The Commission for Public Oversight on Statutory Auditors was established in compliance with the Directive 2006/43/EC of the European Parliament and of the Council.
Sofia 1000
phone: +3592 983 55 39
fax: +3592 983 13 85
office@cposa.bg
LAW FOR THE INDEPENDENT FINANCIAL AUDIT
Prom. SG. 101/23 Nov 2001, amend. SG. 91/25 Sep 2002, amend. SG. 96/29 Oct 2004, amend. SG. 77/27 Sep 2005, amend. SG. 105/29 Dec 2005, amend. SG. 30/11 Apr 2006, amend. SG. 33/21 Apr 2006, amend. SG. 62/1 Aug 2006, amend. SG. 105/22 Dec 2006, amend. SG. 67/29 Jul 2008, amend. SG. 95/1 Dec 2009, amend. SG. 54/16 Jul 2010
Chapter one.
GENERAL PROVISIONS
Art. 1. This law shall provide:
1. the objective and the principles of the independent financial audit;
2. the professional standards of an organisation, the documentation and the fulfillment, as well as the conclusions of the independent audit;
3. (amend. – SG 67/08) the acquisition of a diploma, competence and the exercising of the audit profession by the registered auditors;
4. the rights and the obligations of the registered auditors, implementing independent financial audit;
5. the statute of the Institute of certified public accountants;
6. (new – SG 67/08) the public oversight system for registered auditors.
Art. 2. Independent financial audit shall be a multitude of necessary and inter-related procedures, determined by International Audit Standards, on the basis of which shall be expressed independent opinion about the authenticity in all the aspects of authenticity of the financial audits, prepared in compliance of the Bulgarian financial legislation.
Art. 3. The independent financial audit shall be implemented by certified auditors, members of the Institute of certified public accountants.
Art. 4. (amend. – SG 67/08) Registered auditors and the Institute of certified public accountants shall be subject to independent financial supervision.
Chapter two.
OBJECTIVE AND PRINCIPLES OF THE INDEPENDENT FINANCIAL AUDIT
Art. 5. (1) The objective of the independent financial audit is the expression of an independent auditor’s opinion about the reliable presentation of all the aspects of essence in the financial accounts of:
1. the financial status of the enterprise;
2. the accounted financial result of the activity of the enterprise;
3. the cash flow of the enterprise and the changed in them;
4. the own capital of the enterprise and the changes in it.
(2) The independent auditor opinion of para 1 shall be expressed with regard to the compliance of the financial audits with the applicable financial standards, as well as with any other nationally accepted accountancy base for preparation of the financial accounts.
(3) The formation and the expression of independent auditor’s opinion shall be implemented in compliance with the International audit standards.
Art. 6. The independent financial audit shall comprise procedures for determining reasonable security by check of:
1. the observing of the principles of audit;
2. the consequence of the implementation of the announced accounting policy;
3. methodological reasoning of the current accounting for comprehensive and reliable reflecting of the assets, the liabilities and the activity of the enterprise, restricted till the achievement of the objectives of the audit;
4. the effectiveness of the internal control, restricted to the achievement of the objectives of the audit;
5 the process of audit finishing;
6. the reliability and the necessary for the users scope of the information, presented in the financial audit;
7. (amend. – SG 67/08) compliance of the information in the financial account, with the one in the report of the activity and any other information, provided by the management bodies of the undertaking together with the audited account.
Art. 7. (amend. – SG 67/08) When carrying out independent financial audit registered auditors shall observe the Professional – Code of Ethics of professional accountants, adopted by the International Federation of Accountants. The ethical principles, guiding the professional conduct and the responsibilities of the auditors shall be:
1. independence – no connection with the registered auditors, including by partners and staff, with respect to the checked enterprise. Its managers and persons, related with them, with persons in material, personal or other aspect;
2. objectivity, impartiality and not admitting of prejudice, conflict of interests or other influence, which can impede the real assessment of the auditor;
3. professional competence – the ownership 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 in secret of the information about the activity of the enterprise, received as result of the implemented independent audit;
5. professional conduct – the auditor shall act in his professional work in a way, which is in compliance with the good name of the auditor’s profession and is restraining from activities, which would lead to damage of the prestige of the profession.
6. honesty – the auditor shall be honest, consistent and objective in the implementation of the audit;
7. knowing and applying the professional standards – the auditor shall implement independent audit in compliance with the approved professional standards and the national legislation;
8. (amend. – SG 67/08) responsibility – the registered auditor shall be personally responsible for the opinion, expressed by him/her; the specialized auditing company shall bear responsibility for the auditor opinion, expressed on behalf of its name.
Art. 8. (suppl. – SG 67/08) Subject to independent financial audit shall be annual, consolidated, intermediate and other financial accounts, in those cases where this is provided by a law, upon request of owners, state bodies and other users of financial information.
Chapter three.
ORGANISATION, DOCUMENTING AND CONCLUSIONS OF THE INDEPENDENT FINANCIAL AUDIT
Art. 9. (1) (amend. – SG 67/08) The independent financial audit shall be carried out on the basis of a contract between the trustee company and the registered auditor as individual or by his enterprise or the specialised auditing company, pointing out the registered auditor, responsible for carrying out independent financial audit.
(2) (suppl. – SG 67/08) The remuneration and the terms of payment of audit services shall be agreed between the persons of para 1. The remuneration shall be calculated as a specific amount only for the audit service in question, it may not be affected by the provision of other services and may not be made conditional.
(3) (new – SG 67/08; revoked – SG 54/10)
(4) (new – SG 67/08; amend. – SG 54/10) The contract of para 1 shall be concluded upon a decision of the general assembly, the unlimited liable partners or the individual owner of the capital in the trustee company.
(5) (new – SG 67/08; revoked – SG 54/10)
(6) (new – SG 67/08) Registered auditors, with whom a contract for carrying out of independent financial audit, may be discharged only in case there are well-grounded reasons for that. Different opinions regarding the accounting treatment or the audit procedures shall not be considered well-grounded reasons for discharge.
(7) (new – SG 67/08; suppl. – SG 54/10) The audited unit - trustee and the registered auditor shall notify within one month term the Commission for Public Supervision of Registered Auditors of discharge or resignation of the registered auditor, providing an account of the reasons for that.
Art. 10. The accepting of obligation for carrying out independent financial audit shall be documented with a letter for accepting of audit engagement. The contents of the letter shall be determined according to the International audit standards.
Art. 11. The documenting of the independent financial audit and the procedures for its fulfilment shall be implemented in compliance with the legislation in effect and the International audit standards.
Art. 12. (amend. – SG 67/08) The management of the enterprise shall concede to the registered auditors the financial account, prepared by them, ready for issuing an audit report. The conceding of the financial account shall be carried out together with the report on the activity and any other information, which the management bodies attach to the audited account, as well as signed confirmation or preliminary letter by the management according to the International audit standards.
Art. 13. (amend. – SG 67/08) (1) The conclusions of the registered auditor after the financial audit has been carried out shall be reflected in an audit report.
(2) Audit reports shall be prepared according to the International audit standards.
(3) (revoked – SG 54/10)
(4) Audit reports must contain clearly expressed opinion about the audited financial accounts as a whole.
(5) The opinion, expressed on the financial account, shall be certified by:
1. the registered auditor, if he issues audit reports on behalf personally of his name – with his signature and seal;
2. the registered specialised auditing company – 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 auditor, being in charge of the audit.
(6) The signature and the seal shall be put on the audit report and on the account balance sheet, expense in the income statement/income statement, account of the cash flows and account of the own capital, with regards to which has been expressed the independent auditor opinion.
Art. 14. (1) (amend. – SG 67/08) The seal of the registered auditor shall be with ellipsoid form. On it shall be written the name, the family name and the number of the registered auditor in the register of the registered auditors of the Institute of certified public accountants.
(2) The specialised auditing company shall use for the purposes of the audit a seal with ellipsoid form. On it shall be written "specialised auditing company", its company and headquarters and the number in the register of the registered auditors in the Institute of certified public accountants.
(3) (amend. – SG 67/08) The personal seal of the registered auditor and the seal of the specialised auditing company shall be used for certification of the audit of the financial accounts also in other cases, provided by a law.
(4) (amend. – SG 67/08) The seals of para 1 and 2 shall be issued after entry in the register of the registered auditors at the Institute of certified public accountants.
Chapter four.
ACQUISITION OF COMPETENCE OF CERTIFIED PUBLIC ACCOUNTANT AND REGISTERED AUDITOR. ACKNOWLEDGEMENT OF COMPETENCE OF REGISTERED AUDITORS FROM THE EUROPEAN UNION AND THIRD COUNTRIES (TITLE AMEND. – SG 67/08)
Art. 15. (amend. – SG 67/08) (1) As certified public accountant and a registered auditor can apply a person, who has not been convicted for a crime of general character under chapter five, chapter six and section I, Ia, II and IV and chapter seven of the Special part of the Penal Code, who has not been deprived of the right to exercise audit profession or activities in the sphere of finance and accounting and who has not been deprived of the right to hold accountable position;
(2) The requirement of para 1 shall also apply with regards to members of managing and control bodies of specialised audit companies.
