Audit Business in the World and in Georgia
Maka Ghaniashvili
How to manage auditing business so that Georgia becomes more attractive for investors
Demand on providing auditing service increases every year in Georgia. It is clearly reflected in statistical data as well. By the end of 90’s annual income from audit service did not exceed Gel 2-3 millions, while in 2006 this indicator increased to Gel 20 million, excluding VAT, and it reached 25 millions by the year of 2007. Is spite of the above provided data, there is a lot that needs to be changed and improved in auditing activities; this particularly refers to legislation level. What direction does this field follow; will the rout taken by government assist the development and extension of market?
Historical overview
Audit activities began with adopting Law on “Audit activities” of Georgia in 1995. Auditing is conduced on physical and legal persons’ entrepreneurial activities, accounting, taxation, inspecting financial and industrial activities, expertise and consulting. An independent inspector examines company’s activities. It is not a penalty and revision under plan. It is the examination by an independent third party that is not connected to the subjects of auditing. Its report is confidential and is available to entrepreneurs. It’s up to entrepreneur whether it will consider the conclusions and recommendations. There are four types of audit reports: positive, conditional positive, negative and refusal to write an audit report/conclusion. Council for Audit Activities of the Parliament of Georgia was established in 1996 to implement state regulation of audit activities. Its competences covered: working out standards and methodological recommendations; attestation and passing attestation exams; working out license statements and issuing licenses, controlling the quality of provided auditing services, receiving statistical report forms, carrying out a united state register of audit companies and solving other issues related to state regulation. Georgia expected international standards of audit activities in 1999 that was issued in Georgian in two levels. Accepting international standards was confirmed by normative act as well. It implied that audit companies were obliged to carry out their activities under these standards. From the beginning there was an obligatory auditing, the subject of which were financial organizations (banks stock exchange, insurance companies) as well as all Ltds. Advantage of an obligatory auditing was that everyone became aware of auditing activities. Before it was familiar to limited number of entrepreneurs. Demand on auditing from the entrepreneurs was increasing more and more. Demand on auditing service was increasing, various auditing companies were formed. Besides, a demand on quality also appeared. Although to put it mildly, a quality did not really meet international standards. As it was remarked by Council for Audit Activities of the Parliament of Georgia, from the beginning, when the council was formed and auditing activities were just starting, everything seemed to be all right. Although soon negative events took place that were certainly caused by their reasons, namely, 90’s and economic crisis in Georgia. By that time pension was only 14 Gels and even that was not issued to people, the same applied to low salaries. Auditors were in unfavorable position. Majority of them, like those having other professions, had to think about other important issue: how to survive. Auditors began to write their auditing conclusions for minimal earning, let’s say 20 Gel, that amounted to month and a half pension to a pensioner auditor. The situation was widely spread. It greatly contributed to the creation of so called ‘cheap auditors’. Besides, auditing was an obligatory and taxation department did not receive balances without auditing reports. It referred to all Ltds. Let’s take an entrepreneur for example, the one who had a small shop, so called ‘box’. The capital, as well as the whole Georgia was full of these types of small shops during 90’s and it was the major source of income to their owners. It had neither accounting nor other office structures – the owner was a founder, salesman, as well as accountant. Why did he/she need to carry out an audit? On the other hand, taxation service required auditing report from it. In this case an entrepreneur searched for a cheap auditor that would write a formal audit report. An entrepreneur got a simple audit notice from him and it was not 2008 (4)
Miscellaneous
Audit Business in the World and in Georgia
How to manage auditing business so that Georgia becomes more attractive for investors
Maka Ghaniashvili
Demand on providing auditing service increases every year in Georgia. It is clearly reflected in statistical data as well. By the end of 90’s annual income from audit service did not exceed Gel 2-3 millions, while in 2006 this indicator increased to Gel 20 million, excluding VAT, and it reached 25 millions by the year of 2007. Is spite of the above provided data, there is a lot that needs to be changed and improved in auditing activities; this particularly refers to legislation level. What direction does this field follow; will the rout taken by government assist the development and extension of market?
