1. Marjan Odar, Slovenian Institute of Auditors 1 Slovenian Institute of Auditors Marjan Odar, Ph.D. Director General Marjan Odar, Ph.D. Director General

2. Marjan Odar, Slovenian Institute of Auditors 2 Slovenian Institute of Auditors §Address: Dunajska cesta 106, 1000 Ljubljana Slovenia §Telephone number: + 386 1 568 55 54 §Fax number: + 386 1 568 63 32 §e-mail: info@si-revizija.si §web site: www.si-revizija.si

3. Marjan Odar, Slovenian Institute of Auditors 3 Legal environment §Establishment of the Institute: 9 September, 1993 §Legal form: Institute, governed by the provisions of the Institute’s By- laws (Official Gazette of the R of Slovenia No. 70/01) §Slovenian Audit Act §(Official Gazette of the RS No. 11/01) -harmonised with the EU legislation - http://www.si- revizija.si/o_siru/dokumenti/zakon_o_revidiranju-an.doc

4. Marjan Odar, Slovenian Institute of Auditors 4 Tasks and powers §The Institute carries out tasks and implements powers in the domain of l auditing and l other professional domains related to auditing §Professional domains related to auditing: l accounting l business finance l internal audit l information systems audit l tax analysis and consulting l valuation of business, real estate, machines and equipment

5. Marjan Odar, Slovenian Institute of Auditors 5 Audit services may be provided by §a company with a registered office in the Republic of Slovenia which has obtained the licence of the Institute for the provision of such services - audit company §a certified auditor providing audit services on an individual basis as occupation who has obtained the licence of the Institute for the provision of such services - solo-practitioner §the professional title is protected by law as long as it ensures adequate quality

6. Marjan Odar, Slovenian Institute of Auditors 6 BOARD STRUCTURE OF THE ORGANISATION Senior Advisers (3)Legal Adviser Administrators (2) Director AUDIT COUNCIL AUDIT SECTION COUNCIL OF EXPERTS TAX ADVISORY SECTION BUSINESSFINANCESECTION ACCOUNTINGSECTION SECTION FOR VALUATION INFORMATION SYSTEMS AUDIT SECTION FOR INTERNAL AUDIT

7. Marjan Odar, Slovenian Institute of Auditors 7 The main governing bodies §BoardBoard §DirectorDirector §Audit CouncilAudit Council §Council of ExpertsCouncil of Experts

8. Marjan Odar, Slovenian Institute of Auditors 8 Board of the Institute – the main tasks §adopts articles of association and other general acts §adopts working and development programs of the Institute and monitors their implementation §determins business plans and approves annual reports of the Institute §determines policies for price formation of audit services; §determines rates and prices for the services performed by the Institute

9. Marjan Odar, Slovenian Institute of Auditors 9 13 members of the Board are appointed (for a 4-year term): §4 by the founder (Association of the Accountants, Treasurers and Auditors of Slovenia) §6 by registered members of the Institute §2 by the minister of finance §1 by the employees of the Institute

10. Marjan Odar, Slovenian Institute of Auditors 10 Director of the Institute (appointed for a 4-year term by the Board of the Institute) should §hold the professional title of a certified auditor §have the qualities and experience required for the management of the Institute §be a national of the Republic of Slovenia §have a certificate of no previous convictions

11. Marjan Odar, Slovenian Institute of Auditors 11 9 members of the Audit Council are appointed (for a 4- year term) §5 of them, who should hold the licence of a certified auditor, are appointed by certified auditors §3 representatives of the interested public, who should have appropriate professional knowledge and experience in the field of accountancy and finance, are appointed by the minister of finance (two of them on proposal of the Chamber of Commerce and Industry of Slovenia) §director of the Institute is a member in his capacity