Art. 16. (amend. - SG 105/05, in force from 01.01.2006, amend. - SG 33/06; suppl. – SG 54/10) For the acquisition of competence as certified public accountant can apply a person, who meets the following requirements for compulsory degree of graduated higher education and compulsory professional practice in the sphere of accounting, the internal, the external audit and the financial inspection, as a body of the National Revenue Agency, as an inspector to the Commission for Public Oversight of Statutory Auditors, and/or as a lecturer in the sphere of audit, control and finance:
1. accounting – economic education with master degree and 4 years of practice;
2. accounting – economic education with bachelor degree and 5 years of practice;
3. another higher economic education and 7 years of practice;
4. another higher education and 10 years of practice.
Art. 17. (prev. text of Art. 17, amend. – SG 67/08) Before acquiring right to sit for exams as per Art. 18, candidates for certified public accountants should have passed successfully exams in the following spheres:
1. basics of the accounting (theory of the accounting);
2. financial accounting (accounting of the enterprise);
3. management accounting;
4. analysis of the financial accounts;
5. (suppl. – SG 67/08) financial control and audit standards, including International audit standards;
6. commercial law;
7. labour and insurance law;
8. finance of the enterprise;
9. (amend. – SG 67/08) mathematics and statistics;
10. micro-economics;
11. information systems and technologies;
12. (new – SG 67/08) risk management and internal control.
(2) (new – SG 67/08) If the candidate for certified public accountant has not sat for an exam in a sphere of the list per para 1, the exams in the said spheres shall be organised by the Institute of certified public accountants following a procedure, approved by the Commission for Public Supervision of Registered auditors.
Art. 18. (1) (amend. – SG 67/08) A diploma of certified public accountant shall be acquired after a successful passing of written exams before the Institute of certified public accountants in:
1. (suppl. – SG 67/08; amend. – SG 95/09, in force from 01.01.2010) accounting, including International financial reporting standards;
2. commercial law;
3. (suppl. – SG 67/08) independent financial audit, including International audit standards;
4. (amend. – SG 67/08) tax and insurance law.
(2) (amend. – SG 67/08) Before the exam in independent financial audit the candidates for certified public accountants must have at least 2 years of professional practice in a specialised auditing company of a registered auditor. The practice shall be proved before the Institute of certified public accountants by a certificate, issued by the corresponding qualified auditor or the specialised auditing company and a copy of an employment record card or by other documents certifying the period of employment.
(3) (amend. – SG 67/08) The practice of para 2 shall be included in the required practice of art. 16
Art. 19. (1) The persons, who have successfully passed the exams of art. 18, shall get diplomas as certified public accountant and shall be entered in a special register at the Institute of certified public accountants.
(2) (revoked – SG 67/08)
Art. 20. (1) (revoked – SG 96/04’ In Force from 1st of January 2005; new – SG 67/08; previous text of Art. 20 – SG 54/10) Certified public accountants shall acquire the right to sign audit reports with an opinion about the financial accounts after a year of practice in a specialised audit company or in a firm of a registered auditor and after they have been entered in the register of registered auditors as per Art. 24.
(2) (new – SG 54/10) Requirement for practice as per Para 1 shall not be applied if the acquired practice under Art. 18, Para 2 is at least three years.
Art. 21. (amend. – SG 67/08) A person, who has acquired competence to sign auditor reports with opinion on financial accounts in a Member State of the European Union or a state from the European Economic Area, shall be entered in the register of the registered auditors under this Law after he/she has passed successfully exams on Bulgarian commercial, tax and insurance law in Bulgarian language at the Institute of certified public accountants. The terms and the procedure for conducting the abovementioned exams shall be approved by the Commission for Public Supervision of Registered Auditors.
Art. 21a. (new – SG 67/08; amend. – SG 54/10) (1) The Institute of Certified Public Accountants shall enter in the register of Art. 24 each auditor or an audit firm from a third country, who presents audit report of the annual or consolidated financial accounts of a company, established outside the European Union, whose transferable securities are admitted to trade on a regulated market in the country, except for the case, where the latter company issues only debt securities as per Art. 100j, Para 2, tem 4 of the Law on Public offering of Securities, which securities are admitted to trade on a regulated market with a nominal price per one unit not less than the equivalent in BGN of 50 000 EUR; or in the cases of debt securities, denominated on a currency different than EUR, with a nominal price as on the date of issuance, not less than the BGN equivalent of 50 000 EUR.
(2) Auditors and audit firms from third countries envisaged in Para 1 shall be subject to the public oversight system, to the quality assurance system, as well as to the inspections, investigations and sanctions as provided for in this Law.
(3) Para 2 shall not be applied in the case, where the quality assurance system of another Member State of the European Union, or of a third country assessed as equivalent, has executed an inspection of the quality of the respective auditor or audit firm envisaged in Para 1 within the previous three years.
(4) Observing the reciprocity principle, the Institute of Certified Public Accountants shall enter in the register an auditor from a third country, after the latter presents evidence that he/she meets requirements, equivalent to the provided in Art. 15-19, and have passed successfully the examinations under Art. 18.
(5) Observing the reciprocity principle, the Institute of Certified Public Accountants shall enter in the register a third-country audit firm after it provides evidence that:
1. three quarters of the members of the managing bodies and the registered auditors, carrying out audit on behalf of the firm, meet requirements equivalent to the ones as per Art. 15 -19;
2. the audit company carries out independent financial audit, observing the principles of independence and objectivity and rules, equivalent to the ones as per Art. 9 and Art. 33, Para 2;
3. the audit company publishes on its web site annual report on transparency meeting the requirements of Art. 40l, or fulfills other equivalent announcement requirements in case it audits units carrying out public interest activity.
(6) The Institute of Certified Public Accountants, through the Commission for Public Oversight of the Statutory Auditors shall inform the European Commission of the performed assessment of the reciprocity as per Para 2 and 3, as well as of the basic agreements for co-operation with the public oversight systems, quality assurance systems and the sanctions implementation with those third countries.
(7) Audit reports on financial accounts, and issued by auditors or audit companies from third countries, who are not registered in the state following the legal procedure shall be legally irrelevant.
Art. 21b. (new – SG 77/05; suppl. SG 62/06, in force from 01.01.2007; prev. text of Art. 21a, amend. – SG 67/08) The Institute of certified public accountants shall organise training and conducting of the exams of Art. 18, 21 and 21a, determining their sequence, regularity, way of carrying out and the system of assessment of the knowledge for exercising the profession of a registered auditor.
(2) The contents of the exams as well as the rules for their organizing and conducting shall be adopted by the managing board of the Institute of certified public accountants, shall be approved by the Commission for Public Supervision of Registered Auditors and shall be annually announced in a proper manner.
Art. 22. (amend. – SG 67/08) The Institute of certified public accountants shall work out rules for continuous training of certified public accountants and registered auditors. The rules for organising and conducting continuous training shall be adopted by the managing board of the institute, shall be approved by the Commission for Public Supervision of Registered Auditors and shall be annually announced in a proper manner.
(2) The training as per para 1 for each calendar year may not last less than 40 hours.
(3) As regards to registered auditors, who have not carried out audit for a period of three consecutive years, the training as per para 1 may not last less than 80 hours.
Chapter five.
PRACTICING THE PROFESSION OF A REGISTERED AUDITOR (TITLE AMEND - SG 67/08)
Art. 23. (amend. – SG 67/08) The exclusive rights to practice the profession of a registered auditor shall be exercised:
1. (suppl. – SG 54/10) directly or through an enterprise of a registered auditor;
2. (revoked – SG 54/10)
3. through a participation in a specialised auditing company.
Art. 24. (amend. – SG 67/08) (1) The Institute of certified public accountants shall create and keep a register of the registered auditors.
(2) (amend. – SG 54/10) In order to exercise right to sign audit reports with opinion about financial accounts, the certified public accountant, who has acquired the practice required as per Art. 20 shall submit an application for membership in the Institute of certified public accountants and for entry in the register of the registered auditors, accompanied by a court certificate of conviction and a declaration, that he meets the requirements of this law.
(3) Entry of auditing companies in the register of registered auditors shall be carried out on the basis of application, signed by the persons representing the company, accompanied by a certificate of conviction of the partners – registered auditors and the persons managing or representing the company, the names an the addresses of the rest of the partners, a declaration signed by the managers, that the company meets the conditions of this law, together with documents, confirming the fulfilment of the requirements of § 1, item 9 of the Additional provisions.
(4) The managing board of the Institute of certified public accountants shall approve sample application for entry in the register of registered auditors.
(5) The managing board of the Institute shall decide about the applications of the candidates with a motivated decision in 14-days term from the date of submission. The decision shall be announced in writing to the candidates and shall enter into force on the date of its adoption.
(6) In case of refusal of membership and registration the decision of the managing board can be appealed against in two weeks term before the Commission for Public Supervision of Registered Auditors. The Commission shall decide about the appeal in two months term from receiving it.
(7) The decision of the Commission for Public Supervision of Registered Auditors shall be subject to court appeal by the order of the Administrative Procedure Code.
Art. 25. (amend. – SG 67/08) (1) Each registered auditor and auditing company shall acquire individual numbers following the entry in the register of the registered auditors.
(2) The information from the register shall be kept in electronic format in Bulgarian language and shall be accessible to the public by electronic means via the web site of the Institute of the certified public accountants.
Art. 26. (amend. – SG 54/10) The Institute of Certified Public Accountants shall annually, till March 31st , publish the list of the registered auditors on its official Internet site.
