ENHANCING QUALITY OF FINANCIAL REPORTING PROJECT TF NO:019228
EQFinRep will build on and deepen the reforms achieved under CFREP Project (the first phase implemented) , and support implementation of the CAP activities not yet addressed. FINREP Project will focus on: (i) Further modernization of CFR legislation, to be fully compliant with the EU acquis communautaire –including differentiated financial reporting and auditing requirements for various entities (depending on the level of public interest in their operations and taking into account simplification requirements for SMEs and micro-entities) and ensuring adequate funding and institutional arrangements for audit oversight and quality assurance; (ii) Further modernization of accountancy education and professional qualification to meet good international standards and benchmarks; (iii) Further capacity strengthening of monitoring and enforcement institutions, such as audit oversight board and financial sector regulators, so that they can ensure proper application of accounting and auditing standards by corporate entities, including financial sector entities; (iv) Improving the Public Register of Financial Statements’ operation, to ensure financial statements are publicly available for users, including potential investors and creditors.
PROJECT DEVELOPMENT OBJECTIVES
The Overall Development Objective of the Country Action Plan is to improve accountability and transparency in corporate financial reporting in Albania in line with international good practices, by way of aligning the country’s statutory and institutional frameworks with the EU acquis communautaire and with a view to Albania’s aspiring to EU accession.
The proposed Project Development Objective (PDO) is to improve the institutional and technical capacity of universities, professional organizations, tax and supervisory authorities, and commercial register for quality financial reporting in line with the EU acquis communautaire and good international practice. To that effect the project will focus on strengthening the human capacity of the accountancy and audit professions, improving public availability of companies’ financial information, and improved monitoring and evaluation by regulators of the quality of financial reporting.
The major beneficiaries are the GoA and the National Steering Committee. The project will work with stakeholders responsible for various functions in the CFR framework in Albania. All stakeholders have expressed their commitment to the project results. Some beneficiaries were previouslyinvolved in the CFREP, including the National Accounting Council, Public Oversight Board, IEKA, leading accountancy education institutions and professional associations. The EQFinRep will additionally include the tax authority, National Registration Centre, Bank of Albania and Financial Supervision Authority.
Project’s expected results are: (a) Strengthened capacity of universities and professional institutions to implement the accountancy curricula compatible with international good practices; improved understanding and application of relevant accounting and auditing standards by practitioners; (b) Enhanced capacity of the Tax Authority to better understand financial reporting standards and reconcile differences among fiscal reporting and general purpose reporting; (c) Improved capacity of audit oversight institution (POB) and financial regulators in monitoring and enforcing higher quality of financial reporting based on IFRS prepared by financial institutions; Increased technical capacity of Public Oversight Board to lead and oversee the performance of the quality assurance system for the audit profession; (d) Strengthened capacity of the National Registration Centre to provide reliable, timely and easy access to the public of financial statements of corporate entities; (e) Improved reform management capacity of the National Steering Committee responsible for overseeing financial reporting reforms and the Ministry of Finance.
The proposed project comprises four recipient executed components.
Component 1. Accountancy education.
The component will focus on strengthening accountancy and audit education, including university education, education of financial statements preparers and tax employees, and technical capacities of the accounting and audit professions. Support will be provided to various stakeholders to enhance their understanding and practical application of accounting and auditing standards, including developing modern audit methodologies to facilitate sound quality audits. Stakeholders for this component will include universities, members of professional organizations, and staff of tax authority. Key outputs include preparation and delivery of training programs for lecturers and trainers, preparers of financial statements, Tax Authorityemployees, and auditors.
Component 2. Monitoring and enforcement of financial reporting and auditing
The component will help improve the monitoring and enforcement of financial reporting and auditing by strengthening the audit oversight system and enhancing the capacities of financial sector regulators in financial reporting. It will finance technical assistance and training (including on the job training) to improve the operation of the Public Oversight Board, and will enhance POB and financial regulators’ capacity to monitor and enforce higher quality IFRS-based financial statements by financial institutions. Key deliverables include capacity building support for POB inspectors; assistance to Bank of Albania (BoA) and Albanian Financial Supervisory Authority (AFSA) to improve their ability to monitor/enforce publication of PIEs financial statements, support to the POB, BoA and AFSA to establish an efficient cooperation protocol on quality assurance for the audits of financial sector companies; and IFRS training for financial regulators.
Component 3. Filing and publication of statutory financial statements
The component will aim to improve transparency and disclosure of financial information through the filing and publication of statutory financial statements. It will provide support for the National Register Centre to establish software, regulations and processes (including some controls and basic checks on completeness, applicable financial reporting standards and on auditing requirements), as well as capacity building to improve activities in collecting financial statements/audit reports and making them available to the public. The users of such financial information are analysts, investors, creditors, who use financial information for resource allocation purposes (lending, investment, etc.), but also the general public in case of SOEs or public interest entities.
Component 4. Project management, coordination, evaluation and public awareness
This component will include incremental operating costs related to project management, including the overall reform management and coordination, project related fiduciary activities (procurement and financial management), as well as monitoring and evaluation (M&E) activities which would serve the authorities to ensure the long term sustainability of the reform results. This component will facilitate preparation of the next phase of the reform program through the preparation of the third phase project proposal, which could be potentially funded by the EU instrument for pre-accession (IPA). This component also envisages support to the Ministry of Finance on maintaining reform momentum, as well as public awareness activities aimed at disseminating the importance of financial reporting among various stakeholder groups, including users of financial information.