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Adoption Status of International Accounting and Auditing Standards in Azerbaijan

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Azerbaijan has made significant progress in adopting international accounting and auditing standards. This article provides a summary and analysis of the adoption status of International Standards on Auditing (ISAs), International Public Sector Accounting Standards (IPSASs), Investigation and Discipline (I&D) processes, and International Financial Reporting Standards (IFRSs).

International Standards on Auditing (ISAs)

  • The Chamber of Auditors of Azerbaijan Republic (CAAR) adopted the IESBA Code for its members in 2010.
  • The code has been translated into Azerbaijani and is applied by CAAR members.
  • Proposed amendments to the Law on Accounting are expected to adopt the IESBA Code of Ethics for professional accountants, but a timeline is not known.

International Public Sector Accounting Standards (IPSASs)

Current Adoption Status

  • Budgetary organizations and municipalities must prepare financial statements in accordance with IPSASs as adopted by the Ministry of Finance.
  • The standards are currently national standards with reference to IPSAS and are on a partial-accrual basis.

Planned Transition

  • It is expected that they will transition to full accrual-basis IPSAS.

Investigation and Discipline (I&D) processes

Current Adoption Status

  • CAAR conducts I&D of auditors under the Law on Audit.
  • Accredited professional accountants’ organizations must have in place an I&D system for their members.

Areas for Improvement

  • The APFM has identified areas that need improvement to align with SMO 6 best practices.

International Financial Reporting Standards (IFRSs)

Mandatory Adoption

  • Public interest entities (PIEs) must apply IFRSs under the Law on Accounting.

Flexible Adoption Options

  • Large entities can opt to apply full IFRS or IFRS for SMEs, while medium-sized entities must apply IFRS for SMEs.
  • Small entities may opt to apply IFRS for SMEs.

Summary

In summary, Azerbaijan has made progress in adopting International Standards on Auditing (ISAs), but the adoption status of Investigation and Discipline processes is partially implemented. The country’s adoption of International Public Sector Accounting Standards (IPSASs) is also partial, with a plan to transition to full accrual-basis IPSAS. Finally, International Financial Reporting Standards (IFRSs) are mandatory for public interest entities, while large and medium-sized entities have some flexibility in their application.