In its 2006 "Doing Business Guide," PricewaterhouseCoopers (PwC) states that the Audit Act requires audits to be carried out in accordance with International Standards on Auditing (ISAs). Obligatory annual audits are required for (1) consolidated financial statements; (2) all joint-stock companies; (3) limited partnerships and limited liability companies whose total revenue for the year prior to the year subject to the audit amounts to over HRK 30 million; (4) banks, insurance companies, investment and pension funds, pension insurance companies and other regulated companies; and (5) all related companies, regardless of their size, if the controlling company is subject to mandatory audit. All other companies are audited pursuant to their own rules, i.e., the Memorandum of Incorporation or the Articles of Association. The Croatian Chamber of Auditors (CCA) is a professional organization composed of audit companies, individual auditors, and certified auditors. It is responsible for the translation, publication, and implementation of auditing standards in Croatia and monitors the compliance of its members with the Audit Act, ISAs, and other professional audit rules. According to the World Bank's 2002 Report on the Observance of Standards and Codes (ROSC) on Accounting and Auditing, the translation and publication process was up to date, and audits were carried out in accordance with all ISAs and other pronouncements issued by the International Federation of Accountants (IFAC) as of 2002. However, there is insufficient information publicly available as to Croatia's compliance with the most recent versions of the ISAs.

General Overview

In 2006, the PricewterhouseCooper (PwC) "Doing Business Guide" stated that the Audit Act requires audits to be carried out in accordance with International Standards on Auditing (ISAs). Obligatory annual audits are required for (1) consolidated financial statements; (2) all joint-stock companies; (3) limited partnerships and limited liability companies whose total revenue for the year prior to the year subject to the audit amounts to over HRK 30 million; (4) banks, insurance companies, investment and pension funds, pension insurance companies and other regulated companies; and (5) all related companies, regardless of their size, if the controlling company is subject to mandatory audit. All other companies are audited pursuant to their own rules, i.e., the Memorandum of Incorporation or the Articles of Association. The World Bank's 2002 Report on the Observance of Standards and Codes (ROSC) on Accounting and Auditing declared that Croatia's translation and publication process was up to date, and that audits were therefore carried out in accordance with all ISAs and other pronouncements issued by the International Federation of Accountants (IFAC) as of 2002. However, there is insufficient information publicly available as to Croatia's compliance with the most recent versions of the ISAs.

The PwC 2006 report emphasizes that "the implementation of international accounting and auditing standards has been difficult in certain areas" (p.37). In late 2005, new accounting and auditing laws were enacted which enhanced the independence of audits and sought to improve standards and regulations in order to move closer to eventual accession to the European Union. Audits are conducted pursuant to the Audit Act, ISAs, and rules of the audit profession, such as the International Federation of Accounts (IFAC) Code of Ethics for Professional Accountants, according to the PwC 2006 report. In 2007, the Croatian Association of Accountants and Financial Experts (CAAFE) reported that both listed and non-listed entities employ the same auditing standards.

The 2006 CAAFE report notes that, prior to January 1, 2006, the regulator for the Croatian securities market was the Croatian Securities and Exchange Commission (CSEC). There were no additional auditing requirements for listed entities. Insurance supervision was carried out by the Insurance Companies Supervisory Authority (ICSA), which had no responsibility with respect to the monitoring and enforcement of accounting and auditing requirements in Croatia. The 2007 EBRD assessment adds that, on January 1, 2006, Croatia established the Croatian Financial Services Supervisory Agency (CFSSA), which, pursuant to the 2006 Act on the Croatian Financial Services Supervisory Agency, assumed the responsibilities and competencies of the former CSEC, ICSA, and the Agency for Supervision of Pension Funds and Insurance . The 2006 CAAFE report goes on to note that the Croatian National Bank (CNB) supervises banks and similar financial institutions; however, it does not monitor or enforce accounting and auditing requirements in Croatia. The board of the Varaždin Stock Exchange (VSE) and the Zagreb Stock Exchange (ZSE) respectively monitors financial reporting, accounting, and auditing requirements.

The Croatian Chamber of Auditors (CCA) is a professional organization composed of audit companies, individual auditors, and certified auditors, according to the PwC 2006 report. The CCA (1) translates, publishes, and interprets ISAs; (2) issues a Code of Professional Ethics for Auditors; (3) proposes the audit examination program; (4) carries out professional training and arranges examinations to acquire the title of certified auditor; (5) issues the certified auditor certificate; (6) prescribes the terms and conditions for the recognition of foreign auditor certificates chartered; and (6) keeps the register of certified auditors and the register of individual auditors, joint audit offices and audit companies. The CCA monitors the compliance of audit companies, individual auditors, and certified auditors with the Audit Act, ISAs, and other professional audit rules. The CCA is supervised by the Ministry of Finance (MoF).

