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AUDIT ACTIVITY QUALITY CONTROL PRESENTED ON THE EXAMPLE OF GEORGIA
Section 1. Accounting
Buchukuri Lali,
Phd, in Economics, Faculty of Business Administration Ivane Javakhishvili Tbilisi State University, E-mail: Lali.buchukuri@gmail.com
AUDIT ACTIVITY QUALITY CONTROL PRESENTED ON THE EXAMPLE OF GEORGIA
Abstract: The issue relating to improvement of audit firms and control of their quality is discussed in the mentioned article. Georgia's aspiration to EU membership requires development of investing and business environment to be promoted that is necessary condition for improvement of Georgia's economy. Successful functioning of business depends on management organizational level and structure, as well as on the reliability quality of financial information for external customers. This could be achieved without perfect regulation of audit. Therefore, quality control of audit activity has great importance.
Key words: Auditing activities, auditing activities legislation, quality control of audit activity.
An independent internal audit is given a special ber States" (hereafter referred to as an Agreement) the
attention not only in the United States of America and Europe but around the whole world including Georgia. The establishment of Audit companies in Georgia has begun in the first half of 90th of XX century. In 1995 the Law of Georgia on "Audit Activities" was adopted to regulate the audit activities which can be regarded as the first step taken in development of audit activities in Georgia. Since 2013, the Code of Ethics by International Ethics Standards Board for Accountants has been in force.
Georgia's aspiration to join European Union requires the improvement of normative and legislative framework in compliance with the international practice, facilitation and development of investment and business environment, which is a prerequisite for the economic development of Georgia. Pursuant to "the Association Agreement between the European Union and the European Atomic Energy Community and Georgia's collaboration with their Mem-
state undertook a liability to approximate with the international laws in accounting, auditing and corporate management in prescribed terms as per EU code of laws and normative acts introducing standards step-by-step in order to strengthen the cooperation with Europe regarding political, economic and social issues.
With the aim of improving the legal framework on June 8, 2016 a new "law of Georgia on Accounting, Reporting and Auditing" was adopted. The regulation of audit activities had been possible through professional organization previously. Based on the new law, audit activity became a subject to state supervision, which is carried out by the Service for Accounting, Reporting and Auditing Supervision under Ministry of Finance of Georgia. A certain part of the audit company representatives argued that the formation of the regulatory agency as a structural unit of the Ministry of Finance will lead to a conflict of interests. It would be desirable to create
Section 1. Accounting
the Service for Accounting, Reporting and Auditing Supervision as an independent state institution. Additionally, in consideration of EU directives the agency which is responsible for auditing must be independent from audit profession and free from conflict of interests [3, Chapter 35.2].
A number of experts assess the new legislation as positive. From their standpoint, the law requirements are in full line with EU directives. They also believe that the state supervision over the audit activities will allow to take efficient steps in terms of audit activity quality control. In the light of the fact that more than 230 audit companies and 420 audits are registered in Georgia currently, the quality control of audit activities represents a significant factor indeed.
The international companies occupy the majority of Georgian audit activity market, however a certain part of Georgian audit companies also managed to become strong subjects. In 2015 the rating of audit companies based on their incomes is as follows (Data released by the Federation of Professional Accountants and Auditors of Georgia) [1].
1. JSC "EY Georgia";
2. Pricewaterhousecoopers Central Asia and Caucasus a branch office of B. A. in Georgia;
3. KPMG Georgia Ltd;
4. BDO Ltd;
5. Ltd "Deloitte and Touché" Georgia;
6. Financial Management Group;
7. LLC "Grand Thornton";
8. LLC "Aresem capto";
9. Audit Concern "Tsodnisa";
10. Ltd "Baker Tilly Georgia".
Since 2005 the internationally recognized companies has "conquered" the entire "Market" of audit activities in Georgia. The reason lies in the fact that the clients give much more priority to the reports made by the internationally recognized companies than those specialists whose activities are less recognized. The reforms are intensively made in Georgia which are aimed to develop the audit activities and meet the euro directives at the maximal extent. However, there are number of issues which require a significant improvement, in particular audit activity control that is substantially important for development of national audit activities.
References:
1. Law of Georgia on Accounting, reporting and auditing, June 08, - 2016.
2. Law of Georgia on Accounting and financial audit, June 29, - 2012.
3. Directive 2014/56/Eu OfThe European Prliamnet And OfThe Council. Amending Directive 2006/43/ec on statutory audits of annual accounts and consolidated accounts, of 16 April - 2014.
4. "The Association Agreement between the European Union and the European Atomic Energy Community and Georgia's collaboration with their Member States", Vilnius, - 2013.
5. URL: http://www.ifac.org
6. URL: http://www.gfpaa.ge
7. URL: http://www.saras.gov.ge