12. Marjan Odar, Slovenian Institute of Auditors 12 11 members of the Council of Experts are appointed (for a 4-year term 11 members of the Council of Experts are appointed (for a 4-year term) §9 by the registered members of the Institute l certified auditors, auditors, certified valuators, internal auditors, management accountants, business finance experts, information systems auditors, tax consultants §2 by university institutions from among the university professors

13. Marjan Odar, Slovenian Institute of Auditors 13 Professional work of the Institute §organised in sections /committees/ l audit section (covered by the Audit Council) l other sections (covered by the Council of Experts) accounting section business finance section tax advisory section section for valuation (real estate, plant and machinery, business) section for information systems auditing internal audit section

14. Marjan Odar, Slovenian Institute of Auditors 14 The sections are §represented by the registered members of the Institute §managed by the committees of 5 members (elected by registered members of each section) The Institute receives no external subsidies l its main source of income is fees for audit companies, various ordinary training programs, conferences, seminars l budget - apox. 1. Mio. €

15. Marjan Odar, Slovenian Institute of Auditors 15 Powers of supervision - Quality Assurance §supervision of audit companies l with the purpose to establish whether an audit company observes audit rules in the course of auditing l audit rules: ISAs, Code of Professional Ethics of External Auditors, Basic Audit Principles, Guidelines for Audit Companies, audit practice statements and recommendations of the Audit Council §supervision of certified auditors §supervision of certified valuators

16. Marjan Odar, Slovenian Institute of Auditors 16 Professional Standards §According to the Audit Act the Institute is authorised to adopt and publish the following professional standards: l accounting standards l auditing standards l business and finance standards l internal audit standards l information systems audit standards l standards in the field of business, real estate, machine and equipment valuation

17. Marjan Odar, Slovenian Institute of Auditors 17 Already adopted and published §accounting standards §internal audit standards §business-finance standards §audit rules §business-finance principles

18. Marjan Odar, Slovenian Institute of Auditors 18 Important responsibility in the accounting field §According to the Companies’ Act the Institute is authorised to set and prepare Slovenian Accounting Standards, which are to be approved by the Ministry of Finance and §Ministry of Economy §New SAS were put into force on 1 January, 2006

19. Marjan Odar, Slovenian Institute of Auditors 19 Enforcement of professional standards §accounting standards l enforced by the Companies’ Act and other special acts (referring to banks, insurance companies, mutual funds, etc.) §auditing standards l ISAs and other audit rules are enforced by the Audit Act §other standards l enforced by professional rules

20. Marjan Odar, Slovenian Institute of Auditors 20 Training programs §Language: Slovene §Minimum formal education requirement: B. Sc. §Certification requirements and training programs are offered by the Institute §BASIC TRAINING for all training programs (except for certified real estate valuator and certified machine and equipment valuator): 76 hours accounting18 hoursaccounting18 hours auditing 8 hoursauditing 8 hours business finance15 hoursbusiness finance15 hours corporate and tax law20 hourscorporate and tax law20 hours mathematical and statistical methods10 hoursmathematical and statistical methods10 hours business communication 5 hoursbusiness communication 5 hours

21. Marjan Odar, Slovenian Institute of Auditors 21 Additional - Special training programs §AUDITOR l basic training76 hours l special subjects auditing37 hoursauditing37 hours accounting and taxation25 hoursaccounting and taxation25 hours business finance15 hoursbusiness finance15 hours §CERTIFIED AUDITOR l basic trainingauditor l special subjects auditing28 hoursauditing28 hours accounting30 hoursaccounting30 hours taxation16 hourstaxation16 hours business finance26 hoursbusiness finance26 hours organisation of auditing procedures14 hoursorganisation of auditing procedures14 hours

22. Marjan Odar, Slovenian Institute of Auditors 22 §VERIFIED INTERNAL AUDITOR l basic training76 hours l special subjects auditing41 hoursauditing41 hours accounting and taxation21 hoursaccounting and taxation21 hours business finance15 hoursbusiness finance15 hours §VERIFIED MANAGEMENT ACCOUNTANT l basic training76 hours l special subjects accounting and taxation62 hoursaccounting and taxation62 hours business finance15 hoursbusiness finance15 hours §VERIFIED BUSINESS FINANCE EXPERT l basic training76 hours l special subjects business finance52 hoursbusiness finance52 hours accounting and taxation25 hoursaccounting and taxation25 hours