Art. 27. (amend. – SG 67/08) (1) The register shall include at least the following information concerning registered auditors – natural persons:
1. their name, permanent address, registration number and information about the web site of the registered auditor;
2. trade name, registered office, head office, web site and registration number of the specialized audit company, where the registered auditor works, or the address of the unit via which he/she carries out the activity or with which the latter is related as a partner or in another way, where applicable;
3. any other registration as a registered auditor in another Member State of the European Union, in a state from the European Economic Area and/or in a third country, including the registration number and the name of the competent authority in the state where the person is registered.
(2) The register shall include at least the following information concerning registered auditing companies:
1. trade name and registration number;
2. legal and organizational form;
3. contact person, information about the web site;
4. registered office and head office;
5. the addresses of all offices of the auditing company in the state;
6. the names, business addresses and registration number of all owners and stock-holders;
7. name, permanent address and registration number of the registered auditors, who have concluded contracts with the auditing company;
8. the names and addresses of the members of the managing or control bodies of the audit company;
9. membership in an audit network and a list of the names and addresses of the companies which are members or which are related to the audit network, or indication of the spot where such information is publicly accessible;
10. any other registration as a registered auditor in another Member State of the European Union, in a state from the European Economic Area and/or in a third country, including the registration number and the name of the competent authority in the state there hat the company is registered.
(3) Auditors and auditing companies from third countries, registered according to Art. 21a shall be entered in the register as auditors and auditing companies from third countries, not as registered auditors.
(4) In case a change occurs in the circumstances which are subject to entry, the persons referred to in paras 1 and 2 shall notify in writing the Institute of certified public accountants of the change within 7 days from its occurrence.
(5) In case a notification as per para 4 has been received, the Institute of certified public accountants shall reflect the changes in the register within three working days from its submission.
(6) Information concerning the cases of sanction of registered auditors and the type of punishment imposed shall be published in the register.
(7) Information about the address, web site and phone numbers of the Commission for Public Supervision of Registered Auditors shall also be contained in the register.
Art. 27a. (new – SG 67/08) (1) A registered auditor shall be deleted from the register in case of:
1. death;
2. submission of application fro deletion of registration;
3. coming into effect of sentence for committed crime under Chapter five, Chapter six, sections I, Ia, III and IV and Chapter seven from the Special part of the Penal Code;
4. deprivation of right to practise audit profession, activity or other similar profession or activity in the sphere of finance and accountancy;
5. deprivation of right to hold accountable position;
6. deprivation of right to practise audit activity as per Art. 41, para 3.
(2) Information concerning the cases of deletion of registration, as well as the reasons for that shall be published in the register.
(3) In the cases of temporary deprivation of right to independent financial audit of financial accounts under this Law, in the register shall be indicated the penalty imposed as well as its term.
(4) In those cases where paras 1 and 3 are being applied with regards to a registered auditor, who is approved in another Member State of the European Union and who has been entered in the register of this state, the Commission for Public Supervision of Registered Auditors shall notify the competent authorities of the relevant Member State, stating the reasons for that.
Art. 27b. (new – SG 67/08) (1) A fee shall be collected for entry in the Institute of certified public accountants.
(2) The amount of the fee under para 1 shall be determined by the general assembly of the Institute of certified public accountants upon proposal by the managing board.
Art. 27c. (new – SG 67/08) Each registered auditor shall take an oath and sign an oath sheet with the following contents: "I swear in knowledge and laws that I will fulfill my obligations of a registered auditor independently, objectively, in good faith and with professional competence. I will be guided by the laws in the Republic of Bulgaria, the adopted professional audit standards, ethical norms and principles of behaviour, approved by the Institute of certified public accountants. If I break this oath, I shall be punished according to the law and the professional and ethical norms of the Institute of certified public accountants. "
Art. 28. (1) (suppl. – SG 96/04, in force from 01.01.2005, amend. – SG 67/08) At carrying out independent financial audit the registered auditors shall be independent from the company being audited and shall not take part in the decision-making process of the said company.
(2) A registered auditor should not carry out independent financial audit if there is any direct and immediate financial or business connection, employment relationship or any other kind of connection/relationship, including certain extra non-audit services, between the registered auditors or the network and the audited company, that a reasonable and informed third party would conclude compromise the registered auditor's independence.
(3) In those cases where the registered auditors' independence is affected by different types of threats, such as self-review, self-interest, advocacy, familiarity or trust, and intimidation, the registered auditor shall apply safety measures in order to mitigate the said threats. If the measures applied do not reduce adequately the impact of the said threats and the independence is compromised, the registered auditor shall not carry out the independent financial audit.
(4) Registered auditors shall include in the working documents related to the audit all essential threats to their independence, as well as the safety measures applied in order to mitigate them.
(5) The restrictions and the requirements referred to in paras 1 through 4 shall also apply to all share-holders and employees in the specialized audit firm.
Art. 28a. (New, SG 91/02; amend. – SG 67/08; suppl. – SG 54/10) The registered auditors are allowed to participate and sign audit opinion in one specialized auditing company only.
Art. 29. (revoked – SG 67/08)
Art. 30. The members of the Institute of certified public accountants and the specialised auditing companies shall pay incoming fee at the accepting and annual fees, determined by the managing board of the institute.
Chapter six.
RIGHTS AND OBLIGATIONS OF THE REGISTERED AUDITORS
Art. 31. The registered auditors shall have the exclusive right to implement independent audit of the financial accounts of the enterprises.
Art. 32. At implementing of 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 observe the conducting of the inventory of the assets and the liabilities of the enterprise.
Art. 33. (1) (prev. text of Art. 33 – SG 67/08) The registered auditor shall be obliged:
1. to observe the principles: independence, professional competence, confidentiality, honesty and objectivity;
2. to fulfil the undertaken auditor obligation, except objective circumstances do not occur, which impede him;
3. (new – SG 67/08) to inform the management of the company – client of all circumstances that might affect its independence at carrying out audit obligation;
4. (new – SG 67/08) to protect in appropriate manner the confidentiality and the professional secret of the whole information and the documents, to which he/she has access at carrying out the audit task; this requirement shall not apply if public supervision system is in function;
5. (new – SG 67/08) to provide access to the whole relevant information concerning the audited company in those cases where he/she has been replaced by another registered auditor;
6. (new – SG 67/08) to keep on observing the confidentiality requirement after he/she has completed the work regarding specific audit obligation;
7. (prev. text of item 3 – SG 67/08) to inform the management of the company – client about essential violations of the laws and other normative acts, of its foundation and other internal acts, norms and procedures, as well as about any other information, as far as it has become known to him in the process of carrying out independent audit;
8. (prev. text of item 4 – SG 67/08) to warn the company – client within his competence about activities or lapses, which can harm it as far as they have become known to him in the process of carrying out the independent audit;
9. (prev. text of item 5 – SG 67/08) clarify to the company – client the significance of certain information, received at fulfilment of his auditor obligation;
10. (prev. text of item 6 – SG 67/08) to present documents, proving the fulfilment of the auditor obligation and the expressed opinion;
11. (prev. text of item 7 – SG 67/08) to observe the International audit standards and the Code of Professional Ethics, adopted by the Institute of certified public accountants;
12. (prev. text of item 8 – SG 67/08) to account its activity before the Institute of certified public accountants following a procedure, approved by it;
13. (prev. text of item 9 – SG 67/08) to participate in the activity of the Institute of certified public accountants and its bodies, as well as to observe the statutes of the institute;
14. (prev. text of item 10 – SG 67/08) to insure himself for the risks of his professional activity;
15. (prev. text of item 11, suppl. – SG 67/08) to cooperate with the bodies of the Institute of certified public accountants and the Commission for Public Supervision of Registered Auditors;
16. (new – SG 54/10) to keep the audit documentation for a period of 5 years.
(2) (new – SG 67/08) Owners of audit companies. As well as members of their managing or control bodies shall not get involved in the conducting of independent financial audit in a manner that threatens the independence and objectivity of the registered auditor, who carried out independent financial audit on behalf of the auditing company.
Art. 33a. (new – SG 67/08) When carrying out independent financial audit of consolidated financial account of a group of companies:
1. the auditor of the group shall bear overall responsibility for the audit report regarding the consolidated financial account;
2. the auditor of the group shall carry out an inspection and keep records regarding his/her inspection of the audit activity, carried out by registered auditors, auditors and/or auditing companies from other Member States of the European Union, or from third countries for the purposes of the audit of the group; the records kept by the auditor of the group are made in such a way as to allow inspections of the performance of the auditor of the group to be carried out;
3. in those cases where a unit of a group of companies is being audited by an auditor or an auditing company from a third country, with which there are no contractual relations, as provided for in Art. Art. 40s, the auditor of the group shall be responsible for providing upon request by the Institute of certified public accountants and/or the Commission for Public Supervision of Registered Auditors the documentation regarding the auditing activity, carried out by the auditor or the auditing company from a third country, including the working documents related to the audit of the group
4. in order to guarantee that the documentation under item 3 will be provided, the auditor of the group keeps copy of it and/or arranges unlimited access to the documentation with the third-country auditor or the third-country audit entity upon request of the latter or undertakes other appropriate measure;
5. in case there are legal or other obstacles which do not allow the auditor to provide the working documents regarding the audit by a third country, the documentation kept by the auditor of the group shall include evidence that the latter has undertaken actions for obtaining access to the documentation related to the audit, as well as a proof of such obstacles.
Chapter seven.