Historical overview
Audit activities began with adopting Law on “Audit activities” of Georgia in 1995. Auditing is conduced on physical and legal persons’ entrepreneurial activities, accounting, taxation, inspecting financial and industrial activities, expertise and consulting. An independent inspector examines company’s activities. It is not a penalty and revision under plan. It is the examination by an independent third party that is not connected to the subjects of auditing. Its report is confidential and is available to entrepreneurs. It’s up to entrepreneur whether it will consider the conclusions and recommendations. There are four types of audit reports: positive, conditional positive, negative and refusal to write an audit report/conclusion. Council for Audit Activities of the Parliament of Georgia was established in 1996 to implement state regulation of audit activities. Its competences covered: working out standards and methodological recommendations; attestation and passing attestation exams; working out license statements and issuing licenses, controlling the quality of provided auditing services, receiving statistical report forms, carrying out a united state register of audit companies and solving other issues related to state regulation. Georgia expected international standards of audit activities in 1999 that was issued in Georgian in two levels. Accepting international standards was confirmed by normative act as well. It implied that audit companies were obliged to carry out their activities under these standards. From the beginning there was an obligatory auditing, the subject of which were financial organizations (banks stock exchange, insurance companies) as well as all Ltds. Advantage of an obligatory auditing was that everyone became aware of auditing activities. Before it was familiar to limited number of entrepreneurs. Demand on auditing from the entrepreneurs was increasing more and more. Demand on auditing service was increasing, various auditing companies were formed. Besides, a demand on quality also appeared. Although to put it mildly, a quality did not really meet international standards. As it was remarked by Council for Audit Activities of the Parliament of Georgia, from the beginning, when the council was formed and auditing activities were just starting, everything seemed to be all right. Although soon negative events took place that were certainly caused by their reasons, namely, 90’s and economic crisis in Georgia. By that time pension was only 14 Gels and even that was not issued to people, the same applied to low salaries. Auditors were in unfavorable position. Majority of them, like those having other professions, had to think about other important issue: how to survive. Auditors began to write their auditing conclusions for minimal earning, let’s say 20 Gel, that amounted to month and a half pension to a pensioner auditor. The situation was widely spread. It greatly contributed to the creation of so called ‘cheap auditors’. Besides, auditing was an obligatory and taxation department did not receive balances without auditing reports. It referred to all Ltds. Let’s take an entrepreneur for example, the one who had a small shop, so called ‘box’. The capital, as well as the whole Georgia was full of these types of small shops during 90’s and it was the major source of income to their owners. It had neither accounting nor other office structures – the owner was a founder, salesman, as well as accountant. Why did he/she need to carry out an audit? On the other hand, taxation service required auditing report from it. In this case an entrepreneur searched for a cheap auditor that would write a formal audit report. An entrepreneur got a simple audit notice from him and it was not an actual check.
What does the Council for Audit Activities do this time? As head of the Council, Mr. Elguja Afridonidze remarked: ‘The council did not possess mechanisms to influence these processes during that period of time. Controlling quality was not possible due to a fact that initial version of a Law did not take it into consideration. The council was issued a regulatory and controlling function only after introducing amendments. From the beginning the Council was not envisaged in a law on regulation bodies. This change was also introduced later and as a result Council for Audit Activities gained controlling function. Later the Council demanded to cancel obligatory auditing. At least there should be a type of gradation. For instance, if a company does not have to pay VAT, it should not be obliged to become the subject of auditing. In addition, the law did not foresee any responsibilities towards auditors no matter how they fulfilled their imposed obligations. Safety mechanism did not exist. One was not deprived of Certificate or anything. The only thing that could be done was to stop license. Anyway, entrepreneur would go and open other firm. The council wanted to change this issue as well. A special legislation draft was prepared according to which certain punishment was envisaged for false auditing report. It could be either fine, legal punishment or some other form of responsibility’.
This legislative draft was prepared by the beginning of 2000’s. At the same time accounting reforms began in Georgia. Accounting field separated form the ministry of finances and moved to self regulation. Georgian Federation of Professional Accountants and Auditors was established. The issue of changing state regulation of auditing activities into a self regulation system was then put for discussion. The following is the question that has not been solved yet – who should regulate auditing activities: state or a profession? Although the issue is a subject of discussion not only in Georgia.
Parallels with the world events
There were two models of managing this filed in the world before: continental (spread in major countries of Europe) with the mixed supervisory system on auditing activities and Anglo Saxon system (USA, Canada, Great Britain), that implied self regulation from professional organizations side only. However, events of 2001 in the US changed approaches towards auditing activities.
Enron & Parmalat
Enron was the greatest American energy company, the capital turnover of which amounted to USD 111 billions by the year of 2000. However, the company was revealed to be a bankrupt by late 2001. The reasons of it lied in irregular accounting procedures. Auditing was carried out by an international company ‘Anderseni’. It was one of the “Big Five” large international accounting firms. Instead of showing actual financial situation of the company, it assisted managements to fraud documentation.
