As they transition from socialist to market economies following decades of turbulence and conflict, the countries of the Western Balkans­­—Albania, Bosnia and Herzegovina, Kosovo, Macedonia, Montenegro and Serbia­­—have made significant progress in adopting international best practices in corporate financial reporting, and now share a common commitment to join the European Union. However, further efforts are needed in ensuring effective implementation of international standards and achieving full compliance with EU requirements.

There is already significant bilateral cooperation among regional professional accountancy organizations (PAOs), according to a regional survey of ten Western Balkan PAOs representing more than 20,000 certified professionals conducted by the World Bank Centre for Financial Reporting Reform. The question now is: can this cooperation be scaled up on a regional basis to accelerate accountancy profession development in the Western Balkans?

At a joint regional workshop, facilitated by CFRR and IFAC, national PAOs, European and international PAO representatives and international experts explored this idea and possible closer regional integration. The final conclusion was that there could be much to gain from greater collaboration.

Status of Adoption of International Standards in the Western Balkans

Analysis of data collected through the IFAC Member Compliance Program indicates that most international standards for corporate financial reporting have been adopted and are being used in all six jurisdictions in the Western Balkans (see the International Standards: 2017 Global Status Report for details).  Timely translation of the standards and the need to ensure externally that the standards are being complied with are some of the implementation challenges facing the profession in the region. 

Although progress has been made in establishing quality assurance (QA) review systems and efforts are underway to create cross border QA networks, effective investigative and disciplinary (I&D) systems are yet to be introduced. Additionally, more effort is needed in adopting International Public Sector Accounting Standards (IPSAS) and incorporating the revised International Education Standards (IES).

How could PAOs benefit from further regional integration?

Well-established and internationally-recognized PAOs support the accountancy profession in fulfilling its essential role of ensuring high-quality financial reporting, which contributes to sustainable economic development. The PAOs in the Western Balkan region, although well-developed as compared to other economies in transition, face a number of challenges.

While the accountancy profession is legally recognized in most cases, its participation in standard setting and regulation is limited, especially in education, I&D, and establishing and monitoring ethical requirements. PAOs have either no direct responsibility for the adoption of international standards or share the responsibility with a variety of stakeholders, including government, audit oversight authorities, and other PAOs. The profession, therefore, needs to actively collaborate with other stakeholders to drive adoption and implementation of international standards and best practices.

The Western Balkan accountancy profession is mainly traditional in its service offerings with compliance services dominating. Therefore, the accountancy services offered tend to have a low perceived value and are mainly viewed as a cost rather than a value-added service. Cooperation in advocating for the important role of the profession and communicating PAO’s value-add with one strong regional voice in a unified effort may have a stronger impact.

There is also a high degree of fragmentation of the profession. Existence of multiple PAOs at a national level at various stages of their maturity and integration with international institutions lead to difficulties in achieving uniform, consistent and high-quality standards of financial reporting in some jurisdictions. Lack of common requirements for the education of professional accountants, and differing levels of quality of education impede mobility of work force and limit number of reciprocity agreements and recognitions of qualification.

Finally, in some Western Balkan countries, legal restrictions cause many PAOs to struggle to sustainably finance their operations. Sharing costs through collaboration on different initiatives—for example, translation of international standards—will help PAOs support operations and serve the public interest.

Next Steps

Recognizing the significance of the present challenges, going forward the Western Balkan PAOs could explore the need to cooperate more closely regionally and engage in collective problem solving as a unified voice, drawing on the many synergies and commonalities between the countries, in order to achieve sustainable development. Some of the benefits of enhanced cooperation include:

  • improved implementation of international standards for corporate financial reporting;
  • increased influence of the accountancy profession in communicating with stakeholders and promoting its interests;
  • enhanced professional accountancy education quality (e.g., experience sharing, good practice exchange, joint initiatives, harmonization of views);
  • cost sharing opportunities (e.g., translations, joint continuing professional development, training, conferences, seminars); and
  • workforce mobility (e.g., reciprocity agreements and recognition of qualifications).

The World Bank CFRR and IFAC will continue to support PAOs in the Western Balkans along this journey through a joint in-depth analysis of the benefits of closer integration and sharing international experiences, as well as facilitating a series of targeted follow-up webinars to continue and progress the discussion.

Maria Chuvasheva

Former IFAC Senior Technical Manager, Quality and Development, IFAC

Maria Chuvasheva was a senior technical manager within IFAC's Quality and Development team. As part of the IFAC Member Compliance Program, Maria worked with professional accountancy organizations from Eastern and Southern Europe, supporting them in adopting and implementing international standards in their jurisdictions and ensuring fulfillment of IFAC membership obligations. She also led the member and country profile reporting initiative, which focuses on providing global stakeholders with data and analysis on adoption and implementation status of international standards and best practices and PAOs’ role in the process. Before joining IFAC, Maria spent nine years with the Financial Standards Foundation, a private sector initiative focused on monitoring adoption of 12 Key Standards for Sound Financial Systems for sound financial systems. She holds master’s degrees in Philology and Economics from St. Petersburg University (Russia) and a Master of International Affairs degree from Columbia University (USA).

Kalina Shukarov Savovska
Kalina Shukarova Savovska

Principal

Kalina is a Principal, currently working on several IAASB projects, including the going concern and audit evidence projects. the listed entity and public interest entity projects.

Kalina previously worked with The World Bank in Vienna, Austria where she led activities involving capacity building and accountancy education, providing policy advice to client countries on corporate financial reporting reform and developing the accounting and auditing profession, with a primary focus on auditing standards. Prior to that, Kalina was an Executive Director with Ernst and Young with many years of practical audit experience.

Kalina is an ACCA and a Certified Internal Auditor (CIA).

Follow Kalina on LinkedIn.