PROPRIETARY LIABILITY
Art. 34. (1) (amend. – SG 67/08) The registered auditors shall be liable to payment of compensation up to the threefold amount of the contracted remuneration for audit for the damages, which they have caused to their principals, if they are direct and immediate result of the guilty acts or omissions of the auditor.
(2) The responsibility of para 1 shall be implemented according to the Law for the obligations and contracts and the rules of the general appeal procedures.
Art. 35. (1) The registered auditors shall not bear responsibility for admitted violations on behalf of the managerial bodies and employees of the audited enterprises.
(2) The certification of the financial accounts shall not exempt from responsibility the management of the audited enterprise for the lawfulness and the expedience of their activities during the audited period.
Chapter seven.
"A" PUBLIC OVERSIGHT SYSTEM FOR REGISTERED AUDITORS (NEW – SG 67/08)
Art. 35a. (new – SG 67/08) Public oversight over the activity of registered auditors shall be exercised by the Commission for Public Supervision of Registered Auditors.
Art. 35b. (new – SG 67/08) (1) The Commission for Public Supervision of Registered Auditors, called hereinafter "the Commission", is an independent body, legal entity supported by the budget, having its registered office in Sofia. The Commission’s activity shall be financed by the state budget and the budget of the Financial Supervision Commission.
(2) (amend. – SG 54/10) The Commission is acting as a College and consists of a Chairman and four members. In case the Chairman is absent, his/her functions shall be performed by a member of the Commission, appointed by the Chairman for each individual case.
(3) Chairman and members of the Commission may only be Bulgarian citizens, meeting the following requirements:
1. to have completed higher legal or economic education and acquired qualification Master degree;
2. (amend. – SG 54/10) to have certain knowledge in the spheres related to the independent financial audit, as well as to have at least 5 years of professional experience in the said spheres;
3. not to have been convicted of deliberate crime of general nature;
4. not to carry out activity related to independent financial audit.
(4) The Chairman of the Commission shall be elected by the National Assembly and upon proposal by the Budget Finance Commission.
(5) Within one-month term from the election, the Chairman of the Commission shall conduct consultations in order to single out candidates for members of the Commission, observing the following principles:
1. (amend. - SG 54/10) one person shall be proposed by the Minister of Finance;
2. one person shall be proposed by the manager of the Bulgarian National Bank;
3. one person shall be proposed by the Financial Supervision Commission;
4. (amend. - SG 54/10) one person shall be proposed by managing board of the Institute of Certified Public Accountants.
(6) Members of the Commission shall be elected by the National Assembly upon proposal by the Chairman of the Commission.
(7) (amend. - SG 54/10) The member of the Commission, proposed by the managing board of the Institute of Certified Public Accountants, may carry out activity related to the independent financial audit.
(8) The Chairman of the Commission shall administer the activity of the Commission and shall represent it.
Art. 35c. (new – SG 67/08) (1) The Mandate of the Commission shall be 4 years. The Chairman and the members of the Commission may not be elected for more than two consecutive mandates.
(2) The Mandate of a chairman and a member of the Commission shall be terminated by the National Assembly ahead of term:
1. in case a resignation has been filed;
2. in case the person is actually unable to fulfill his/her duties for a period longer than six months;
3. if the person no longer meets the requirements as per Art. 35b, para 3;
4. in case the person has not taken part in three or more sessions of the commission within one year.
(3) In case of termination of the mandate of a Chairman or of a member of the Commission ahead of term, they shall be replaced for the remaining period of the mandate by another person following the procedure of Art. 35b, paras 4, 5 and 6.
(4) (amend. - SG 54/10) The members of the Commission, not including its Chairman, shall not enter labour or servant legal relationship with the Commission.
(5) The Chairman of the Commission shall receive basic monthly remuneration amounting to three average monthly remunerations of the persons hired under employment and official terms of relations in the public sector according to information of the National Statistical Institute. The basic monthly remuneration shall be recalculated each quarter taking into consideration the average monthly working salary for the last month of the preceding quarter.
(6) (amend. - SG 54/10) Members of the Commission, except for the Chairperson, shall receive remuneration per each session in an amount of one basic monthly salary for the country. The received total monthly remuneration cannot exceed 50 percent of the basic monthly remuneration of the Chairperson.
Art. 35d. (new – SG 67/08) (1) The Commission adopts regulations for its activity which shall be promulgated in the State Gazette.
(2) At carrying out its activity the Commission shall be supported by administration, the structure and work organization of which is set out by the regulation under para 1.
(3) Legal relations with administration employees occur and shall be regulated according to the Labour Code.
(4) The Law for the Administration shall not apply to the administration of the Commission.
(5) Basic monthly remunerations and the additional salaries of administration employees shall be calculated in accordance with internal rules, adopted by decision of the Commission upon proposal of its Chairman, and the availability of funds under the Commission’s budget.
Art. 35e. (new – SG 67/08) (1) The Commission shall be in charge of the oversight over:
1. acquisition of competence, registration of registered auditors, including auditors and audit firms from other Member States of the European Union, and from third countries, as well as deprivation of the competence.
2. adopting and observing standards for professional ethics, internal quality control of auditor firms and at the performing of the audit;
3. (amend. - SG 54/10) continuous training, quality assurance systems, investigation and punishment system;
(2) For the purpose of performing its activity, the Commission shall:
1. exercise supervision over the activity of the Institute of certified public accountants as per Art. 37;
2. approve the rules and the procedures for carrying out quality assurance reviews of the activity of the registered auditors, the persons involved in the reviews, as well as the annual plan for carrying out reviews;
3. assign further or repeated reviews in the cases where the results from the quality assurance reviews carried out by the bodies of the Institute of certified public accountants are unsatisfactory;
4. in cases of repeated failure to observe the terms fixed for completion of the reviews, of unsatisfactory quality of the reviews being carried out or systematic delays of the terms shall be appointed one or more members of the Commission to take part in the reviews in collaboration with the bodies of the Institute of certified public accountants;
5. carry out investigations upon received signals and proposals by interested persons regarding supposed crime, as well as in other cases whenever it considers appropriate; in those cases the Commission may be supported by the respective bodies of the Institute of certified public accountants;
6. impose punishments in the cases provided for by the law;
7. (amend. - SG 54/10) approve or return with a reasoned request for revision the rules under Art. 21a;
8. prepare and publish on its website annual working programme for its activity;
9. cooperate with the respective authorities of the European Union, with supervision bodies of the Member State of the European Union or of third countries which are in charge of independent financial audit;
10. prepare and present to the National Assembly an annual account of its activity not later than May 30 of the next year, which shall be published on the web site of the Commission.
(3) In fulfillment of their duties the chairman and the members of the Commission shall be entitled to require:
1. from the registered auditor who is subject to review/investigation - documents, certified copies of documents, data, references and other information of importance for the reviews/investigation within terms fixed by them;
2. from the registered auditor who is subject to review/investigation – in writing explanations on matters related to the review/investigation within terms fixed by them;
3. certified copies of documents, data, references and other information – from legal persons and sole traders, not including the registered auditor who is subject to review/investigation, who are related to the review/investigation;
4. provision of documents, certified copies of documents, data, references and other information related to the powers of the Commission, from the Institute of certified public accountants.
(4) Registered auditors may not refer to confidentiality and professional secret requirements when exercising powers of the Commission under this Law.
(5) During reviews/investigations the Chairman and the members of the Commission shall be obliged to establish their identity by official card and to present to the commission a decision for carrying out of the review/investigation.
Art. 35f. (new – SG 67/08) (1) (amend. - SG 54/10) Sessions of the Commission shall be considered regular if the Chairman and at least two of its members are present.
(2) (amend. - SG 54/10)The Commission shall adopt its decisions by open voting and a majority of three votes.
(3) (amend. - SG 54/10) Decisions under Art. 41 and 42 regarding deprivation of right to carry out independent financial audit and deprivation of right to practice audit activity shall be adopted by secret voting and a majority of four votes.
(4) The Chairman and the members of the Commission may not abstain from voting.
(5) Supplementary rules regarding the Commission’s activity shall be set out by the regulation as per Art. 35d, para 1.
Art. 35g. (new – SG 67/08) The Chairman and the members of the Commission, as well as the employees from its administration shall be obliged not to disclose and to provide information which has become known to them during or on occasion of carrying out their activity, except in the cases provided for in a law. The said obligation shall not be extinguished after their leaving the Commission or its administration.
Chapter eight.
INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS
Art. 36. The Institute of certified public accountants shall be a corporate body at independent maintenance with headquarters in Sofia.
Art. 37. (1) (amend. – SG 67/08) The Institute of certified public accountants shall guarantee that the registered auditors practice their independent audit profession in public interest.
(2) The Institute of certified public accountants shall organise and manage the professional activity of its members by:
1. organising and carrying out the exams of the candidates for getting of diploma as a certified public accountant;
2. registering the auditors, who get their competence according to the requirements of this law;
3. organising and conducting different forms for increase of their professional qualification;
4. organising training of the candidates for certified public accountants in interaction with higher schools, selected by it;
5. publish its magazine, study aids and scientific works, connected with the development and the promotion of the auditor’s profession;
6. approving internal quality control system for the activity of its members;
7. developing, if necessary, professional audit rules and techniques for additional assisting and regulation of the activity of its members;
8. controlling the quality of the audit activity and the professional conduct of its members;
9. organising, assisting and implementing research activity in the field of the independent financial audit, of accounting analysis and other related spheres;
10. (new – SG 67/08) preparing and present to the Commission a draft working programme in order to be approved;
11. (new – SG 67/08) preparing and present to the Commission annual report on its activity;
12. (new – SG 67/08) supporting the activities of the Commission.