Enron bankruptcy caused significant changes in the US economy. Investors lost their trust towards largest corporations of the country. Suspicious data used by managers of energy concern damaged not only other large companies, but auditing companies and their activities as well. Potential investors doubted about approaches towards auditing activities and the following statements: buying certain companies and other operations are based on trust. We don’t know the people who actually manage the company, but we get guarantees from audit while buying the company’s shares. The reports published to calm investors down include statements: financial situations in X companies as well as their sub-divisions presented by them correspond to truth’.
Although as we have already mentioned, investors approach has changed. Number of companies has changed their accounting mechanisms to keep trust. For example, PricewaterhouseCoopers separated consulting and auditioning services. Approaches have changed not only from audit companies, but also from state as well. The fact of giving self regulation to auditing activities was carefully thought of. Maybe it was better to create a state controlling mechanism and to increase state regulation over this field. Well, this is what they have done in the US. Moreover, the reforms were headed by US state secretary.
Later, in 2003 the same event took place in Europe. Parmalat an Italian dairy and food corporation went bankrupt due to financial fraud and wrong audit inspection. The fact was followed by EU statement, 2003 on ‘Reinforcing Obligatory Audit’.
15 years conception on developing auditing activities was worked out in EU. The conception highlights those measures that should be taken in order to ‘gain the lost trust of investors towards market and capital. Financial scandals, Enron collapse and other events of current period forced EU to recheck regulation policy of the field’- says 2003 EU resolution. The supporters of reforms in the US also discussed the necessity of regaining investors trust two years prior. ‘the fact that we need to introduce better accounting standards to give the right information to investors and shareholders, is clear’ – this is what President Bush declared following the Enron scandal.
Situation in Georgia
Number of reforms have been implemented in Georgia since Rose Revolution. Two significant changes that greatly affected auditing activities are worth noting: obligatory auditing for Ltds was abolished in 2005 and the second – number of structures issuing licenses and permissions decreased (number of licenses decreased from 1000 to about 100), therefore auditing activities were reduced as well. Part of experts believe that this change negatively affected quality of auditing services, as a result Council for Audit Activities has lost its controlling function again. According to Elguja Afridonidze: ‘In my opinion, state does not posses the corresponding tools and it can not fulfill the function that is necessary and that is the part of it competence. Licensing in this field has been canceled and the Council is deprived of any mechanism to carry out punishment no matter how bad an auditing company or an individual audit works. There is no obligatory state registration to deprive the company of this registration in case of any wrong doing. Besides, we need to approve and except international changes and standards by means of normative acts. Why should an entrepreneur carry out an accounting by international standards, if it is not a normative act in Georgia? It is the states prerogative.’
Number of auditing companies support the increase of state regulation. We have spoken to director of one of auditing company Mr. Aleksandre Okromchedlishvili. He remarked: ‘State control is certainly necessary. If I am to blame, I should be responsible for that. There should be a link between a reason and an outcome. An auditor should think of high quality and of meeting certain standards. Council for Audit Activities of the Parliament of Georgia is functioning in Georgia. It can do a really significant business, although today the council is somehow deprived of functions. Well, what can be said about controlling auditing activities in Georgia, when there is not even a food quality control system? Moreover, there is a legislative draft in Parliament of Georgia according to which they intend to abolish the Council. When the legislator does not considere the necessity of this institution, we can not discuss the rest. On the other hand, this system is expected to be controlled, licensed and certified by state body. All the above said should be done through some fund or an association. While I have the certificate given by an auditor, it should be legitimized and approved by the state. As a director of an auditing company, I really would like to see the council with stronger functions from controlling, organizational as well as methodological point of view. I would like to see my activities being controlled and monitored to feel more responsible. On the other hand I would like to get certain methodological and methodical assistance from the council.’
Legislative draft (on Accounting and Auditing), that Mr. Aleksandre Okromchedlishvili had discussed, was prepared in spring 2006 by Kakha Bendukidze, former State Minister of Georgia for coordination of economic reforms. According to the draft accounting and auditing field were united and changed to self regulation. The draft abolishes Council for Audit Activities while the whole world implements absolutely different, just opposite measures – self regulation is changed into state regulation, for example in Russia where moving into self regulation was started. The discussion of a legislative draft was stopped. Moreover, in May 2006 EU adopted a directive that reads: ‘Member States should organize an effective system of public oversight for statutory auditors and audit firms
on the basis of home country control. All statutory auditors and auditing companies should be submitted to state supervision ‘ ( Article 32, directive of the European Parliament and the European Council, 2006). In addition, the directive directly demands member states to abolish self regulation from the second part of 2008 and entirely to move to state regulation. According to the World Bank data nearly all states try to comply their legislation with the EU direction. Parliament has shared recommendations of Council for Audit Activities and other professional organizations based on the above mentioned directive and refused the state to adopt this draft on spring sessions of 2006. There is a GEPLAC report on the draft as well: ‘we conceder putting generally auditing regulation into a self regulation regime, while the whole world’s auditing regulation regime is being reinforced, to be a wrong action. It will not improve investment climate in Georgia’.
