The Law on Auditing Activity should be revised to make it more consistent with the EU Statutory Audit Directive MOF X The Government, after analysing the weaknesses and needs of the SOE sector, should strengthen mechanisms for the accountability and oversight of SOEs, including enhanced financial reporting, transparency and audit requirements. MOF, MOE and PPA X Engage a dialogue to raise awareness on the benefits of corporate governance and enhance existing practices especially as they relate to financial reporting and auditing within all PIEs, including significant SOEs NCFM, MOF, PPA, stock exchange, and business association(s) X The Profession The Government and professional associations should collaborate to increase the reliability of the local accountancy profession through revision of the syllabus, introduction of a quality assurance mechanism for the preparation and evaluation of examination questions, etc. MOF Professional Associations X There is a need to structure and standardize the additional examinations by the NBM and NCFM for the certification of auditors for the audit of financial institutions, insurance companies and the securities market. In the longer term, such industry-specific examinations could be abolished. NBM and NCFM X The professional associations should promote the profession through Professional X
Table 3: A&A Requirements in Top 10 SOEs with Largest Asset Size Entity Sector State share % Thousands MDL A&A requirements Availability of the financial statements Managing Authority Total assets Total Revenue Accounting Audit 1. JSC Banca de Economii (PIE) Banking 56 5,841,010 666,003 IFRS Mandatory Yes Ministry of Finance 2. JSC Moldtelecom Telecommunication 100 5,445,160 2,238,624 NAS Mandatory No Public Property Agency 3. SE Administratia de Stat a Drumurilor Road infrastructure 100 3,821,397 59,677 NAS Not required by Law. Done for 2011. No Ministry of Transport and Road Infrastructure 4. JSC Centrala electrica cu termoficare nr.2 Electricity generation 100 3,101,095 1,493,413 NAS Not required by Law No Ministry of Economy 5. SE Calea Ferata din Moldova Railways 100 2,609,169 1,281,826 NAS Not required by Law No Ministry of Transport and Road Infrastructure 6. SE Moldelectrica Electricity sector transmission 100 2,252,589 298,490 NAS Not required by Law No Ministry of Economy
Regulated entities are required to file their financial statements with the appropriate regulator. Banks are required to: (i) file their full financial statements with the NBM by April 30 following each year-end; (ii) make available copies of their annual report to the public free of charge and (iii) publish their balance sheet and audit opinion in both national newspapers as well as in local newspapers wherever the bank has a branch also by April 30 following each year-end. It is worth noting that such partial publication is inadequate in scope as it may be misleading for users in that an audit report should be read as a whole. The following table summarizes the corporate reporting requirements in Moldova: Table 4. Corporate Financial Reporting Requirements in Moldova Entities Accounting Standards Audit Requirement Public Disclosure PIEs IFRS Required. Required. Limited liability companies NAS or IFRS on voluntary basis Not required. Required. Joint stock companies (excluding PIEs) NAS or IFRS on voluntary basis Required for JSC meeting the criteria set in Article 2 of the Law on JSCs. Required.33 34 State Owned Enterprises NAS or IFRS Not required for state enterprises; for JSCs, the same rule as above. Required. 33 34 Savings and Credit Associations (SCAs) NAS 63 Presentation of financial statements by the SCA and by other similar entities Required for SCAs with license C and SCAs with license B exceeding a certain asset value. Required. 33 34 entities NAS and Norms approved by the Ministry of Finance Not required. Required.34 Micro entities NAS 62 Accounting based on simply accounting system. No requirements to prepare financial statements. Not applicable. Not applicable.
The professional associations should be more proactive in the implementation of the accounting and auditing reforms through increased quality and improved perception of the profession by the business community. This could include: Making twinning arrangements with institutes and associations in other countries Establishing peer-review mechanisms within the respective associations for better quality audits. Committing to compliance with IFAC’s Statements of Membership Obligations or similar requirements. Partnering with industry, trade and commerce chambers to engage in dialogue with the Government and regulators to facilitate the accounting and auditing reforms. Partnering with other stakeholders and perhaps development partners in knowledge sharing activities for accountants on accounting standards, for auditors on auditing standards and for businesses and investors on the importance of this agenda. Accounting and Auditing Standards The national accounting standard-setting process should be made more participatory and sustainable. The standard-setting approach should be expanded to provide for broader consultation with preparers, users and auditors of financial statements as well as tax experts. Furthermore, sufficient time should be allowed for public consultations, with all such discussions and feedback being transparent. Consideration should be given to the sustainability of the standard-setting process together with clarification of the way future revisions will be made to keep the standards up-to-date. As adopting the IFRS for SMEs would allow national standard setters to benefit from the rigorous and participatory process followed by the IASB, national standards setters may find it more effective to refocus their attention into participating in this process and expressing their needs to IASB, rather than developing their own customised solutions. The process for adopting accounting and auditing standards should be streamlined. The Law on Accounting and Law on Auditing Activity between them require the use of IFRSs, ISAs and IFAC’s Code of Ethics. However, the legislation requires translations of these standards or any updates to them to be published in the Official Monitor and there is currently a backlog of standards and their updates for publication. The Ministry of Finance should make sure that all updates enter into force on a timely basis. Monitoring and Enforcement The capacity of the Public Registry needs strengthening. The Public Registry is responsible for ensuring that companies comply with the financial reporting and transparency provisions of the Law on Accounting. However, the Public Registry has neither the capacity nor the resources to fulfil these responsibilities, which would initially require that: The Public Registry is provided with the necessary IT infrastructure to collect, process and publish the financial statements required by the Law;
The JSC Law, State Enterprise Law and Law on Enterprises should be amended to require statutory financial statement audits in all public interest entities Addressed in the new Law on Auditing Activity where statutory audit of financial statements of all public interest entities became mandatory. Clarify the role of the Censors’ Committee with respect to the financial reporting process and restrict the obligation to have Censors to entities not subject to statutory audits Outstanding. The Law on Joint Stock Companies remains unchanged. As described in the main body of this ROSC report, the role of JSCs’ Censors’ Committee continues to be unclear. CNVM’s and SIIS’s powers and capacity for enforcing accounting standards and financial reporting requirements should be strengthened Partially addressed. Regulatory framework improved; substantial implementation challenges. The CNVM and SIIS have been superseded by the National Commission on Financial Markets (NCFM) which has the power to enforce accounting standards and financial reporting requirements. Finalize the draft of a new Auditing Law Regulatory framework improved; substantial implementation challenges. A new Law on Auditing Activity was adopted in 2007 and entered into force on January 1, 2008 Establish an independent Audit Oversight Council Regulatory framework improved; substantial implementation challenges. An Auditing Oversight Council (AOC) independent of the auditing profession was established under the MOF. However, there are issues with respect to resources and capacity that are described in the main body of this ROSC report.