Kyrgyz Republic

Accounting

The Law on Accounting No. 76, 2002 sets out the main principles of accounting and financial reporting in the Kyrgyz Republic. In February 2013, amendments to the Accounting Law introduced differentiated financial reporting requirements based on an entity’s size and public interest considerations. Application of IFRS as translated in the Kyrgyz language are required for public interest entities (PIEs), including listed companies, banks, other financial institutions, investment funds, insurance companies, and non-government pension funds. IFRS for SMEs is required for all other entities.

Small- and medium-sized enterprises (SMEs), sole traders, and micro businesses can apply simplified accounting rules established by the Government of the Kyrgyz Republic or IFRS for SMEs on a voluntary basis.

As of 2020, there is no official Kyrgyz translations of IFRS or IFRS for SMEs, and the Russian translation of IFRS and the 2009 IFRS for SMEs as published on the website of the State Service for Regulation and Supervision of the Financial Market of the Kyrgyz Republic (SSRSFM) are being applied. IFRS for SMEs were translated into Kyrgyz language as part of the Strengthening the Capacity of the Accountancy Profession in the Kyrgyz Republic (2016-2020) project implemented by the Institute of Chartered Accountants of England and Wales (ICAEW) under the UK Department for International Development (DFID)-funded IFAC Professional Accountancy Organization Capacity Building Program. As of December 2020, the translation is being reviewed for publication.

Financial institutions operating according to the principles of Islamic banking and finance use Islamic financial accounting standards adopted in accordance with the Kyrgyz law.

Auditing

The Law on Audit Activities No. 134 of 2002 as amended in 2019 sets out general provisions for the practice of auditing. Banks and other financial institutions, insurance companies, issuers of publicly traded securities, and other entities specified by law are subject to statutory audits.

The Government’s Resolution on ISA Adoption in the Kyrgyz Republic No. 470 of 2008 requires audits to be conducted in accordance with ISA as promulgated by the IAASB, translated into Kyrgyz language, and made publicly available by the SSRSFM. However, no official Kyrgyz translation of ISA exists as of 2020, and the Russian translation of the 2016–2017 IAASB Handbook is to be applied.

As of 2020, both the Law on Accounting and the Law on Audit Activities are being revised under the World Bank’s The Kyrgyz Audit and Reporting Enhancement Project (KAREP).

In the Kyrgyz Republic, only auditors are regulated at the state level by the Law on Audit Activities No. 134 of 2002 as amended in 2019. As of 2020, the rest of the profession is united on a voluntary basis through membership in local professional accountancy organizations (PAOs). As part of implementation of the World Bank’s The Kyrgyz Audit and Reporting Enhancement Project (KAREP), the Law on Accounting No. 76, 2002 is being revised to introduce, inter alia, mandatory certification of accountants. The Law on Auditing is also being revised to introduce mandatory membership of auditors in a professional accountancy organization (PAO), which are to be accredited in accordance with specific criteria.

The State Service for Regulation and Supervision of Financial Markets (SSRSFM) regulates auditors under the Law on Auditing Activities and the Kyrgyz Government’s Decree on the Regulation of SSRSFM of 2009. The SSRSFM is responsible for: (i) overseeing initial professional development (IPD) and continuous professional development (CPD) requirements for audit professionals that are established in law; (ii) licensing and registration of auditors, and maintaining auditors’ register; (iii) establishing requirements for professional auditors’ qualification; (iv) administering the professional certification examination; (v) enforcing the professional standards approved for application by Kyrgyz auditors; and (vi) conducting quality control reviews and putting in place investigative and disciplinary processes for non-compliance with the standards and laws of the Kyrgyz Republic. The provision of CPD for auditors is delegated to the associations of auditors accredited by the SSRSFM.

According to the Law on Audit Activities, candidates wishing to obtain an audit certificate and license, must have a university degree in economics/finance, acquire three years of relevant practical experience, while candidates not holding such a degree must have seven years of relevant experience. Candidates must also pass four examinations in law and taxation, accounting, auditing, and financial analysis.