However, reform should really be implemented. There is no doubt. Auditing business is expanding in Georgia. Administration on industrial activities have increased – financial police has been established, an entrepreneur started to think and came to a conclusion that it is necessary to have all financial documentation in order. If before one used the service of some invented accountant and used formal reports, now the demand on high quality auditing has increased. International auditing companies have opened their representations in Georgia. Together with the extension of market the need for renewing and encouraging legislative market has appeared. The reform definitely needs to be implemented. But the way we have mentioned above, is wrong – this is what is considered by part of experts. Parliament has put certain amendments to the draft introduced by government. Experts believed a new legislative draft introduced in December 2006 ‘On accounting and auditing’ to be a step foreword in comparison with the government draft law. However, even this draft did not totally cover EU directive. It is necessary to prepare the legislative basis that will fully correspond to EU directive and will support the development of market. The year of 2006 passed with this dispute and government introduces a revolutionary draft law to the parliament – ‘Global competitiveness of financial sector’ that covered draft on ‘accounting and auditing’ prepared by Kakha Bendukidze. Georgia’s legislative body denied the adoption once again. As it has been declared in Council for Audit Activities, besides self regulation issues, the draft law has other drawbacks that will hamper the development of this field. According to Elguja Afridonidze: ’The draft law introduced by the government implies that our profession should be regulated by the professional organization, which is the member of international federation. All auditors or auditing companies that would like to carry out business activities in Georgia should be the member of the professional organization being a full fledged member of International Federation of Accountants (IFAC). Georgian Federation of Professional Accountants is the only such organization in Georgia. In case of adapting this draft law, it becomes a monopolist. By this law we point to each auditor to become the member of the organization that is a member of IFAC, no matter you actually want it or not. Opponents may argue on this issue and may state that any auditing company has the right of becoming a member of IFAC and it will not require the membership of Georgian Federation of Professional Accountants and Auditors. All right, that is allowed; However, it is practically impossible. IFAC has 133 actual members from 123 countries. Although there are only several countries, the world leading countries that have 2 representatives. Others are represented by 1 member. As for Georgia, presenting 2 members in this case is absolutely impossible!
Another great drawback of this draft law, in my opinion, is an issue of professional education. this is what is written in a draft law: ‘Auditor is a person who has completed ACC program’. Well, that’s fine. This Scottish program is quite famous and spread in the world, but besides it, there are some other programs as well being recognized by the international federation. Let’s say, I have completed some other program in the US. It turns out that I have to take a new program course to receive ACC education. Parliament of Georgia has its own views, group of authors of different professional organizations have their opinions as well. We have our recommendations. We need to gather all the above mentioned and to form it as a new draft law. Let’s hope that a new parliament will adopt the new draft law on auditing activities that will really contribute to the development of this field and to market expansion.an actual check.
What does the Council for Audit Activities do this time? As head of the Council, Mr. Elguja Afridonidze remarked: ‘The council did not possess mechanisms to influence these processes during that period of time. Controlling quality was not possible due to a fact that initial version of a Law did not take it into consideration. The council was issued a regulatory and controlling function only after introducing amendments. From the beginning the Council was not envisaged in a law on regulation bodies. This change was also introduced later and as a result Council for Audit Activities gained controlling function. Later the Council demanded to cancel obligatory auditing. At least there should be a type of gradation. For instance, if a company does not have to pay VAT, it should not be obliged to become the subject of auditing. In addition, the law did not foresee any responsibilities towards auditors no matter how they fulfilled their imposed obligations. Safety mechanism did not exist. One was not deprived of Certificate or anything. The only thing that could be done was to stop license. Anyway, entrepreneur would go and open other firm. The council wanted to change this issue as well. A special legislation draft was prepared according to which certain punishment was envisaged for false auditing report. It could be either fine, legal punishment or some other form of responsibility’.
