plan, 2017.
• World Bank, Accountancy Education: Benchmarking Study, 2017.
• World Bank, Accountancy Education: A Collection of Good Practices, 2017.
• World Bank, Report on the Observance of Standards and Codes?Accounting and Auditing: Kosovo, 2012.
• World Bank, Report on the Observance of Standards and Codes?Accounting and Auditing: Kosovo, 2006.
• World Bank, CFRR, Stocktaking of Public Sector Accounting and Reporting Environment in PULSAR Beneficiary Countries: Kosovo, 2020.