23. Marjan Odar, Slovenian Institute of Auditors 23 §VERIFIED TAX CONSULTANT l basic training76 hours l special subjects tax procedures and tax audit47 hourstax procedures and tax audit47 hours accounting and taxation25 hoursaccounting and taxation25 hours business finance15 hoursbusiness finance15 hours §VERIFIED INFORMATION SYSTEMS AUDITOR l basic training76 hours l special subjects information systems auditing40 hoursinformation systems auditing40 hours information science37 hoursinformation science37 hours

24. Marjan Odar, Slovenian Institute of Auditors 24 §CERTIFIED BUSINESS VALUATOR l basic training76 hours l special subjects business valuation52 hoursbusiness valuation52 hours accounting and taxation26 hoursaccounting and taxation26 hours business finance15 hoursbusiness finance15 hours §CERTIFIED REAL ESTATE VALUATOR l subjects real estate valuation 132 hoursreal estate valuation 132 hours accounting and taxation15 hoursaccounting and taxation15 hours business finance15 hoursbusiness finance15 hours §CERTIFIED MACHINE AND EQUIPMENT VALUATOR l subjects valuation of machines and equipment 132 hoursvaluation of machines and equipment 132 hours accounting and taxation20 hoursaccounting and taxation20 hours business finance15 hoursbusiness finance15 hours

25. Marjan Odar, Slovenian Institute of Auditors 25 Conditions of admission (prescribed by the Audit Act the Audit Act) §certified auditor l university degree l five years’ working experience of which minimum three years in auditing after the date of obtaining the licence to carry out the tasks of an auditor l examination of professional competence to carry out tasks of a certified auditor l certificate of no previsous convictions l command of the Slovene language

26. Marjan Odar, Slovenian Institute of Auditors 26 §auditor university degree two years’ working experience –in the field of auditing or internal audit examination of professional competence to carry out tasks of an auditor certificate of no previsous convictions command of the Slovene language §certified valuator university degree five years’ working experience in the field requiring knowledge necessary for carrying out tasks of a valuator examination of professional competence to carry out tasks of a certified valuator certificate of no previsous convictions command of the Slovene language

27. Marjan Odar, Slovenian Institute of Auditors 27 Conditions of admission (for other titles, not prescribed by the Audit Act Conditions of admission (for other titles, not prescribed by the Audit Act) §internal auditor, management accountant, business finance expert, information systems auditor, tax consultant professional qualifications obtained in graduate school appropriate working experience examination of professional competence to carry out tasksof a certain profession certificate of no previsous convictions command of the Slovene language fulfilment of requirements set by the code of ethics for the profession in question

28. Marjan Odar, Slovenian Institute of Auditors 28 Continuing training requirements §30 hours of training per year (for all titles)

29. Marjan Odar, Slovenian Institute of Auditors 29 Audit profession - Legal Basis §Auditing Act §International Standards on Auditing §Basic Auditing Principles §Other auditing rules, adopted by the Slovenian Institute of Auditors

30. Marjan Odar, Slovenian Institute of Auditors 30

31. Marjan Odar, Slovenian Institute of Auditors 31 Auditing Council §decides about the issue and withdrawal of licences for auditing firms and certified auditors (auditors); §supervises the auditing; §adopts the auditing rules; §lays down the criteria for obtaining the certificate of a certified auditor and auditor; §performs other professional tasks related to the development of the auditing profession.

32. Marjan Odar, Slovenian Institute of Auditors 32 Quality control §Auditing firms §Certified auditors §Auditors §The quality control is performed: l by monitoring, collecting and verifying the reports, l by reviewing the operations of the entities under control.