Art. 38. (amend. - SG 54/10) The Institute of Certified Public Accountants shall be represented by its Chairperson.
Art. 39. (1) Bodies of the Institute of certified public accountants shall be:
1. general meeting;
2. management council;
3. control council;
4. professional ethics council;
5. council for quality control of the audit services;
6. disciplinary council.
(2) (amend. – SG 67/08; amend. - SG 54/10) The general meeting shall approve statutes, elect the Chairperson of the Institute of Certified Public Accountants and its members of the bodies.
(3) (suppl. – SG 54/10)The managing board shall organise and currently rule the activity of the Institute of certified public accountants and report to the general meeting. The Chairperson shall preside the sessions of the Managing Board.
(4) The control council shall control the fulfilment of the decisions of the general meeting, the fulfilment of the budget of the institute and the activity of management council.
(5) (amend. – SG 67/08) The professional ethics council shall control the fulfilment of the Code of Professional Ethics.
(6) (amend. – SG 67/08) The council for quality control of the audit services shall control the quality of the audit activity of the registered auditors by carrying out inspections according to rules, procedures and plans, approved by the Commission. The members of the council shall be members of the Institute of certified public accountants according to a rotation principle.
(7) The disciplinary council shall consider the findings of the council for quality control of the audit services and of the professional ethics council. On the basis of the findings of the council for quality control of the audit services and of the professional ethics council the members of the disciplinary council can compile acts for establishing of breaches.
(8) The organisation and the activity of the bodies of para 1 shall be regulated in the statutes of the Institute of certified public accountants.
Art. 40. The financing of the activity of the Institute of certified public accountants shall be ensured from:
1. incoming and annual fees of the members of the institute;
2. incomes from fees for conducting courses and exams;
3. incomes from subscription and publishing activity;
4. incomes from implementing consultancy services;
5. incomes from sanctions, imposed by the institute;
6. incomes from grants;
7. other incomes.
Chapter eight.
"A" QUALITY CONTROL SYSTEM FOR THE ACTIVITY OF REGISTERED AUDITORS (NEW – SG 67/08)
Art. 40a. (new – SG 67/08) (1) (amend. - SG 54/10) All registered auditors and registered audit firms, who are members of the Institute of Certified Public Accountants, as well as registered auditors and audit firms from the Member States of the European Union, or of third-countries shall be subject to quality control regarding their activity.
(2) The quality control system is established and functions according to the rules, procedures and plans, approved by the Commission upon proposal by the Institute of certified public accountants.
(3) (amend. - SG 54/10) The quality control system functions by the following manner –the appointed by the Commission inspectors and controllers to the Institute of the Certified Public Accountants carry out quality assurance inspections under the supervision of the Commission.
(4) (amend. – SG 54/10) Inspectors of the Commission, as well as the controllers shall be in labour and non-labour legal relationships with the Commission. They shall be appointed under a procedure, determined by the Interior Regulations of the Commission.
(5) (amend. – SG 54/10) On the basis of the results of the executed inspections, by the inspectors to the Commission and by the controllers to the Institute of Certified Public Accountants, Commission shall be entitled to give prescriptions, which shall be obligatory for execution by the registered auditors, and to undertake measures regarding them.
(6) The Commission shall assign further or repeated reviews in those cases where the results of the quality assurance reviews carried out are unsatisfactory.
(7) In case of repeated failure to observe the fixed terms for completion of the reviews, unsatisfactory quality of the reviews being carried out or systematic delay of the terms shall be appointed one or more members of the Commission to take part in the reviews.
(8) The Commission shall carry out reviews upon received signals and proposals by interested persons regarding supposed crime, as well as in other cases whenever it considers appropriate In those cases the Commission may be supported by the respective bodies of the Institute of certified public accountants.
(9) (amend. – SG 54/10) The quality control system envisaged in Para 3 shall be financed by:
1. the budget of the Commission – for the participation of the inspectors in the inspections of quality assurance;
2. funds of the Institute of Certified Public Accountants – for the participation of the controllers in the inspections of quality assurance.
(10) (revoked – SG 54/10)
(11) (revoked – SG 54/10)
(12) (revoked – SG 54/10)
(13) (revoked – SG 54/10)
Art. 40b. (new – SG 67/08) (1) Quality control of the registered auditors’ activity shall be carried out, observing the following requirements:
1. the control shall be exercised by persons who are independent from the respective registered auditors – subject to the audit;
2. the financing of the control activities shall be adequate, sufficient and independent from the registered auditors being supervised;
3. there shall be provided enough resources for the carrying out of the control activities required;
4. (amend. – SG 54/10) persons, who carry out quality control shall have proper professional education and relevant experience in the field of independent financial audit and financial accounting and also they must have undergone quality assurance training course;
5. there should be no conflict of interests between the persons carrying out quality control, and the registered auditors – subject to the review.
(2) There is conflict of interests within the meaning of para 1, item 5 in case the persons, carrying out quality assurance:
1. and the registered auditor – subject to the review have been partners in a firm, the subject of activity of which is independent financial audit;
2. have carried out audits of companies, being audited by the registered auditor – subject to the review during the last three years;
3. and the are connected persons.
Art. 40c. (new – SG 67/08) (1) Quality control of the registered auditors’ activity shall include:
1. review of the audit documentation regarding compliance with the audit standards applicable;
2. review for compliance with the requirements of the International Audit Standards;
3. review regarding compliance with ethical principles and rules, including independence rules;
4. ascertainment of adequacy of time and human resources, used for carrying out of the audit according to its scope and complexity;
5. ascertainment of adequacy of the auditors’ remunerations for the audit;
6. assessment of the internal quality control system, applied by the registered auditor.
7. (new – SG 54/10) inspection for observance of the prescriptions under Art. 40a, Para 5.
(2) When carrying out audit of an audit company in the excerpt shall be included the audits, carried out by each registered auditor, who has carried out activity on behalf of the company.
Art. 40d. (new – SG 67/08) (1) Reports shall be worked out for the results of each review carried out, containing the main conclusions from the exercised control. A copy of the report shall be given to the registered auditor – subject of the review.
(2) The Institute of certified public accountants shall annually publish a summary of the results of the quality control activity.
Art. 40e. (new – SG 67/08) (1) (amend. – SG 54/10) A registered auditor, carrying out independent financial audit of a company performing public interest activity, shall be subject to review regarding the quality of the audit activity at least once in three years.
(2) (amend. – SG 54/10) A registered auditor who does not carry out independent financial audit of a company performing public interest activity, shall be subject to review regarding the quality of the audit activity at least once in six years. The Institute of certified public accountants shall draw in a detailed report on the quality assurance reviews of the activity of the said auditors per each calendar quarter. A copy of the report shall be presented to the commission within 15 days from the expiry of the respective quarter.
(3) (amend. – SG 54/10) Quality assurance inspections under Para 1 shall be carried out by the Commission for Public Oversight of the Statutory Auditors. A copy of the inspection shall be sent to the Institute of the Certified Public Accountants. Registered auditors may also take part in the inspection.
(4) (revoked – SG 54/10)
Chapter eight.
"B" REQUIREMENTS FOR INDEPENDENT FINANCIAL AUDIT OF PUBLIC-INTEREST ENTITY (NEW – SG 67/08)
Art. 40f. (new – SG 67/08) (1) Each company carrying out public interest activity, shall establish an audit committee.
(2) The audit committee shall be elected by the general meeting or by the individual owner of the capital of the public-interest entity. The general meeting or individual owner of the capital shall determine the mandate and the number of the members of the audit committee.
(3) Elected as members of the audit committee can be:
1. managing directors;
2. members of managing bodies of the legal entity;
3. persons who are in employment relations with the legal entity.
(4) (amend. – SG 54/10) At least one of the members of the audit committee shall be independent from the supervision board and should have graduated university with a degree in accounting or finance, as well as shall have at least 5 years of professional experience in the sphere of accounting or audit.
(5) (revoked – SG 54/10)
Art. 40g. (new – SG 67/08) (1) As regards to entities, which are joint-stock companies, the functions of the audit committee may be performed by the managing board or by the board of directors or by the supervision board, if according to the last annual account the company meets at least two of the following requirements:
1. average number of the staff for the current year – up to 50 persons;
2. the net book value of assets by December 31 – up to 18 000 000 BGN;
3. gross income from profit for the current year – up to 20 000 000 BGN.
(2) In the cases referred to in para 1 the sessions of the body performing the functions of an audit committee shall be administered by a chairman who may not be a managing director and has been elected by the supervision board by two-tier system or by the general meeting of the stock-holders by one-tier system.
Art. 40h. (new – SG 67/08) (1) The audit committee shall perform the following functions:
1. monitor the financial reporting process in the public-interest entity;
2. monitor the effectiveness of the company's internal control systems;
3. monitor the effectiveness of the company's risk management systems;
4. monitor the independent financial audit in the company;
5. review the independence of the registered auditor of the company in compliance with the requirements of the Law and the Code of Ethics of professional accountants, and monitor the provision of additional services to the audited entity by the registered auditor.