As mentioned above, other categories of accountancy profession are not legally regulated but may choose to join a PAO and be subject to its regulation. Information on associations of auditors accredited by the SSRSFM is limited. The Union of Accountants and Auditors (UAA), which merged with the Chamber of Accountants and Auditors in 2019 and is an IFAC Associate, requires its members to have a diploma in accounting from an accredited university, three years of work experience, and hold a Certified Accounting Practitioner (CAP) or Certified International Professional Accountant (CIPA) certification, which it offers. The UAA, also offers CPD programs for its members and the wider profession, requires its members to adhere to the IESBA Code of Ethics, and investigates and disciplines its members. Foreign practitioners who are members of IFAC member organizations can become full members of the UAA without fulfilling any additional requirements.

Audit oversight arrangements in the Kyrgyz Republic are implemented by the State Service for Regulation and Supervision of Financial Markets Republic (SSRSFM) under the Law on Audit Activities No. 134 of 2002 as amended in 2019 and the Kyrgyz Government’s Decree on the Regulation of SSRSFM of 2009. SSRSFM’s responsibilities, among others, include: ((i) overseeing initial professional development (IPD) and continuous professional development (CPD) requirements for audit professionals established in law; (ii) licensing and registration of auditors, and maintaining auditors’ register; (iii) establishing requirements for professional auditors’ qualification; (iv) administering the professional certification examination; (v) enforcing the professional standards approved for application by Kyrgyz auditors; and (vi) conducting quality control reviews and putting in place investigative and disciplinary processes for non-compliance with the standards and laws of the Kyrgyz Republic.

A new Law on Auditing is in a drafting stage as of the date of the assessment which envisions establishment of an independent audit oversight council to be involved in quality assurance, which will consider issues of internal and external audit quality control mechanisms. The council will consist of representatives of government agencies, business, and academic communities.

As of 2020, there are six associations of auditors accredited by the State Service for Regulation and Supervision of the Financial Market of the Kyrgyz Republic (SSRSFM), with limited information about these associations available.

The Union of Accountants and Auditors (UAA)

The UAA, one of the associations accredited by the SSRSFM, was founded in 1999 with the support of the USAID/Pragma Corporation and unites accounting technicians, junior accountants, preparers of financial statements, chief accountants, and auditors on a voluntary basis. Membership is open to individuals holding the Certified Accounting Practitioner or Certified International Professional Accountant designations, which it offers. The UAA develops annual CPD programs for its members and the wider profession. In addition to membership in IFAC, the UAA is a member of the Eurasian Council of Certified Accountants and Auditors. To achieve efficiencies and to build further capacity of the accounting profession in Kyrgyz Republic, in 2019 UAA merged with the Chamber of Accountants and Auditors (CAA). The merger was supported by the Strengthening the Capacity of the Accountancy Profession in the Kyrgyz Republic (2016-2020) project implemented by the Institute of Chartered Accountants of England and Wales (ICAEW) under the UK Department for International Development (DFID)-funded IFAC Professional Accountancy Organization Capacity Building Program. The CAA was established in 2001 as the result of a merger of four previously existing professional accountancy organizations and provided trainings and CPD courses.

In the last several years, two main projects were undertaken in the Republic of Kyrgyzstan aimed at improving the quality of corporate financial reporting and strengthening the capacity of the accountancy profession and other stakeholders.

The Strengthening the Capacity of the Accountancy Profession in the Kyrgyz Republic (2016-2020) project was implemented by the Institute of Chartered Accountants of England and Wales (ICAEW) under the UK Department for International Development (DFID)-funded IFAC Professional Accountancy Organization Capacity Building Program. The projects’ main achievements include advancing accountancy education; strengthening the capacity and recognition of the profession; supporting professionals with implementation of international standards; and strengthening audit regulation among other matters.