33. Marjan Odar, Slovenian Institute of Auditors 33 Monitoring §Carried out by experts: l authorised by the Director of the Institute; l employed at the Institute. §4 certified auditors and 1 lawyer §42 auditing firms §app. 150 active certified auditors (out of 189)

34. Marjan Odar, Slovenian Institute of Auditors 34 Quality control §auditing firm; §within the auditing firm: l each certified auditor (statutory auditor) - directly; l auditors - indirectly (through the review of the files); §minimum three years’ cycle for auditing firms with listed companies; §minimum five years’ cycle for other auditing firms; §all the documents of the firm must be available.

35. Marjan Odar, Slovenian Institute of Auditors 35 Disciplinary sanctions for certified auditors and auditors §withdrawal of the licence; §public warning.

36. Marjan Odar, Slovenian Institute of Auditors 36 Withdrawal of the licence the licence was obtained by stating false data; the person has been convicted of a commercial or property crime; he/she holds investments in the client; he/she is connected with the client in another manner that could give rise to a doubt as to the independence and objectivity of auditing; he/she violates the auditing rules, which results in a deficient and misleading audit report; he/she violates the duty to preserve the secrecy of confidential data; he/she repeatedly violates other provisions of auditing rules.

37. Marjan Odar, Slovenian Institute of Auditors 37 Conditional withdrawal of the licence  The Institute may provide that the withdrawal will not be implemented if within the time limit set by the Institute of no less that six months and not exceeding two years, the certified auditor or the auditor refrains from committing another violation giving rise to the withdrawal of the licence or a public warning.

38. Marjan Odar, Slovenian Institute of Auditors 38 Public warning §violation of the auditing rules; §no grounds for withdrawal or conditional withdrawal of the licence.

39. Marjan Odar, Slovenian Institute of Auditors 39 Disciplinary sanctions for auditing firms §order for elimination of violation; §imposition of additional measures; §withdrawal of the licence.

40. Marjan Odar, Slovenian Institute of Auditors 40 Order for elimination of violation §The auditing firm l violates the prohibition connected with the investments; l carries out the activities prohibited under the Auditing Act; l is organised as a joint-stock company but it has not issued registered shares; l violates the duty of reporting and notification; l violates other auditing rules.

41. Marjan Odar, Slovenian Institute of Auditors 41 Imposition of additional measures §Seriously violation of auditing rules. §Measures: the improvement of procedures of internal supervision of auditing; the improvement of procedures of internal supervision concerning the flow of confidential data; the change of internal structure of the auditing firm; other measures required for implementation of the auditing rules.

42. Marjan Odar, Slovenian Institute of Auditors 42 Withdrawal of the licence §the licence was obtained by stating false data;  additional measure was imposed on the auditing firm, and the competent body (old or newly appointed) failed to eliminate the violations and/or to take additional measures.

43. Marjan Odar, Slovenian Institute of Auditors 43 Publishing of the final sanctions  The summarised decision is to be published in the professional journal of the Institute (Revizor - The Auditor).

44. Marjan Odar, Slovenian Institute of Auditors 44 Disciplinary sanctions in the years 2003 - 2005 §Certified auditors: l 19 public warnings: 12 final, 7 not final (4 cases at the court); l 1 withdrawal (final). §Auditing firms: l 7 orders for elimination of the violation.

