DEVELOPMENT AND PERSPECTIVES OF INTERNAL AUDITING IN THE IMPROVEMENT OF BUSINESS QUALITY OF ENTERPRISES – EMPIRICAL RESEARCH IN CROATIA

This paper is the result of empirical research among the 180 biggest Croatian companies measured in terms of total revenues. The survey was addressed to the managers of internal auditing departments but also the managers who supervise the business activities within the company. The empirical research was conducted from February till March 2007. In that period 43 companies answered to the survey which makes the rate of return of 24%. The aim of this empirical research was to investigate the current position and the presence of internal auditing in Croatian companies, to investigate the instruments of measurement, the business quality among the internal auditors in Croatia and to investigate the contribution that internal auditors make in improving the business quality among the most successful companies in Croatia.Ovaj rad je rezultat empirijskog istraživanja provedenog među 180 najvećih Hrvatskih tvrtki sa stajališta ukupne dobiti. Istraživanje je bilo namijenjeno voditeljima internih revizorskih odjela ali i menadžerima koji nadgledaju poslovanje unutar tvrtke. Istraživanje je provedeno u periodu od veljače do ožujka 2007. U tom su periodu na upitnik odgovorile 43 tvrtke što znači da je stopa povratne informacije 24%. Cilj ovog empirijskog istraživanja bio je istražiti trenutnu poziciju i prisustvo interne revizije u hrvatskim tvrtkama te istražiti instrumente mjerenja, kvalitetu poslovanja među internim revizorima u Hrvatskoj i ispitati doprinos kojeg interni revizori daju u poboljšanju kvalitete poslovanja najuspješnijih tvrtki u Hrvatskoj

HARMONISING SANCTIONS AGAINST EXTERNAL AUDITORS

The European Parliament adopted the Directive 2014/56/EU amending the Directive 2006/43/EC on every statutory audit in the EU and the Regulation (EU) No. 537/2014 containing requirements that relate specifically to statutory audit of public interest entities. One of the main issues imposed by the new audit Directive and Regulation is introducing and harmonizing measures against statutory auditors and audit firms. This new audit legislative impose harmonized administrative pecuniary sanction on statutory auditors, audit firms and public interest entities for identified infringements of the rules. Member States should apply identical criteria when determining the sanction to be imposed with the possibility of withdrawing the approval of the statutory auditor or audit firm concerned. In that sense, the aim of this paper is to investigate the auditor’s liability according to the existing regulatory framework in the Republic of Croatia, as well as the legal consequences for infringements of the rules. In addition, this paper presents comparative overview of the solutions for audit infringements adopted by the selected European Union Member States that have already transposed the new audit regulation into national legislation

FRAUD RISK ASSESSMENTS: AN EMPIRICAL ANALYSIS

This paper provides the theoretical review of the fraud risk characteristics, systematization of the existing fraud knowledge and the causes of fraud occurrence. Moreover, it determines the roles and the responsibilities of managers and auditors in the fraud risk assessments. In addition, risk factors relating to the misstatements arising from fraudulent financial reporting have been examined. According to the results of numerous scientific and expert studies it is obvious that a system of internal controls, including fraud risk assessments as an elementary component of this system, contributes to reducing fraud occurrence. In order to gain information about the factors that could cause fraudulent financial reporting, the empirical research has been conducted on the sample of companies operating in the Republic of Croatia. The respondents, accountants and auditors, revealed how often they meet fraud risk factors. Although, according to respondents\u27 answers, companies rarely encounter circumstances that indicate the possibility of fraud, the obtained data imply that there are possibilities that financial statements contain misstatements as a result of fraud. Examples of circumstances indicating the possibility that the financial statements contain a material misstatement resulting from fraud include: last-minute adjustments that significantly affect financial results, followed by transactions that are not recorded in a complete or timely manner or are improperly recorded as to amount, accounting period, classification, or entity policy and unsupported or unauthorized balances or transactions. The problems, which the accountants most frequently encountered were undue time pressures imposed by management to resolve complex or contentious issues, an unwillingness to address identified deficiencies in internal control on a timely basis and missing documents

AUDIT MARKET CONCENTRATION – EVIDENCE FROM CROATIA

Statutory audit is designated to protect the public interest and has a significant impact on the overall economy. There are concerns that the Big Four audit firms have become too dominant and that the collapse of one of these firms would disrupt the whole financial system. In terms of revenues received, the total market share of the Big Four audit firms for listed companies exceeds 90% in a vast majority of European Union Member States. Prior studies have shown that high audit market concentration limits the choice of auditor for large companies and sets a high barrier of entry for mid-tier audit firms, while the effect on audit quality and audit fees is still unclear. Therefore, the regulators are considering reforms to dilute the Big Four’s dominance and improve competition in the audit market. The paper reviews the proposed and implemented measures that are the most common, together with their advantages and drawbacks. In addition, the characteristics of the audit market in Croatia are investigated, with a focus on market concentration measured by standard measures such as the Concentration rate, the Herfindahl Hirschman Index and the Gini coefficient. According to market shares based on total clients’ assets and revenues, the audit market for listed companies is moderately to highly concentrated, with a decrease in the five-year period (2013 compared to 2008)

Stanje i perspektive financijskog izvještavanja i revizije u kotirajućim poduzećima u Republici Hrvatskoj