The IFAC/ICAEW/DFID project was implemented in close collaboration with the Kyrgyz Audit and Reporting Enhancement Project (KAREP) carried out by the World Bank’s Centre for Financial Reporting Reform (CFRR), which is still ongoing as of 2020. The KAREP is aimed at raising the quality of audit services and building trust in the audit profession, as well as strengthening financial reporting capacity and raising public accountability of state-owned enterprises. In addition, the KAREP project will help SMEs to bridge their accounting knowledge gap and compile financial statements acceptable to local banks, thus, contributing to the improvement of access to finance for smaller businesses.

Regional consultations are also underway to harmonize the provision of auditing services as part of integration into the Eurasian Economic Union, of which the Kyrgyz Republic is a member.

The Law on Audit Activities No. 134 of 2002 as amended in 2019 requires auditors and audit firms to follow quality control standards and to undergo mandatory quality assurance (QA) reviews. The responsibility for developing and implementing the system has been assigned to the State Service for Regulation and Supervision of Financial Market (SSRSFM) under the Kyrgyz Government’s Decree on Regulation of SSRSFM of 2009. SSRSFM has a dedicated department, which conducts reviews according to a formal questionnaire and process. As of the date of the assessment, however, a moratorium on conducting the reviews has been imposed pending the adoption of a new law on auditing activities.

Current Status: Partially Adopted

There are several institutions engaged in the regulation of the initial professional development (IPD) and continuing professional development (CPD), where the education of the profession is regulated at the state level in the Kyrgyz Republic: The Ministry of Science and Education of the Kyrgyz Republic, which develops curricula, universities, and the State Service for Regulation and Supervision of the Financial Market of the Kyrgyz Republic (SSRSFM).

The Law on Audit Activities No. 134 of 2002 as amended in 2019 sets the IPD and CPD requirements for auditors. Candidates wishing to obtain an audit certificate and license, must have a university degree in economics/finance, acquire three years of relevant practical experience, while candidates not holding such a degree must have seven years of relevant experience. Candidates must also pass four examinations in law and taxation, accounting, auditing, and financial analysis administered by the SSRSFM. The SSRSFM, under the Decree on Regulation of SSRSFM of 2009, is authorized to administer certification exams, license auditors, and authorize CPD providers for statutory auditors. Provision of CPD services for auditors is delegated to professional accountancy organizations (PAOs). The content of the CPD is not specified by law or other regulation.

Other categories of accountancy profession are not legally regulated but may voluntarily join a PAO and be subject to its regulation. The Union of Accountants and Auditors (UAA), which merged with the Chamber of Accountants and Auditors in 2019 and is an IFAC Associate, requires its members to have a diploma in accounting from an accredited university, three years of work experience, and hold a Certified Accounting Practitioner (CAP) or Certified International Professional Accountant (CIPA) certification, which it offers. The UAA, also offers CPD programs for its members and the wider profession. The UAA is one of seven associations of auditors accredited by the SSRSFM. There is no publicly available information on whether the other associations establish educational requirements for their members.

Overall, the accountancy education as described above (both IPD and CPD) in the jurisdiction is not aligned with the IES. However, significant progress has been made in the last several years to align accountancy education with the IES. A syllabus for a new three-level Russian qualification for professional accountants and learning materials in the Russian language fully in line with the 2021 IES were developed as part of the Strengthening the Capacity of the Accountancy Profession in the Kyrgyz Republic (2016-2020) project implemented by the Institute of Chartered Accountants of England and Wales (ICAEW) under the UK Department for International Development (DFID)-funded IFAC Professional Accountancy Organization Capacity Building Program. The qualification was developed for and will be administered by the UAA, with the expectation that local universities will incorporate its curriculum into their undergraduate degree program, leading to exemptions for graduating students. The third level would be used for audit certification and exams to be administered by the SSRSFM.

