World Bank Assists FYR Macedonia in Improving Quality of Financial Reporting

December 17, 2015

Skopje, December 17, 2015 –The World Bank presented today the findings of the recently completed Report on the Observance of Standards and Codes on Accounting and Auditing (ROSC A&A), which is part of the joint initiative of the World Bank and the International Monetary Fund. This assessment focuses on the strengths and weaknesses of the accounting and auditing environment that influences the quality of corporate financial reporting, and includes a review of both statutory requirements and actual practice.

The strategic objective of this report is to support the Government in its efforts to improve the business climate in the country, as well as the country’s overarching goal of the EU membership. Findings and recommendations from this report will inform the Government’s decision making aimed at increasing competitiveness and productivity across the economy through the provision of timely and reliable financial information formulated according to internationally accepted standards, while also observing standards of governance that create confidence among local and foreign investors.

"Improved corporate sector financial reporting and auditing, along with appropriate disclosure of financial information, contributes to economic development and growth and to improving access to finance, the investment climate, the overall business environment and job creation”, says Goran Tinjic, World Bank Acting Country Manager for FYR Macedonia, and adds “This ROSC Accounting and Audit contributes to the overarching theme of the World Bank’s Country Partnership Strategy in the country, which is to support EU accession agenda”.

The specific objective of this report is to help the Ministry of Finance and other stakeholders address deficiencies in the institutional infrastructure required for relevant and reliable corporate financial reporting. The three essential pillars of institutional infrastructure are: adequate and appropriate legal requirements, capacity sufficient to implement those requirements, and effective enforcement mechanisms.

This report is an update to the first ROSC A&A prepared in 2003, which identified a number of areas for improvement. The new report verifies that the country made significant progress in aligning the statutory and institutional framework with EU requirements. The Government has carried out reforms consistent with good institutional practices and the aquis communautaire. Major improvements in accounting since 2003 include: the enactment of the law on accounting services, the adoption of a relatively recent version of International Financial Reporting Standards (IFRS), the adoption of the IFRS for Small and Medium-sized entities, improved filing mechanisms for financial statements and improved transparency through the availability of data in the Central Registry.

In addition, reforms that were conducted included: the enactment of a new law on auditing, the establishment of a professional institution for statutory auditors, the preparation of updated certification curricula, the replacement of outdated auditing standards with newer versions, and establishment of quality assurance and public oversight arrangements for the audit profession.

“The ROSC A&A  due diligence included a review of a sample of published financial statements and found that the general quality of financial reporting for public interest companies has improved compared to the 2003 report”, says Kalina Shukarova, World Bank Senior Financial Management Specialist and co-author of the Report, and adds “However, further efforts are needed to improve the quality of financial reporting and the report identifies a number of key areas that need be addressed in order to ensure that the gains achieved are solidified and made sustainable over the medium and longer period”.

The report notes several areas for further improvements, including: align fully the statutory framework with the EU directives including simplifying requirements on SMEs, revisit the organization of the accountancy profession to avoid duplication and ensure its long-term development, continue modernizing accountancy education and training, streamline accounting and auditing standard setting, strengthen the mechanisms to ensure compliance with the standards.

Suggested next steps are for the Government to discuss this diagnostic with the stakeholders, determine the priority areas for further reforms or improvements, assess the resources available and determine the corresponding allocations and remaining gaps. The World Bank is committed to supporting the country in this ongoing reform process.

The full Report on the Observance of Standards and Codes on Accounting and Auditing is available at:

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Elena Karaban
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