This legislative draft was prepared by the beginning of 2000’s. At the same time accounting reforms began in Georgia. Accounting field separated form the ministry of finances and moved to self regulation. Georgian Federation of Professional Accountants and Auditors was established. The issue of changing state regulation of auditing activities into a self regulation system was then put for discussion. The following is the question that has not been solved yet – who should regulate auditing activities: state or a profession? Although the issue is a subject of discussion not only in Georgia.
Parallels with the world events
There were two models of managing this filed in the world before: continental (spread in major countries of Europe) with the mixed supervisory system on auditing activities and Anglo Saxon system (USA, Canada, Great Britain), that implied self regulation from professional organizations side only. However, events of 2001 in the US changed approaches towards auditing activities.
Enron & Parmalat
Enron was the greatest American energy company, the capital turnover of which amounted to USD 111 billions by the year of 2000. However, the company was revealed to be a bankrupt by late 2001. The reasons of it lied in irregular accounting procedures. Auditing was carried out by an international company ‘Anderseni’. It was one of the “Big Five” large international accounting firms. Instead of showing actual financial situation of the company, it assisted managements to fraud documentation.
Enron bankruptcy caused significant changes in the US economy. Investors lost their trust towards largest corporations of the country. Suspicious data used by managers of energy concern damaged not only other large companies, but auditing companies and their activities as well. Potential investors doubted about approaches towards auditing activities and the following statements: buying certain companies and other operations are based on trust. We don’t know the people who actually manage the company, but we get guarantees from audit while buying the company’s shares. The reports published to calm investors down include statements: financial situations in X companies as well as their sub-divisions presented by them correspond to truth’.
Although as we have already mentioned, investors approach has changed. Number of companies has changed their accounting mechanisms to keep trust. For example, PricewaterhouseCoopers separated consulting and auditioning services. Approaches have changed not only from audit companies, but also from state as well. The fact of giving self regulation to auditing activities was carefully thought of. Maybe it was better to create a state controlling mechanism and to increase state regulation over this field. Well, this is what they have done in the US. Moreover, the reforms were headed by US state secretary.
Later, in 2003 the same event took place in Europe. Parmalat an Italian dairy and food corporation went bankrupt due to financial fraud and wrong audit inspection. The fact was followed by EU statement, 2003 on ‘Reinforcing Obligatory Audit’.
15 years conception on developing auditing activities was worked out in EU. The conception highlights those measures that should be taken in order to ‘gain the lost trust of investors towards market and capital. Financial scandals, Enron collapse and other events of current period forced EU to recheck regulation policy of the field’- says 2003 EU resolution. The supporters of reforms in the US also discussed the necessity of regaining investors trust two years prior. ‘the fact that we need to introduce better accounting standards to give the right information to investors and shareholders, is clear’ – this is what President Bush declared following the Enron scandal.
Situation in Georgia
Number of reforms have been implemented in Georgia since Rose Revolution. Two significant changes that greatly affected auditing activities are worth noting: obligatory auditing for Ltds was abolished in 2005 and the second – number of structures issuing licenses and permissions decreased (number of licenses decreased from 1000 to about 100), therefore auditing activities were reduced as well. Part of experts believe that this change negatively affected quality of auditing services, as a result Council for Audit Activities has lost its controlling function again. According to Elguja Afridonidze: ‘In my opinion, state does not posses the corresponding tools and it can not fulfill the function that is necessary and that is the part of it competence. Licensing in this field has been canceled and the Council is deprived of any mechanism to carry out punishment no matter how bad an auditing company or an individual audit works. There is no obligatory state registration to deprive the company of this registration in case of any wrong doing. Besides, we need to approve and except international changes and standards by means of normative acts. Why should an entrepreneur carry out an accounting by international standards, if it is not a normative act in Georgia? It is the states prerogative.’
Number of auditing companies support the increase of state regulation. We have spoken to director of one of auditing company Mr. Aleksandre Okromchedlishvili. He remarked: ‘State control is certainly necessary. If I am to blame, I should be responsible for that. There should be a link between a reason and an outcome. An auditor should think of high quality and of meeting certain standards. Council for Audit Activities of the Parliament of Georgia is functioning in Georgia. It can do a really significant business, although today the council is somehow deprived of functions. Well, what can be said about controlling auditing activities in Georgia, when there is not even a food quality control system? Moreover, there is a legislative draft in Parliament of Georgia according to which they intend to abolish the Council. When the legislator does not considere the necessity of this institution, we can not discuss the rest. On the other hand, this system is expected to be controlled, licensed and certified by state body. All the above said should be done through some fund or an association. While I have the certificate given by an auditor, it should be legitimized and approved by the state. As a director of an auditing company, I really would like to see the council with stronger functions from controlling, organizational as well as methodological point of view. I would like to see my activities being controlled and monitored to feel more responsible. On the other hand I would like to get certain methodological and methodical assistance from the council.’