Working with the universities and updating their curricula is the focus of the World Bank, through its the Kyrgyz Audit and Reporting Enhancement Project (KAREP).

As of the date of the assessment, the Law on Accounting No. 76, 2002 is being revised and is expected to introduce regulation of certain accounting services, including certification of accountants providing those services and consequences for not complying with the requirements.

Current Status: Partially Adopted

The Law on Audit Activities No. 134 of 2002 as amended in 2019 authorizes the Government of the Kyrgyz Republic to establish auditing standards. The Government’s Resolution on ISA Adoption in the Kyrgyz Republic No. 470 of 2008 requires application of ISA for all audits as promulgated by the IAASB and translated into the Kyrgyz language. However, no official Kyrgyz translation of ISA exists as of the date of the assessment, and the Russian translation of the 2016–2017 IAASB Handbook—as published on the website of the State Service for Regulation and Supervision of Financial Market (SSRSFM)—is to be applied.

With the assistance of the World Bank, as of the date of the assessment, the SSRSFM is translating the 2018 IAASB Handbook into the Kyrgyz language.

Current Status: Partially Adopted

The Law on Audit Activities No. 134 of 2002 as amended in 2019 requires auditors, the only category of professional accountants regulated at the state level in the jurisdiction, to abide by the Code of Ethics established by the Government of the Kyrgyz Republic. Such a Code has not been adopted as of 2020; however, the new Law on Auditing that is being revised at the time of writing of this report, contains a provision requiring auditors to abide by the IESBA Code as adopted by the State Service for Regulation and Supervision of Financial Market (SSRSFM), which regulates auditors. With the assistance of the World Bank, as of the date of the assessment, the SSRSFM is translating the 2018 International Code of Ethics into the Kyrgyz language.

Accountants in the jurisdiction are not subject to ethical requirements but may voluntarily join a professional organization and be subject to its regulations. The Union of Accountants and Auditors, an IFAC Associate, reports that it requires its members to follow the IESBA Code of Ethics, the 2010 version of which has been adopted in 2014. The Code, however, is not publicly available and there is no indication that its provisions are sufficiently enforced. UAA reports that it plans to adopt the latest Russian language IESBA Code for its members in 2022, once the translation becomes available.

The UAA is one of six associations of auditors accredited by the SSRSFM. There is no publicly available information on whether the other associations establish ethical requirements for their members.

Current Status: Partially Adopted

Under Article 2-1 of the Law on Accounting, budget institutions are required to apply IPSAS. The Ministry of Finance is responsible for defining accounting standards for the public sector under the law; however, the due process for adoption of IPSASs remains to be established and in practice, national standards are applied on a partial accrual basis as reported in the IFAC, CIPFA Index (2020).

Current Status: Not Adopted

The State Service for Regulating and Supervising the Financial Market of the Kyrgyz Republic (SSRSFM), under the Law on Audit Activities No. 134 of 2002 as amended in 2019 and the Decree on the Regulation of SSRSFM of 2009, is responsible for regulation of auditors, the only category of professional accountants regulated at the state level, including establishing an investigation and discipline (I&D) process. However, as of 2020, an I&D system has not been established due to technical and financial resource constraints of the SSRSFM as well as the legal constraints resulting from contradicting provisions in the Law on Licensing, Criminal, Civil, and Violations Codes.

A review of the existing I&D arrangements in the SSRSFM was conducted as part of the Strengthening the Capacity of the Accountancy Profession in the Kyrgyz Republic (2016-2020) project implemented by the Institute of Chartered Accountants of England and Wales (ICAEW) under the UK Department for International Development (DFID)-funded IFAC Professional Accountancy Organization Capacity Building Program. Specific recommendations were developed aimed at assisting SSRSFM with carrying out its regulatory functions, including I&D.