Art. 40i. (new – SG 67/08) Registered auditors shall report to the audit committee on key matters arising from the implementation of the audit, and in particular on material weaknesses in internal control systems of the company in relation to the financial reporting process.
Art. 40j. (new – SG 67/08) The registered auditor who will carry out independent financial audit of a public-interest entity, shall be elected on the basis of a recommendation from the audit committee.
Art. 40k. (new – SG 67/08) The audit committee shall report its activity before the general meeting or the individual capital owner of the public-interest entity annually along with the adopting of an annual financial account.
Art. 40l. (new – SG 67/08) (1) Registered auditors that carry out independent financial audits of public-interest entities shall publish on their websites annual transparency reports that include at least the following:
1. a description of the legal structure and ownership of the registered auditor;
2. where the audit firm belongs to a network, a description of the network and the legal and structural arrangements in the network;
3. a description of the governance structure of the audit firm;
4. a description of the internal quality control system of the audit firm and a statement by the administrative or management body on the effectiveness of its functioning;
5. date of last quality assurance review carried out by the Institute of certified public accountants or by the Commission regarding quality control of the registered auditor’s activity;
6. a list of public-interest entities for which the registered auditor has carried out audits during the preceding financial year;
7. a statement concerning the registered auditor 's independence practices which also confirms that an internal review of independence compliance has been conducted during the preceding financial year;
8. information concerning involvement of the registered auditor in continuing education, organised by the Institute of certified public auditors following Art. 22;
9. the total turnover of the registered auditor, divided into fees from provided services related to independent financial audit, tax advisory services and other non-audit services;
10. information concerning the basis for the partners' remuneration regarding the audit firm.
(2) The transparency report shall be signed by the registered auditor or by the manager of the audit firm.
(3) The transparency report shall be published annually by March 31 and shall remain on the web site of the registered auditor for at least five years from the date of its publication.
Art. 40m. (new – SG 67/08) (1) Registered auditors that carry out independent financial audits of public-interest entities shall:
1. confirm annually in writing to the audit committee their independence from the audited public-interest entity;
2. disclose annually to the audit committee any additional services provided to the audited entity, other than the audit itself;
3. discuss with the audit committee the threats to their independence and the safeguards applied to mitigate those threats as documented by the registered auditors in fulfilment of Art. 28, paras 3 and 4.
(2) (amend. – SG 54/10) The key auditor partner, as well as an auditor who works directly by way of individual practice, where carrying out audit of public-interest entity, shall resign if he/she has been performing audit engagements within five consecutive years from the date of appointment in the audit firm. They shall not be allowed to participate in the audit of the same entity before the elapse of two years from the resignation from the engagements to audit.
(3) The key audit partner involved in the audit of public-interest entity shall not be allowed to take up a key management position in the audited entity before a period of at least two years has elapsed since he or she resigned as a statutory auditor or key audit partner from the audit engagement.
Chapter eight.
"C" COOPERATION AND INFORMATION EXCHANGE WITH COMPETENT AUTHORITIES OF OTHER STATES (NEW – SG 67/08)
Art. 40n. (new – SG 67/08) (1) The Commission shall cooperate with the respective competent authorities from other Member States of the European Union with the purpose of exercising their powers in the sphere of public oversight of registered auditors.
(2) The Commission shall be the competent authority for cooperation and receipt and provision of information to the public supervision bodies regarding oversight over auditors and audit firms in the other Member States of the European Union, and in third countries.
(3) In those cases where requests have been submitted by the competent authorities of other Member States of the European Union, the Commission shall immediately undertake the necessary actions in order to collect the required information. The Commission shall be supported by the Institute of certified public accountants in the performing of the said activity. If the Commission is unable to provide the required information, it shall notify immediately the respective competent authority of the other Member States of the European Union, which has submitted the request, of the reasons thereof.
(4) The obligation of professional secrecy as per Art. 35g shall not impede the confidential information exchange between the Commission and the competent authorities of the Member States of the European Union.
(5) The obligation of professional secrecy as per Art. 35g shall be applied as regards to the information received pursuant to the present chapter by a competent authority of a Member State of the European Union, which may also be used by the Commission and its administration only in relation to its powers under this Law.
Art. 40o. (new – SG 67/08) (1) Where the Commission has justified doubts that on the territory of another Member State of the European Union have been carried out activities contrary to the provisions of Directive 2006/43/EC of the European Parliament and of the Council of 17 May 2006 on statutory audits of annual accounts and consolidated accounts, amending Council Directives 78/660/EEC and 83/349/EEC and repealing Council Directive 84/253/EEC, called hereinafter "Directive 2006/43/EC", the Commission shall provide detailed information thereof to the competent authority of the respective Member State of the European Union.
(2) In those cases where the Commission has been notified by the competent authority from a Member State of the European Union of a violation of the requirements of Directive 2006/43/EC on the territory of the Republic of Bulgaria, the Commission shall take the necessary measures and inform the respective competent authority of the Member State of the European Union of the outcome.
Art. 40p. (new – SG 67/08) (1) The Commission shall carry out an investigation upon request by the respective competent authority of another Member State of the European Union.
(2) In the cases referred to in para 1 the Commission may allow representatives of the competent authority of the Member State of the European Union to take part in the investigation as observers, upon their request. In these cases the overall investigation shall be subject to thorough control by the Commission.
(3) The Commission may also request that an investigation be carried out by the competent authority of another Member State of the European Union on the latter's territory, with the participation of its members as observes.
Art. 40q. (new – SG 67/08) (1) The Commission may refuse to act on a request for information under Art. 40n concerning carrying out of investigation, or on a request for participation of observers as per Art. 40p, para 2, where:
1. such an investigation and provision of information might adversely affect the sovereignty, security or public order of the Republic of Bulgaria;
2. judicial proceedings have already been initiated in the Republic of Bulgaria in respect of the same actions and against the same registered auditors, in relation to which cooperation has been requested;
3. final judgment has already been passed in the Republic of Bulgaria in respect of the same actions and the same registered auditors, in relation to which cooperation has been requested.
(2) In the cases referred to in para 1 the Commission shall notify the body which has requested cooperation.
Art. 40r. (new – SG 67/08) (1) In the case of independent financial audit of consolidated financial accounts of a local company, auditor or audit firm carrying out independent financial audit of an affiliate, established in another Member State of the European Union, further requirements in relation to the independent financial audit as regards to registration, quality assurance reviews, auditing standards, professional ethics and independence shall not be required.
(2) In the case of independent financial audit of financial accounts of a company having a registered office in another Member State of the European Union, whose securities are being traded on a Bulgarian regulated market, further requirements in relation to the independent financial audit as regards to registration, quality assurance reviews, auditing standards, professional ethics and independence of the registered auditor who carries out financial audit of consolidated financial accounts of this company, shall not be required.
Art. 40s. (new – SG 67/08) (1) The Commission may allow the transfer to the competent authorities of a third country of audit working papers related to the carrying out of independent financial audit, or other documents held by registered auditors, provided that:
1. those audit working papers or other documents related to independent financial audits of companies which have issued securities in that third country or which form part of a group issuing consolidated financial accounts in that third country;
2. the transfer takes place via the Commission for Public Supervision of Registered Auditors to the competent authorities of that third country and at their request;
3. the competent authorities of the third country concerned meet requirements which have been declared adequate by the European Commission in accordance with the procedure laid down in Art. 48 of Directive 2006/43/EC;
4. there are working arrangements on the basis of reciprocity agreed between Commission for Public Supervision of Registered Auditors and the competent authorities of the third country concerned;
5. the transfer is in accordance with the requirements of Chapter six from the Law for Protection of the Personal Data.
(2) The working arrangements referred to in para 1, item 4 shall ensure that:
1. the transfer of working papers related to independent financial audits, or of other documents held by registered auditors is being carried out on the basis of a justified request by the competent authorities of the third country, also indicating its purpose;
2. the persons employed or formerly employed by the competent authorities of the third country that receive the papers transferred are subject to obligations of confidentiality and professional secrecy;
3. the competent authorities of the third country may use the documents provided only for the exercise of their functions of public oversight, quality assurance and investigations that meet requirements of Articles 29, 30 and 32 of Directive 2006/43/EC;
4. the request from a competent authority of a third country can be refused where:
a) the provision of those documents would adversely affect the sovereignty, security or public order of the Republic of Bulgaria;
b) judicial proceedings have already been initiated before the authorities of the Republic of Bulgaria in respect of the same actions and against the same persons in relation to which the transfer of documents has been requested.
(3) The assessment of adequacy referred to in para 1, item 3 shall be carried out by the European Commission in cooperation with the Commission, which shall take the measures necessary to comply with the European Commission's decision.
(4) In exceptional cases and by way of derogation from para 1, the Commission may allow registered auditors and audit firms approved by them to transfer audit working papers related to independent financial audits and other documents held by them directly to the competent authorities of a third country, provided that:
1. investigations have been initiated by the competent authorities in that third country;
2. the transfer does not conflict with the obligations with which registered auditors are required to comply according to this Law;
3. there are working arrangements with the competent authorities of that third country that allow the Commission reciprocal direct access to working papers related to independent financial audits or other documents of that third-country's registered auditors;
4. the requesting competent authority of the third country informs in advance the Commission of each direct request for information, indicating the reasons therefore;
5. the conditions referred to in para 2 are respected.