Legislative draft (on Accounting and Auditing), that Mr. Aleksandre Okromchedlishvili had discussed, was prepared in spring 2006 by Kakha Bendukidze, former State Minister of Georgia for coordination of economic reforms. According to the draft accounting and auditing field were united and changed to self regulation. The draft abolishes Council for Audit Activities while the whole world implements absolutely different, just opposite measures – self regulation is changed into state regulation, for example in Russia where moving into self regulation was started. The discussion of a legislative draft was stopped. Moreover, in May 2006 EU adopted a directive that reads: ‘Member States should organize an effective system of public oversight for statutory auditors and audit firms
on the basis of home country control. All statutory auditors and auditing companies should be submitted to state supervision ‘ ( Article 32, directive of the European Parliament and the European Council, 2006). In addition, the directive directly demands member states to abolish self regulation from the second part of 2008 and entirely to move to state regulation. According to the World Bank data nearly all states try to comply their legislation with the EU direction. Parliament has shared recommendations of Council for Audit Activities and other professional organizations based on the above mentioned directive and refused the state to adopt this draft on spring sessions of 2006. There is a GEPLAC report on the draft as well: ‘we conceder putting generally auditing regulation into a self regulation regime, while the whole world’s auditing regulation regime is being reinforced, to be a wrong action. It will not improve investment climate in Georgia’.
However, reform should really be implemented. There is no doubt. Auditing business is expanding in Georgia. Administration on industrial activities have increased – financial police has been established, an entrepreneur started to think and came to a conclusion that it is necessary to have all financial documentation in order. If before one used the service of some invented accountant and used formal reports, now the demand on high quality auditing has increased. International auditing companies have opened their representations in Georgia. Together with the extension of market the need for renewing and encouraging legislative market has appeared. The reform definitely needs to be implemented. But the way we have mentioned above, is wrong – this is what is considered by part of experts. Parliament has put certain amendments to the draft introduced by government. Experts believed a new legislative draft introduced in December 2006 ‘On accounting and auditing’ to be a step foreword in comparison with the government draft law. However, even this draft did not totally cover EU directive. It is necessary to prepare the legislative basis that will fully correspond to EU directive and will support the development of market. The year of 2006 passed with this dispute and government introduces a revolutionary draft law to the parliament – ‘Global competitiveness of financial sector’ that covered draft on ‘accounting and auditing’ prepared by Kakha Bendukidze. Georgia’s legislative body denied the adoption once again. As it has been declared in Council for Audit Activities, besides self regulation issues, the draft law has other drawbacks that will hamper the development of this field. According to Elguja Afridonidze: ’The draft law introduced by the government implies that our profession should be regulated by the professional organization, which is the member of international federation. All auditors or auditing companies that would like to carry out business activities in Georgia should be the member of the professional organization being a full fledged member of International Federation of Accountants (IFAC). Georgian Federation of Professional Accountants is the only such organization in Georgia. In case of adapting this draft law, it becomes a monopolist. By this law we point to each auditor to become the member of the organization that is a member of IFAC, no matter you actually want it or not. Opponents may argue on this issue and may state that any auditing company has the right of becoming a member of IFAC and it will not require the membership of Georgian Federation of Professional Accountants and Auditors. All right, that is allowed; However, it is practically impossible. IFAC has 133 actual members from 123 countries. Although there are only several countries, the world leading countries that have 2 representatives. Others are represented by 1 member. As for Georgia, presenting 2 members in this case is absolutely impossible!
Another great drawback of this draft law, in my opinion, is an issue of professional education. this is what is written in a draft law: ‘Auditor is a person who has completed ACC program’. Well, that’s fine. This Scottish program is quite famous and spread in the world, but besides it, there are some other programs as well being recognized by the international federation. Let’s say, I have completed some other program in the US. It turns out that I have to take a new program course to receive ACC education. Parliament of Georgia has its own views, group of authors of different professional organizations have their opinions as well. We have our recommendations. We need to gather all the above mentioned and to form it as a new draft law. Let’s hope that a new parliament will adopt the new draft law on auditing activities that will really contribute to the development of this field and to market expansion.