45. Marjan Odar, Slovenian Institute of Auditors 45 The Auditing Profession - history §The period 1996 - 2001 l the first Slovenian Auditing Act the Institute is responsible for the monitoring of statutory audits l special rules accepted by the Council of Experts peer review system l 43 auditing firms l 100 statutory auditors - practitioners

46. Marjan Odar, Slovenian Institute of Auditors 46 §The period 2002 - 2004 l the second Slovenian Auditing Act the quality control procedure is prescribed in details by the act l monitoring system the experts of the Institute –one lawyer –four certified auditors l 42 auditing firms l 130 statutory auditors - practitioners

47. Marjan Odar, Slovenian Institute of Auditors 47 Quality assurance 8.th Directive §independent from the review persons §subject to the public oversight l governed by knowledgeable non-practitioners l independent and transparent nomination procedure l ultimate responsibility for the approval and registration the adoption of auditing rules continuous education, quality assurance and investigative and disciplinary systems Auditing Act §monitoring system, carried out by the Institute’s experts §Auditing Council l governed by knowledgeable non-practitioners by coincidence l the election (5) and the appointment (3) l ultimate responsibility for the issue and withdrawal of licences the adoption of auditing rules the external quality control the establishment of the educational criteria

48. Marjan Odar, Slovenian Institute of Auditors 48 8.th Directive §funding must be secured and free from the influence by statutory auditors and auditing firms Institute’s rates §the quality control (monitoring system and Auditing Council) is funded by the supervision fee defined in the Institute’s rates; the sum of the fees to be paid for an individual year should not exceed the actual costs of supervision for that year

49. Marjan Odar, Slovenian Institute of Auditors 49 8.th Directive adequate resources Actual situation §According to the present activity of the Institute’s monitoring system and of the Auditing Council the resources (human resources and funding) are adequate.

50. Marjan Odar, Slovenian Institute of Auditors 50 8.th Directive §Persons who carry out quality assurance l appropriate professional education l relevant experience in statutory audit and financial reporting l specific training on quality assurance reviews Actual situation §The experts of the Institute l one lawyer and four certified auditors with the licence l specific training on quality assurance review l the lawyer and one certified auditor - a certificate to conduct the procedures based on the General Administrative Procedure Act

51. Marjan Odar, Slovenian Institute of Auditors 51 8.th Directive §The selection of the reviewers l under an objective procedure designed to ensure that there are no conflicts of interest between the reviewers and the reviewed person Actual situation §The whole monitoring team is working at the Institute l no inherent conflicts of interest

52. Marjan Odar, Slovenian Institute of Auditors 52 8.th Directive §The scope of the quality assurance review must include an assessment of l the compliance with auditing rules l the quantity and quality of resources spent l the audit fees charged l the internal control system of the auditing firm Actual situation §The quality assurance review of the auditing firm includes an assessment of l the documentation and report of at least one client of each engagement partner in the auditing firm l the quantity and quality of resources spent l the audit fees charged l the internal quality control system of the auditing firm

53. Marjan Odar, Slovenian Institute of Auditors 53 8.th Directive §Report l the main conclusions of the quality assurance review Actual situation §Report l in accordance with the General Administrative Procedure Act l must contain a detailed description of the auditing rules’ violations

54. Marjan Odar, Slovenian Institute of Auditors 54 8.th Directive §The frequency of the quality control l every six years l every three years for statutory auditors or auditing firms that carry out statutory audits of public interest entities Actual situation §The frequency of the quality control l every five years l every three years for auditing firms and statutory auditors with listed clients

55. Marjan Odar, Slovenian Institute of Auditors 55 8.th Directive §The overall results of the quality assurance system l published annually Actual situation §The overall results of the quality assurance system l published in the annual report of the Institute

56. Marjan Odar, Slovenian Institute of Auditors 56 8.th Directive §Recommendations of quality reviews l shall be followed up by the statutory auditor or auditing firm l otherwise disciplinary actions or sanctions §Disclosure to the public Actual situation §Recommendations l in the case of smaller violations of the auditing rules §Disciplinary sanction l in the case of serious violations §Disciplinary sanction (withdrawal of the licence or public warning) is published in ‘Revizor’.

57. Marjan Odar, Slovenian Institute of Auditors 57 Conclusions §The Slovenian auditing profession meets almost all requirements of the proposed Directive. §There are no obstacles for mutual recognition of regulatory arrangements between Member States in the field of public oversight if they are conceived on the principles of the proposed Directive.