(5) (amend. – SG 54/10) Commission shall inform the European Commission of the working arrangements referred to in para 2 and para 4.
Chapter nine.
BREACHES AND PENALTIES
Art. 41. (amend. – SG 67/08) (1) A registered auditor shall be punished with a fine or a propriety sanction from 2 000 to 20 000 levs or with deprivation from right to carry out independent financial audit of financial accounts for a two-year period if during a review or investigation, carried out by members of the Institute of certified public accountants or by members of the Commission it is established that have not been observed the requirements of:
1. the International audit standards;
2. the Code of Ethics of professional accountants;
3. Art. 22, para 2, Art. 27, para 4, Art. 28, Art. 33 and § 1, item 9of the Additional provisions.
(2) In case deprivation from right to carry out independent financial audit of financial accounts for a two-year period has been imposed, the right shall be restored when the said period expires. During the next three consecutive years quality assurance reviews of this auditor’s activity shall be carried out annually. A copy of the report on the review shall obligatory be presented to the Commission for consideration.
(3) In those cases where through the reviews and investigations carried out during the three-year period is established breach under para 1 made by the registered auditor, the latter shall be deprived from right to carry out audit activity by the Commission and he/she shall be deleted by the register of the registered auditors. The persons, who have been deprived of right to carry out audit activity in this manner shall not be entitled to apply for registered auditors again.
(4) If the breaches of para 1 have been committed by a registered auditor who carries out independent financial audit on behalf of specialised audit company, punishment shall be imposed to a registered auditor – natural person and the specialised audit company on behalf of which the audit has been carried out.
(5) Where a registered auditor has been imposed with a fine or a propriety sanction, in case of repeated offence the punishment shall be in double extent.
(6) Records establishing the violations shall be compiled by members of the bodies of the Institute of certified public auditors or by a member of the Commission, provided that the review/investigation has been assigned to them.
(7) Punitive rulings shall be issued by the chairman of the Commission.
(8) The compiling of the acts, the issuing, the appealing and the execution of the punitive rulings shall be implemented according to the Law for the Administrative Offences and Sanctions.
Art. 42. (amend. – SG 67/08) (1) A registered auditor, who refuses to perform review or investigation or does not render assistance in carrying out such, shall be punished with a temporary deprivation of right to carry out independent financial audit of financial accounts for a period of two years. In this case Art. 41, para 2 and 3 shall be applied respectively.
(2) In case of repeated offence under para 1 the registered auditor shall be deprived of the right to carry out audit activity.
(3) Records establishing the violations under para 1 and 2 and punitive rulings shall be issued according to Art. 41, paras 6, 7 and 8.
Art. 43. (new – SG 67/08) (1) The bodies of the Institute of certified public accountants shall carry out investigation of the offences committed by the registered auditors in relation to the audits performed by them.
(2) Investigations under para 1 shall be carried out upon signals and proposals by interested persons received at the Institute of certified public accountants or at the Commission. Investigations shall also be carried out regarding breaches, found during quality assurance reviews of the registered auditors’ activity.
(3) In the cases of Art. 35e, para 2, item 4 the Commission may appoint its members to take part in the investigation in cooperation with the bodies of the Institute of certified public accountants.
(4) The Commission shall carry out independent investigations in case the committed breaches related to the activity of the Institute of certified public accountants, as well as in other cases, whenever it considers appropriate.
(5) Records establishing violations in the cases of paras 2 and 3 shall be compiled by members of the disciplinary council of the Institute of certified public accountants, and the punitive rulings shall be issued by the chairman of the managing board of the Institute.
(6) Records establishing violations in the cases of para 4 shall be compiled by the member of the Commission, to whom has been assigned the investigation. Punitive rulings shall be issued by the chairman of the commission.
(7) Preparation of records, issue, appeals and execution of punitive rulings shall be carried out according to the Law for the Administrative Offences and Sanctions.
Additional provisions
§ 1. In the context of this law:
1. (amend. – SG 67/08) "Registered auditor" is a natural person, who has acquired right to sign audit reports, expressing opinion regarding financial accounts; or his/her firm or specialised auditing company, entered in the register of registered auditors at the Institute of certified public accountants.
2. "Audit profession" is the profession of registered auditors - provision of services related to independent financial audit or which they carry out directly or by specialised auditing companies.
3. "Breach of the independence of the auditor and conflict of interests" shall exist:
a) when the registered auditor has financial interest in the activity of the audited enterprise, expressed in owning of shares, stocks or other securities, issued by the enterprise, and/or participation in its basic activity;
b) when the registered auditor participates in the management of the audited enterprise;
c) when the registered auditor is in marriage relations or in kinship with the management of the audited enterprise in direct line without restriction and in collateral side up to second degree inclusive;
d) when there is court dispute between the registered auditor and the audited enterprise.
4. (amend. - SG 105/06, in force from 01.01.2007) "Connected persons" are the persons in the sense of § 1, item 3 of the Tax-Insurance Procedure Code.
5. "Essentiality" is a threshold of such summary or individual mistake, detraction and/or omission, established in the indices of a financial account, which can influence or change decision of the users of the account.
6. "Reasonable security" is a high degree of security, expressed positively in the audit report as reassurance, that the information, subject of the audit, does not contain essential omissions, errors and defects.
7. "Company" is an enterprise in the sense of the Law for the accounting.
8. "Second" is the breach, made within one year term after the issuing of the punitive decision, with which to the violator has been imposed the same in kind violation.
9. (amend. - SG 105/06, in force from 01.01.2007; amend. – SG 67/08) "Specialised auditing company" is a company, registered under Art. 64, para 1, items 1, 2 or 3 of the Commercial law or under the legislation of another State - party of the European Economic Area Agreement with basic subject of activity independent financial audit of financial accounts of companies, three quarters of its managing body being registered auditors, auditors, auditors and/or auditing companies from other Members of the European Union, which has good reputation and is:
a) general partnership, where more than half of the partners are registered auditors, auditors and/or audit companies from other Member State of the European Union;
b) limited partnership, where more than half of the unlimited liable partners registered auditors, auditors and/or audit companies from other Member State of the European Union;
c) limited liable company, where more than half of the votes in the general meeting of the partners and the capital belong to registered auditors, auditors and/or audit companies from other Member States.
10. (new – SG 67/08) "Independent financial audit" means an audit of annual financial accounts or consolidated financial accounts insofar as required by the legislation in force except the audit of financial accounts carried out by the Bulgarian National Audit Office.
11. (new – SG 67/08) "Public-interest entities" shall be:
a) public entities and issuers of securities in the state, as well as in another Member State of the European Union and in the European economic Area;
b) credit institutions;
c) insurers, re-insurers, health insurance and pension insurance undertakings
d) trade companies that produce, transfer and sell electric power;
e) trade companies that import, transfer, distribute and transit natural gas;
f) trade companies that provide water-supply, sewage and telecommunication services;
g) Bulgarian State Railways Ltd and it affiliates;
h) (revoked – SG 54/10)
12. (new – SG 67/08) "Key audit partner" means:
a) auditors designated by a specialised audit company for a particular audit engagement as being primarily responsible for carrying out the independent financial audit on behalf of the audit firm; or
b) in the case of a group audit, auditors designated by specialised audit company as being primarily responsible for carrying out the independent financial audit at the level of the group and auditors designated as being primarily responsible at the level of material subsidiaries; or
c) auditors who sign the audit report.
13. (new – SG 67/08) "group auditor" means auditor or specialised audit company carrying out the independent financial audit of annual consolidated accounts;
14. (new – SG 67/08) "audit network" means association of registered auditors which is aimed at cooperation and which is clearly aimed at profit- or cost-sharing or shares common ownership, control or management, common quality-control policies and procedures, a common business strategy, the use of a common brand-name or a significant part of professional resources.
15. (new – SG 67/08) "Third-country auditor" means a natural person who carries out independent financial audits of the annual or consolidated accounts of a company incorporated in a third country.
16. (new – SG 67/08) "Third-country audit entity" means an entity, regardless of its legal form, which carries out independent financial audits of the annual or consolidated accounts of a company incorporated in a third country.
17. (new – SG 67/08) "Affiliate of an audit firm" means any undertaking, regardless of its legal form, which is connected to an audit firm by means of common ownership, control or management.
18. (new - SG 67/08) "A person carrying out activity related to independent financial audits" is any natural person who has not carried out independent financial audit within the meaning of this Law, has not possessed shares, stocks or other securities, issued by the audit company, has not been a member of a managing or control body of an audit company and has not been employed by such firm or related in another manner with audit company during at least three years prior to involvement in the public oversight system.
19 (new - SG 67/08) "Spheres related to independent financial audits" are the ones pointed out in Art. 17.
20. (new - SG 67/08) "International auditing standards" means International Standards on Auditing (ISA) and related Statements and Standards and ethics, insofar as relevant to the independent financial audit.
21. (new - SG 67/08) "Competent authorities of a third country" are the bodies liable for public oversight or for approval and registration of persons, carrying out audit of annual accounting statements and consolidates accounting statements in non-member states of the European Union.
22. (new – SG 54/10) “Inspector” is a person, who does not exercise any activity related to the independent financial audit, and is in labor or non-labour legal relationships with the Commission, and meets the established by this Law requirements for obtained qualification and experience and has undergone training on quality assurance.
23. (new – SG 54/10) “Expert” is a natural person who has specific knowledge of the financial markets, financial accounting, audit or of other fields, related to the inspections of the practice of the auditing carried out under this Law.
