Report on the Observance of Standards and Codes (ROSC), Albania. Accounting and Auditing
June 16, 2006

During the transition to a market economy, Albania successfully put in place several important elements of the institutional and statutory framework on financial reporting. However, this assessment demonstrates that Albania needs to take further steps in order to achieve its goal of a sound financial reporting framework tailored to the needs of the Albanian economy and aligned with the EU acquis communautaire and international standards and practices. The existing framework is not always consistent and complete and limited technical and financial resources contribute to institutional weaknesses in several areas. International financial reporting and auditing have recently become more complex and rigorous. The EU body of law (acquis communautaire) on financial reporting and auditing has evolved significantly over the last years. In such a dynamic international regulatory environment, national financial reporting requirements can easily become out of line. The introduction of a new accounting law in 2004 with the objective of improving the quality of financial reporting in Albania also lays the foundation for improved alignment with the acquis communautaire and international standards and practices. The Albanian government is fully determined to undertake the necessary further steps and to give proper support to improve the financial reporting framework in Albania.
The introduction of a new accounting law is indicative of the current desire for change but more needs to be done to address existing shortcomings. Over the years, various stakeholders have done substantial work on an ad hoc basis to enhance the financial reporting and auditing environment. However, this needs to be accompanied by clear leadership from the government to set the tone for reform and coordinate the process. Otherwise, it will continue to proceed in an ad hoc manner with little gain. Due to recent reorganizations within the Ministry of Finance there is no longer a department responsible for private sector accounting and auditing activities. This should be addressed as some initiating and guiding capacities are necessary. In addition, building appropriate institutional capacity and further enhancements to the statutory framework governing financial reporting will be essential. The linkages to private and financial sector development and the Government’s commitment to the recently concluded Stabilization and Association Agreement (SAA) with the European Union (EU), as a first step toward European integration, could serve as drivers for change.