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Serbia’s Financial Reporting Lags Behind International Standards

Washington D.C., June 22, 2012 - A new report by the World Bank finds that Serbia’s accounting and auditing standards are not up to par with international best practices, putting sustainable economic growth at risk.

The report, “Republic of Serbia: Accounting and Auditing”, assesses the country’s financial reporting system against International Financial Reporting Standards (IFRS) and International Standards on Auditing (ISA). While there have been some improvements in recent years, significant weaknesses remain.

Challenges Ahead

“Serbia needs to strengthen its legal and regulatory framework to ensure that reliable financial information is provided to market participants,” said the report. “The lack of high-quality financial reporting hinders sustainable economic growth and may allow systemic risks to perpetuate.”

Key Areas for Improvement

  • Consolidated Financial Statements: Many companies in Serbia do not prepare consolidated financial statements, making it difficult for investors and regulators to get a complete picture of their financial situation.
  • Auditing Standards: The auditing profession in Serbia is still developing, with many auditors lacking the necessary skills and expertise to conduct high-quality audits.
  • Disclosure Requirements: Companies are often not required to disclose sufficient information about their financial activities, making it difficult for investors and regulators to make informed decisions.

Recommendations

To address these weaknesses, the report recommends that Serbia establish a multidisciplinary National Steering Committee (NSC) for accounting and auditing reform. The NSC would advise policymakers, regulators, and other stakeholders on how to implement reforms and ensure that they are effective.

The report also stresses the importance of robust monitoring and enforcement regimes to encourage compliance with high standards. “Market forces can provide some positive incentives to comply with high standards, but countervailing disincentives often discourage such compliance,” said the report.

Conclusion

By implementing these recommendations, Serbia can improve the quality of its financial reporting and reduce the risk of systemic problems in the future. The World Bank is committed to supporting Serbia’s efforts to strengthen its financial sector and promote sustainable economic growth.

Contact:

  • World Bank
  • Economic & Sector Work
  • Accounting and Auditing Assessment (ROSC)
  • Washington, D.C.

License

This article is licensed under a Creative Commons Attribution 3.0 IGO license.