Republic of Macedonia MINISTRY OF FINANCE

SKOPJE

DEPUTY MINISTER OF FINANCE DIMKO KOKAROSKI, Ph.D.

The Conference on Accounting Reform and Institutional Strengthening

30th June 2004, Brussels

INTRODUCTION

The Republic of Macedonia, pursuant to the obligations arising from the Stabilization and Association Agreement, has commenced reform of the accounting and auditing system to the end of harmonizing the national legislation with the one of the European Union.

INTRODUCTION

The accounting area is regulated in the following legislation:

Company Law;Rulebook on Accounting Standards, recognizing the International Accounting Standards by their application since 1st January 1998;Law on Accounting for the Budgets and the Budget Users and Law on Accounting for Non-Profit Organizations.

INTRODUCTION

There is legislation for three types of audit:

Commercial audit regulated by the Audit Law, applied since 1998, pursuant to which audit is carried out at legal entities and physical persons performing activity (large and medium traders organized as joint stock companies, companies the shares of which are listed at the Stock Exchange and large and medium traders organized as limited liability companies);

State or external audit regulated by the State Audit Law, applied since 1998, pursuant to which audit is carried out over the spending of budget and other government funds, provided from public revenues of the legal entities and the citizens.

INTRODUCTION

-State audit controls the Funds, the legal entities in which the state is a dominant shareholder, the public enterprises, as well as the Funds, the agencies and other institutions established by law and the beneficiaries of the funds from the European Union Funds and other international Funds.

Internal audit regulated by the Law on Budgets pursuant to which audit is carried out regarding the earmarked utilization of the budget funds of all budget users and spending units, the budgets of the local government units and of the Funds.

ACCOUNTING

The adoption of the new Company Law in April 2004 provides reliable and transparent corporative financial reporting.

The financial reporting is carried out in accordance with the International Accounting Standards published in the Official Gazette of the Republic of Macedonia.

The International Accounting Standards are updated annually in order to be harmonized with the current standards.

ACCOUNTING

In accordance with the Company Law, the Minister of Finance in 1999 prescribed the form and the contents of the balance sheets in complience with the Fourth and the Seventh Directive, as well as in the EU Directive on annual statements and consolidated statements of banks and other financial institution.

The adoption of the International Accounting Standards and of the single balance sheets resulted in high level of harmonization of the accounting practice and at the same time, in fulfillment of the requirements to build accounting system compatible with the one in EU countries and beyond.

AUDIT

Commercial Audit

The Company Law regulates the performance of commercial audit in general.

The Audit Law regulates the conditions and the manner of conducting audit at legal entities and physical persons performing an activity, seated in the Republic of Macedonia.

The proposal for adoption of a new Audit Law, prepared on the basis of the solutions in the Eight EU Directive, is in Government procedure.

The new Audit Law was prepared with technical support by the World Bank.

AUDIT

State Audit

The state audit operations, regulated with the State Audit Law,

are carried out in accordance with the INTOSAI International

Standards on Auditing, published in the Official Gazette.

The Audit Law and the State Audit Law incorporate a

provision on application of the Code of Ethics of Professional

Accountants of the International Federation of Accountants by

the certified auditors.

AUDIT

Internal audit

The internal audit in the Republic of Macedonia is carried out

in accordance with the International Standards on Internal

Audit.

The proposal for adoption of the Law on Internal Audit in the

Public Sector is in Government procedure, harmonized with

the acquis communitaire.

IMPLEMENTATION OF EU LEGISLATION IN MACEDONIAN ECONOMIC CONDITIONS

Regarding the implementation of the EU legislation, the

Republic of Macedonia is facing the following:

multitude of limiting factors in the economic sphere

(high unemployment rate, regional instability,

underdevelopment of domestic markets, etc.)

lack of funds, and

the factor - time required for implementation of EU

legislation.

CONCLUSIONS

•By application of aforementioned laws, the reforms in the accounting system and audit and the strengthening of market-oriented institutions will create favorable conditions for investment promotion, they will streamline the business transactions and integrate regional markets into the world economy.

•The strong commitment for EU membership imposes inevitable need for regional coordination of our efforts and partnership with other countries for implementation of EU legislation, to the end of solving the problems on common ground and on high efficiency level.