The general assembly of public interest companies is responsible for appointing auditors no later than September 30 of the year that is subject to the audit. These are companies whose securities are included in the first quotation on a stock exchange or in public joint stock company quotations, banks and other financial institutions, and companies of special state interest whose share capital does not exceed HRK 300 million but, as per Decision of the Government of the Republic of Croatia, are on the list of companies of special state interest. Companies of public interest must also have an audit committee. According to the 2006 PwC report, "the audit committee consists of supervisory board members and members appointed by the supervisory board. At least one member of the audit committee shall have knowledge in the area of accounting and/or audit" (p. 37).

The Croatian Association of Accountants and Financial Experts (CAAFE) is a member of the IFAC (IFAC website).

The Principles

ISA 200 Objective and General Principles Governing an Audit of Financial Statements (effective 2006)

II

There is insufficient information publicly available as to Croatia's compliance with this principle.

ISA 210 Terms of Audit Engagements (effective 2006)

II

There is insufficient information publicly available as to Croatia's compliance with this principle.

ISA 220R Quality Control for Audits of Historical Financial Information (effective 2005)

II

There is insufficient information publicly available as to Croatia's compliance with this principle.

ISA 230R Documentation (effective 2006)

II

There is insufficient information publicly available as to Croatia's compliance with this principle.

ISA 240 The Auditor’s Responsibility to Consider Fraud in an Audit of Financial Statements (effective 2004)

II

There is insufficient information publicly available as to Croatia's compliance with this principle.

ISA 250 Consideration of Laws and Regulations in an Audit of Financial Statements (effective 2004)

II

There is insufficient information publicly available as to Croatia's compliance with this principle.

ISA 260 Communications of Audit Matters With Those Charged With Governance (effective 2004)

II

There is insufficient information publicly available as to Croatia's compliance with this principle.

ISA 300 Planning an Audit of Financial Statements (effective 2004)

II

There is insufficient information publicly available as to Croatia's compliance with this principle.

ISA 315 Understanding the Entity and Its Environment and Assessing the Risks of Material Misstatement (effective 2004)

II

There is insufficient information publicly available as to Croatia's compliance with this principle.

ISA 320 Audit Materiality (effective 2004)

II

There is insufficient information publicly available as to Croatia's compliance with this principle.

ISA 330 The Auditor’s Procedures in Response to Assessed Risks (effective 2006)

II

There is insufficient information publicly available as to Croatia's compliance with this principle.

ISA 402 Audit Considerations Relating to Entities Using Service Organizations (effective 2004)

II

There is insufficient information publicly available as to Croatia's compliance with this principle.

ISA 500 Audit Evidence (effective 2004)

II

There is insufficient information publicly available as to Croatia's compliance with this principle.

ISA 501 Audit Evidence - Additional Considerations for Specific Items (effective 2004)

II

There is insufficient information publicly available as to Croatia's compliance with this principle.

ISA 505 External Confirmations (effective 2004)

II

There is insufficient information publicly available as to Croatia's compliance with this principle.

ISA 510 Initial Engagements — Opening Balances (effective 2004)

II

There is insufficient information publicly available as to Croatia's compliance with this principle.

ISA 520 Analytical Procedures (effective 2004)

II

There is insufficient information publicly available as to Croatia's compliance with this principle.

ISA 530 Audit Sampling and Other Selective Testing Procedures (effective 2004)

II

There is insufficient information publicly available as to Croatia's compliance with this principle.

ISA 540 Audit of Accounting Estimates (effective 2004)

II

There is insufficient information publicly available as to Croatia's compliance with this principle.

ISA 545 Auditing Fair Value Measurements and Disclosures (effective 2004)

II

There is insufficient information publicly available as to Croatia's compliance with this principle.

ISA 550 Related Parties (effective 2004)

II

There is insufficient information publicly available as to Croatia's compliance with this principle.

ISA 560 Subsequent Events (effective 2006)

II

There is insufficient information publicly available as to Croatia's compliance with this principle.

ISA 570 Going Concern (effective 2004)

II

There is insufficient information publicly available as to Croatia's compliance with this principle.

ISA 580 Management Representations (effective 2004)

II

There is insufficient information publicly available as to Croatia's compliance with this principle.

ISA 600 Using the Work of Another Auditor (effective)

II

There is insufficient information publicly available as to Croatia's compliance with this principle.

ISA 610 Considering the Work of Internal Auditing (effective 2004)

II

There is insufficient information publicly available as to Croatia's compliance with this principle.

ISA 620 Using the Work of an Expert (effective 2005)

II

There is insufficient information publicly available as to Croatia's compliance with this principle.

ISA 700 The Auditor’s Report on Financial Statements (effective 2006)

II

There is insufficient information publicly available as to Croatia's compliance with this principle.

ISA 701 Modifications to the Independent Auditor's Report (effective 2006)

II

There is insufficient information publicly available as to Croatia's compliance with this principle.

ISA 710 Comparatives (effective 2004)

II

There is insufficient information publicly available as to Croatia's compliance with this principle.

ISA 720 Other Information in Documents Containing Audited Financial Statements (effective 2004)

II

There is insufficient information publicly available as to Croatia's compliance with this principle.

ISA 800 The Auditor’s Report on Special Purpose Audit Engagements (effective 2006)

II

There is insufficient information publicly available as to Croatia's compliance with this principle.