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  • Financial reporting

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    What do you need to know?

    Commitment of the Government of Albania (GoA) towards the EU accession is an important driving force for enhancing corporate financial reporting.

    Taking into consideration the reforms, GoA’s goal is to enhance corporate financial reporting.
    Enhanced corporate financial reporting is vital for the well-functioning market economy including:

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    • reduced risk of financial market crises and their associated negative economic impact by strengthening the domestic financial architecture
    • increased number and value of foreign direct and portfolio investment;
    • mobilization of domestic savings into local investments;
    • facilitation of smaller-scale corporate borrowers’ access to credit from the formal financial sector by lowering high costs of information and borrowing;
    • allowing investors to properly evaluate corporate prospects and make informed investment and voting decisions, which results in a lower cost of capital and a better allocation of resources;
    • allowing shareholders and the public at large to assess a company’s management performance, thereby promoting the active development of capital markets;
    • supporting economic integration, both regionally and globally.
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    • The diagnostic assessment carried out by the World Bank – Accounting and Auditing Report on the Observance of Standards and Codes (A&A ROSC) in 2006 noted some progress and proposed a number of policy recommendations for further improvements in the statutory framework and in institutional and professional capacity building.

    • The Government of Albania has followed up with some reforms in corporate financial reporting as :
      (i) the 2004 Accounting Law;
      (ii) the 2009 Auditing Law;
      (iii) the Country Action Plan (CAP) to Enhance Corporate Financial Reporting in Albania (CAP) adopted in February 2009, based on the recommendations of the 2006 A&A ROSC.

    • Based on the activities and timing approved in the CAP, the Albanian government, supported by the World Bank and the donator SECO (through the Center for Financial Reporting Reforms – CFRR), has addressed, in the most part, the objectives of the first pillar of CAP by preparing and implementing the Corporate Financial Enhancement Reporting Project – CFREP (funding 1.25 mln. EUR provided by SWISS SECO). This project completed in March 2014. Its focus has been on the following priority activities for developing corporate financial reporting
      (i)improving the legal framework;
      (ii)strengthening the national accounting standard setter;
      (iii) establishing a public oversight system for independent auditors;
      (iv) improving accounting and auditing curricula;
      (v) strengthening reform capacity of the Government in the area of corporate financial reporting, including preparation of the following phases of the reforms.

    • The second phase of Country Action Plan is being implemented, mainly through the ongoing project Enhancing Quality of financial Reporting in Albania (EQ Finrep) which has main objective (PDO) is to improve the institutional and technical capacity of universities, professional organizations and accountancy professionals, tax and supervisory authorities, and commercial register for quality financial reporting in line with the EU acquiscommunautaire and good international practice. To that effect the project will focus on strengthening the human capacity for accountancy and audit professions, improving public availability of companies’ financial information, and improved monitoring and evaluation by regulators of the quality of financial reporting.