New Independent financial audit act

Nina BotevaFounding Partner, Nina Boteva Law Office

The Independent financial audit act is promulgated in State Gazette (SG) No. 95/29.11.2016 and it becomes effective as of 1st of January 2017 for the financial reports for the periods after 1st of January 2017. This Act repeals the last Independent financial audit act SG No. 95/8.12.2015, having been in force for less than a year, as of 1st of January 2016.

Independent financial audit is the audit of annual financial statements or consolidated financial statements where this is required by effective legislation, with the exception of audits of financial statements carried out by the National Audit Office.

The new Law regulates, as did the previous one, the objective and the principles of the independent financial audit; the professional standards of organisation, documentation and implementation, as well as the conclusions of the independent financial audit; the acquisition of a diploma and a right to practice and the practicing of the auditor’s profession by the registered auditors; the rights and the obligations of the registered auditors who perform independent financial audits; the statute of the Institute of the Certified Public Accountants; the system of public oversight of registered auditors.

In the scope of the new Independent financial audit act enters also the status and the functions of a new Commission for public oversight of the registered auditors (the Commission). This commission will be responsible before the National Assembly and it will consist of four members and a president, each mandated for four years. In order to provide the public oversight of the independent auditors, the Commission will cooperate with the European Union (EU) institutions and the EU member states.

The law summarises the general requirements for audit of financial reports and the requirements for statutory audit of financial reports of public-interest entities.

The newIndependent financial audit act provides a more detailed regulation of the public oversight of registered auditors. The oversight includes the duties of the Commission and the audit committee, oversight of the Institute of the Certified Public Accountants and the system of the public oversight of registered auditors, concerning the inspections and investigations, led by the Commission and the audit committee. An audit committee must be created in each public-interest entity.