In addition, as of the date of the assessment, the Law on Auditing is being revised to address, inter alia, I&D of auditors. The draft law envisions mandatory membership of auditors in a professional accountancy organization (PAO), which will be required to have specific provisions related to I&D in its Charter as well as a designated I&D committee. The PAO will be obliged to report such violations to the regulator, which will ultimately be responsible for disciplining and imposition of sanctions.

Assistance to the SSRSFM is also provided through the World Bank’s the Kyrgyz Audit and Reporting Enhancement Project (KAREP).

Accountants in the jurisdiction are not regulated at the state level but may voluntarily join a PAO and be subject to its regulations. As of the date of the assessment, the Law on Accounting is being revised and is expected to introduce regulation of certain accounting services, including certification of accountants providing those services and consequences for not complying with the requirements.

The Union of Accountants and Auditors, an IFAC Associate, reports that it established an I&D system for its members in 2009; however, the system is not in line with SMO 6. In 2020, UAA reports that, following the merger with the Chamber of Accountants and Auditors in 2019, regulations on I&D are being developed to become effective in 2021.

The UAA is one of seven associations of auditors accredited by the SSRSFM. There is no publicly available information on whether the other associations establish I&D procedures for their members.

Current Status: Not Adopted

In February 2013, the Law on Accounting No. 76, 2002, as amended, introduced differentiated financial reporting requirements based on the size and public importance of the entities. IFRS are required for public interest entities, including listed companies, banks, other financial institutions, investment funds, insurance companies, and non-government pension funds. IFRS for SMEs is required for all other entities, except for sole traders and micro businesses, which may apply simplified rules established by the government or may opt to apply IFRS for SMEs.

Financial institutions operating according to the principles of Islamic banking and finance use Islamic financial accounting standards adopted in accordance with the Kyrgyz law.

The Law on Accounting requires application of the current version of IFRS as issued by the IASB and translated into the Kyrgyz language. As of 2020, there is no official Kyrgyz translations of IFRS or IFRS for SMEs, and the Russian translation of IFRS (version not known) and the 2009 IFRS for SMEs—as published on the website of the State Service for Regulation and Supervision of the Financial Market of the Kyrgyz Republic (SSRSFM)—is to be applied.

As part of implementation of the project Strengthening the Capacity of the Accountancy Profession in the Kyrgyz Republic, implemented by the Institute of Chartered Accountants of England and Wales (ICAEW) under the UK Department for International Development (DFID)-funded IFAC Professional Accountancy Organization Capacity Building Program, the 2015 IFRS for SMEs has been translated into Kyrgyz, and as of the date of the assessment, the translation is being reviewed for adoption.

Current Status: Partially Adopted

Relevant Organizations

• Union of Accountants and Auditors (UAA)
• State Service for Regulation and Supervision of Financial Market (SSRSFM)

Relevant Legislation

• Law on Accounting No. 76, 2002 (as amended)
• Law on Introducing Changes and Amendments to the Law of Kyrgyz Republic on Accounting and Financial Reporting, 2012
• Law on Auditing Activity, No. 134, 2002 (as amended)
• Resolution of the Government of the Kyrgyz Republic on ISA adoption in in Kyrgyz Republic No. 470, 2008
• Law on Joint Stock Companies No. 64, 2003
• Law on the National Bank of the Kyrgyz Republic No. 59, 1997 (as amended)
• Law on Business Partnerships and Companies No. 60, 1996 (as amended)
• Regulation on the Service for Regulation and Supervision of the Financial Market of the Kyrgyz Republic (SSRSFM), 2007 (in Russian)

Relevant Publications

• SSRSFM, Strategy for Development of the Corporate Financial Reporting and Auditing in Kyrgyz Republic for 2014–2020 Period, 2014.
• SSRSFM, Action Plan on Fulfilling the Strategy for Development of the Corporate Financial Reporting and Auditing in Kyrgyz Republic for 2014–2020 Period, 2014.
• World Bank, Report on the Observance of Standards and Codes—Accounting and Auditing: Kyrgyz Republic , 2008.