Istraživanje o stanju, ali i o perspektivama financijskog izvještavanja i reviziji je provedeno na temelju godišnjeg upitnika o Kodeksu korporativnog upravljanja kojeg su poduzeća koja kotiraju na burzi morala dostaviti Zagrebačkoj burzi u 2008. godini. Primarni cilj ovog istraživanja je prikazati postojeću praksu poduzeća koja kotiraju na Zagrebačkoj burzi po pitanju financijskog izvještavanja, praksu postojanja sustava interne kontrole i interne revizije, postojanja revizijskog odbora i njegove nezavisnosti te obavljanja eksterne revizije. Na temelju rezultata provedenog istraživanja može se identificirati nekoliko ključnih izazova financijskog izvještavanja i revizije koje je potrebno unaprijediti u budućnosti. Prije svega to se odnosi na daljnje poboljšavanje transparentnosti financijskog izvještavanja poduzeća koja kotiraju na burzi. Nadalje, potrebno je provoditi daljnje aktivnosti vezane uz ispunjavanje zakonske obveze osnivanje revizijskih odbora i, što je još važnije, nužno je da revizorski odbori preuzmu i kvalitetno obavljaju funkcije i ovlasti koje su mu namijenjene. Isto tako, potrebno je ukazati menadžmentu i nadzornim odborima poduzeća na potrebu uvođenja i unapređenje djelovanja sustava unutarnje kontrole i funkcije interne revizije u pojedinim poduzećim

Skills required of professional accountants: Evidence from labour market in Croatia

Purpose: The main purpose of this paper is to develop a further understanding of professional accountants’ attributes and professional skills required by employers. This paper analyses the requirements of the labour market of the Republic of Croatia using the framework derived from IFAC’s International Education Standard (IES) 3 from 2015 to identify the specific dimensions of professional skills in job advertisements. Methodology: This study uses a qualitative data collection method to analyse the required professional skills of professional accountants from the accounting employers’ perception. We have used Internet research to collect primary data and analyse job advertisements. Content analysis was used to analyse job advertisements. Results: The evidence suggests that employers mostly required professional accountants with attributes categorised as the organisational skills dimension. They were followed by attributes categorised as the intellectual skills dimension, the interpersonal and communication dimension, and the personal dimension. Taking into account the professional skills dimension, a professional accountant is required to possess the ability to use appropriate information technology (IT), teamwork skills, responsibility, the ability to work independently, be analytical and committed to learning, since those were most highly ranked attributes in the collected job advertisements. Conclusion: This study revealed a ‘profile’ of a professional accountant considering the requirements of employers regarding professional skills. Future research should take into consideration further analysis regarding the required skills using different data sources and explore the required skills within different accounting related professions and various sectors and sizes of accounting employers

Factors influencing the disclosure of additional financial and non-financial information by large enterprises

Nowadays, more than ever, stakeholders are demanding that additional information are disclosed in addition to financial information as part of corporate reporting. This need is being recognized by regulators, who have begun to enact laws requiring large companies to disclose at least the required information and financial information. This study aims to examine some of the possible company characteristics that may influence the extent of information disclosure, particularly the direction of their influence and significance. The study was conducted on twenty (23.53%) listed companies operating in the real sector (non-financial sector) on the Zagreb Stock Exchange. Initially, the content analysis method was used to analyze the reports. In addition, multilinear regression was conducted to measure the influence of specific company characteristics. The research results revealed that the type of auditor, ownership structure, and size of the board of directors have a statistically significant positive influence on the quality of published financial and non-financial information. In contrast, the quotation days have a negative but not statistically significant influence at the 5% significance level. Finally, even though the overall results regarding the disclosure quality can be interpreted as satisfactory, there is room for further improvement regarding financial and non-financial reporting transparency

Izvješće neovisnog revizora kao instrument za poboljšanje transparentnosti financijskog izvještavanja i kvalitete revizije

Financijski izvještaji predstavljaju jedan od osnovnih instrumenata kojima se donose poslovne odluke. Da bi oni kao takvi predstavljali temelj za donošenje poslovnih odluka, potrebno je dokazati njihovu realnost i objektivnost u iskazivanju financijskog položaja i uspješnosti poslovanja. Mišljenje o realnosti i objektivnosti financijskih izvještaja neovisni eksterni revizor iskazuje u izvješću neovisnog revizora. S obzirom da je izvješće namijenjeno eksternim korisnicima, standardizirano je, zbog čega su upućene brojne kritike revizijske profesije da takvo izvješće ne daje dovoljno informacija korisnicima. Zbog toga je došlo do promjene regulatornog okvira u kojima se dodaju novi elementi u izvješće neovisnog revizora. Između ostalog, revizor je dužan izvještavati o ključnim revizijskim pitanjima. Izvještavanje o ključnim revizijskim pitanjima trebalo bi doprinijeti manjoj informacijskoj asimetriji i povećati kvalitetu financijskog izvještavanje i revizije. Doprinos ključnih revizijskih pitanja kvaliteti revizije u izvješću još uvijek je neistraženo područje. U tom smislu rad predstavlja kritičku analizu postojećih istraživanja o doprinosu izvještavanja o ključnim revizijskim pitanjima kvaliteti revizije. Osim toga, rad daje pregled ključnih revizijska pitanja o kojima izvještavanju revizori na primjeru izdavatelja na Zagrebačkoj burzi