Independent Financial Audit Act. Bulgarian Auditor’s law

Extract

Article 1. This act shall regulate:

1. the objective and the principles of the independent financial audit;

2. the professional standards of organisation, documentation and implementation, as well as the conclusions of the independent financial audit

3. the acquisition of a diploma and a right to practice and the practicing of the auditor’s profession by the certified public accountants;

4. the rights and the obligations of the registered auditors who perform independent financial audits;

5. the statute of the Institute of the Certified Public Accountants

Article 2. The independent financial audit shall be a sum of necessary and inter-related procedures determined by International Audit Standards, on the basis of which an independent opinion on the credibility in all the aspects of significance of the financial reports prepared in compliance of the Bulgarian accounting legislation.

Article 3. The independent financial audit shall be implemented by registered auditors who are members of the Institute of the Certified Public Accountants.

Article 4. The profession of the registered auditors shall be self-regulating and independent within the framework specified by the law.

Objective and principle of independent financial audit

Article 5. (1) The objective of the independent financial audit is the expression of an independent auditor’s opinion on the truthful presentation of all the aspects of significance in the financial reports of:

1. the financial status of the enterprise;

2. the reported financial result of the activity of the enterprise;

3. the cash flows of the enterprise and the changes in them;

4. the shareholders’ equity of the enterprise and the changes in it.

(2) The independent auditor’s opinion under paragraph 1 shall be expressed in respect of the compliance of the financial reports with the applicable accounting standards, as well as with any other nationally accepted accounting base for preparation of the financial reports.

 (3) The formation and the expression of the independent auditor’s opinion shall be implemented in compliance with the International Audit Standards.

Article 6. The independent financial audit shall comprise procedures for determining reasonable security by a check of:

1. the compliance with the principles of accounting;

2. the sequence of the implementation of the announced accounting policy;

3. the methodological justification of the accrual basis of accounting for comprehensive and truthful presentation of the assets, the liabilities and the activity of the enterprise, limited to the achievement of the objectives of the audit;

4. the effectiveness of the internal control, limited to the achievement of the objectives of the audit;

5 the process of the closing of the accounts;

6. the reliability and the necessary for the users comprehensiveness of the information presented in the financial report;

7. agreement between the information in the financial report and in the management report and any other information provided by the management together with the audited report.

Article 7. When performing an independent financial audit, the registered auditors shall observe the Professional Ethic Code of the Institute of the Certified Public Accountants. The ethical principles governing the professional conduct and the responsibilities of the auditors shall be:

1. independence – no connection of the registered auditors, including through their partners and staff, with the audited enterprise, with its managers or with persons connected with them in a financial, personal or some other aspect;

2. objectivity, impartiality and zero tolerance for prejudice, conflict of interests or other influence which can interfere with the objective judgement of the auditor;

3. professional competence – the possession of sufficient necessary professional knowledge in the sphere of the effective commercial, accounting and tax legislation, the International Accounting Standards and the International Audit Standards;

4 confidentiality – preserving secret the information about the activity of the enterprise obtained as result of the performed independent audit;

5. professional conduct – the auditor shall act in his professional work in a way which is in agreement with the good name of the auditor’s profession and shall refrain from activities which would lead to damaging the prestige of the profession.

6. honesty – the auditor shall be honest, consistent and objective in the implementation of the audit;

7. knowledge and ability to apply the professional standards – the auditor shall implement the independent audit in compliance with the approved professional standards and national legislation;

8. responsibility – the certified public accountant shall be personally responsible for the opinions expressed by him; the specialized auditing company shall be responsible for the auditor’s opinion expressed on its behalf.

Article 8. Independent financial audit shall be performed on annual, interim and other financial reports, when this is stipulated by a law, upon request of owners, state authorities and other users of financial information.

Organisation, documentation and conclusions of the independent financial audit

Article 13. (1) The conclusions of the registered auditor after the implemented financial audit shall be reflected in an audit report.

(2) The audit report must contain clearly expressed opinion about the audited financial reports as a whole.

(3) The audit reports can be:

1. report without reservations (unqualified report);

2. a report without reservations but with a paragraph for alerting the attention to certain aspects (modified unqualified report);

3. a report with reservations due to restrictions of the audit (modified qualified report);

4. report with reservations due to disagreement with the management of the enterprise (modified qualified report);

5. report with a refusal to express opinion because of the presence of significant limitations before the audit (modified report with a refusal to express opinion)

6. a report with expressed negative opinion due to significant disagreement with the management of the enterprise (modified report with an opinion of disagreement).

(5) The opinion expressed on the financial report shall be certified by:

1. the registered certified public accountant if he is issuing the audit report personally on his own behalf- with his signature and seal;

2. the registered specialised auditing company if it issues the audit report on its own behalf – with the signature of the person representing the enterprise, with the seal of the specialised auditing company and with the personal signature of the registered certified public accountant who is responsible for the audit.

Rights and obligations of the registered auditors

Article 31. The registered auditors shall have the exclusive right to perform independent financial audit of the financial reports of the enterprises.

Article 32. When performing their audit obligation, the registered auditors shall have the right to require full cooperation and information from the management of the enterprise, as well as to oversee the inventory taking of the assets and liabilities of the enterprise.

Article 33. The registered auditor shall be obliged:

1. to observe the principles of: independence, professional competence, confidentiality, honesty and objectivity;

2. to fulfil the assumed auditor obligation, unless there are objective circumstances which interfere with him/her;

3. to inform the management of the client enterprise – client of significant violations of the laws and other statutory instruments, of its acts of association and of its other internal acts, norms and procedures, as well as of any other information, to the extent that they became known to him in the process of performing the independent audit;

4. to warn the client enterprise, within his competence, of actions or omissions which can harm it, to the extent that they became known to him in the process of performing the independent audit;

5. clarify to the client enterprise the significance of certain information obtained in the process of fulfilling the auditor’s obligation;

6. to present documents proving the fulfilment of the auditor’s obligation and the expressed opinion;

7. to observe the International Audit Standards and the Professional Ethic Code adopted by the Institute of the Certified Public Accountants;

8. to account for its activity before the Institute of the Certified Public Accountants according to a procedure approved by it;

9. to participate in the activity of the Institute of the Certified Public Accountants and its bodies, as well as to observe the Articles of Association of the Institute;

10. to insure himself for the risks of his professional activity;

11. to cooperate with the bodies of the Institute of the Certified Public Accountants.

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