24. (new – SG 54/10) “Controller” is a person, who is a member of the Institute of the Certified Accountants, and who has undergone training on quality assurance and is approved as a controller.
25. (new – SG 54/10) “Experience in the field of the independent financial audit” is the experience in the field of the accounting, financial accounting and of the auditing.
26. (new – SG 54/10)”Inspection” is a set of systematic planned procedures for reviewing the quality of the activity of the registered auditors and specialized audit firms and includes assessment of observance of the applicable standards of audit and of the requirements for independence, of the quantity and quality of the expended recourses, of the received audit remuneration and of the system of internal quality assurance.
27. (new – SG 54/10) “Investigation” is the carrying out of set of procedures for finding, correction and prevention of wrong performance of the independent financial audit, as well as of violations of the applicable international standards and legislative provisions by the registered auditors and by the specialized audit firms.
§ 1a. (new - SG 67/08) This law introduces the requirements of Directive 2006/43/EC of the European Parliament and of the Council on statutory audits of annual accounts and consolidated accounts, amending Council Directives 78/660/EEC and 83/349/EEC and repealing Council Directive 84/253/EEC.
§ 1b. (new – SG 54/10) Commission of Public Oversight of the Statutory Auditors shall be the competent body, which the supervision over the registered auditors and the specialized audit firms; as well as the effective co-operation on the Community level, with regard to the oversight actions of the Member States of the European Union are assigned to.
Transitional and concluding provisions
§ 2. The requirements:
1. for practical audit practice by the order of art. 18, para 2 shall be applied from January 1, 2003;
2. of art. 20 shall be applied from January 1, 2003;
3. for participation of the certified public accountant only in one specialised auditing company shall be applied for audit and certification of annual financial accounts for 2002 and the following years.
§ 3. (1) The Institute of certified public accountants, established with art. 53 of the revoked Law for the accounting (prom. SG 4/91; amend. and suppl. SG 26/92, SG 55/93, SG 21, 33, 59/96, SG 52/97, SG 21/98, SG 57,81, 83, 113/99, SG 1, 99/00; revoked SG 98/01) shall continue its activity by the order of chapter eight of this law.
(2) The Institute of certified public accountants shall elect the newly created bodies under art. 39, para 1, items 4, 5 and 6 of this law till September 30, 2002.
§ 4. The persons, acquired competence of certified public accountants under the revoked Law for the accounting, shall acquire rights of registered qualified expert – accountants under this law, taking oath and signing an oath declaration.
§ 5. The qualified expert – accountants, acquired competence till December 31, 2001, can implement independent financial audit from January 1, 2003 after receiving a certificate from the Institute of certified public accountants for participation in courses for increase of their professional qualification in the International audit and the International accounting standards.
§ 6. The persons, who have successfully passed exams by the order of the revoked Law for the accounting, but have not acquired competence by the date this law enters into force, shall acquire competence according to the previous order.
§ 7. (Amend,. SG 91/02) The International audit standards, approved by the Institute of certified public accountants, shall enter into force on July 1, 2003. Till this date shall be applied the National audit standards.
§ 8. The seals of the qualified expert – accountants, acquired competence by the order of the revoked Law for the accounting, shall be valid till July 1, 2002. The registered qualified expert – accountants of § 4 shall substitute the old seals by the order of this law till July 1, 2002.
§ 9. Till the signing of agreements for mutual recognising of the diplomas with similar professional organisations from abroad the recognising of the competence of the persons of art. 21 shall be implemented by the order of art. 16 – 18 of this law.
§ 10. The law shall enter into force on January, 2002.
The law was passed by the 38th National Assembly on November 9, 2001 and was affixed with the official seal of the National Assembly.
Transitional and concluding provisions
TO THE TAX-INSURANCE PROCEDURE CODE
(PROM. – SG 105/05, IN FORCE FROM 01.01.2006)
§ 88. The code shall enter in force from the 1st of January 2006, except Art. 179, Para 3, Art. 183, Para 9, § 10, item 1, letter "e" and item 4, letter "c", § 11, item 1, letter "b" and § 14, item 12 of the transitional and concluding provisions which shall enter in force from the day of promulgation of the code in the State Gazette.
Transitional and concluding provisions
TO THE ADMINISTRATIVE PROCEDURE CODE
(PROM. – SG 30/06, IN FORCE FROM 12.07.2006)
§ 142. The code shall enter into force three months after its promulgation in State Gazette, with the exception of:
1. division three, § 2, item 1 and § 2, item 2 – with regards to the repeal of chapter third, section II "Appeal by court order", § 9, item 1 and 2, § 15 and § 44, item 1 and 2, § 51, item 1, § 53, item 1, § 61, item 1, § 66, item 3, § 76, items 1 – 3, § 78, § 79, § 83, item 1, § 84, item 1 and 2, § 89, items 1 - 4§ 101, item 1, § 102, item 1, § 107, § 117, items 1 and 2, § 125, § 128, items 1 and 2, § 132, item 2 and § 136, item 1, as well as § 34, § 35, item 2, § 43, item 2, § 62, item 1, § 66, items 2 and 4, § 97, item 2 and § 125, item 1 – with regard to the replacement of the word "the regional" with the "administrative" and the replacement of the word "the Sofia City Court" with "the Administrative court - Sofia", which shall enter into force from the 1st of May 2007;
2. paragraph 120, which shall enter into force from the 1st of January 2007;
3. paragraph 3, which shall enter into force from the day of the promulgation of the code in State Gazette.
Transitional and concluding provisions
TO THE LAW OF AMENDMENT AND SUPPLEMENT OF THE LAW FOR THE VOCATIONAL EDUCATION AND TRAINING
(PROM. – SG 62/06)
§ 20. This law shall enter into force from the date of entry into effect of the Treaty concerning the Accession of the Republic of Bulgaria to the European Union.
Transitional and concluding provisions
TO THE LAW ON AMENDMENT AND SUPPLEMENTATION OF THE ACCOUNTANCY LAW
(PROM. – SG 105/06, IN FORCE FROM 01.01.2007)
§ 61. This Law shall enter into force from 1 January 2007, except § 48, which enters into force from 1 July 2007.
Transitional and concluding provisions
TO THE LAW ON AMENDMENT AND SUPPLEMENTATION OF THE LAW FOR THE INDEPENDENT FINANCIAL AUDIT
(PROM. – SG 67/08)
§ 44. Within one month from entry into force of this law the National Assembly shall elect a chairman of the Commission for Public Supervision of Registered Auditors and its members.
§ 45. Within one month from its election, the Commission for Public Supervision of Registered Auditors shall adopt regulations for its activity.
§ 46. (1) Certified public auditors and specialised audit companies – members of the Institute of certified public auditors and entered in the register of the institute prior to the entry into force of this law, shall be considered registered auditors, who have acquired competence and entered in the register of registered auditors according to the requirements of the law.
(2) Within two months from entry into force of this law the Institute of certified public auditors shall bring the register of registered auditors and the seals of the registered auditors being issued pursuant to Art. 14 in compliance with the requirements of this law.
§ 47. By June 31 2010 the Commission for Public Supervision of Registered Auditors shall review Chapter eight "A" quality control system for the activity of registered auditors (new – SG 67/08), taking into consideration the results from the functioning of the quality control system and the good European practices and, where necessary, shall make well-grounded proposals for amendments.
Transitional and concluding provisions
TO THE LAW ON AMENDMENT AND SUPPLEMENTATION OF THE LAW ON THE CORPORATE INCOME TAXATION
(PROM. – SG 95/09, IN FORCE FROM 01.01.2010)
§ 51. This Law shall enter into force from 1 January 2010 except § 10, 11 and 14, which shall enter into force from 1 January 2009.
Transitional provisions
TO THE LAW ON AMENDMENT AND SUPPLEMENTATION OF THE LAW ON THE INDEPENDENT FINANCIAL AUDIT
(PROM. – SG 54/10)
§ 26. At the moment when this Law enters in force, the mandate of the member of the Commission – representative of the Ministry of Economy, Energy and Tourism, as well as the mandates of the members-representatives of the Institute of the Certified Accountants shall be terminated.
(2) The Chairperson of the Commission, within 14-days term from the entering into force of this Law, shall propose to the National assembly to elect a member of the Commission – representative of the Institute of the Certified Accountants.
§ 27. Provision of Art. 40m. Para 2 shall be applied to audit engagements for annual financial accounts, compiled after 31 December 2008.
RELEVANT EUROPEN LEGISLATION
COUNCIL DIRECTIVE 89/48/EEC of 21 December 1988 on a general system for the recognition of higher-education diplomas awarded on completion of professional education and training of at least three years` duration
COUNCIL DIRECTIVE 84/253/EEC of 10 April 1984 on the approval of persons responsible for carrying out the statutory audits of accounting documents
COUNCIL DIRECTIVE 83/349/EEC of 13 June 1983 based on Article 54(3)(g) of the Treaty on consolidated accounts
COUNCIL DIRECTIVE 78/660/EEC of 25 July 1978 based on Article 54(3)(g) of the Treaty on the annual accounts of certain types of companies
REGULATION (EC) 438/2001 of 2 March 2001 laying down detailed rules for the implementation of Council Regulation (EC) No. 1260/1999 as regards the management and control systems for assistance granted under Structural Funds