1 Table of Contents I Best Practice.......................................................................................................................................... 5 1.1. ACCA.............................................................................................................................................. 5 1.2. International Education Standards ............................................................................................... 5 II As–Is Analysis of A&A Market in Serbia ................................................................................................ 6 2.1. State universities in Serbia with faculties of economics ............................................................... 6 2.2. Professional education bodies and organizations ........................................................................ 9 2.2.1. Members of professional education bodies and organizations.......................................... 10 2.2.2. Licensing and conditions of obtaining license .................................................................... 11 2.2.3. Education standards and exams ......................................................................................... 12 III Primary Research ................................................................................................................................ 14 3.1. Key Stakeholders ......................................................................................................................... 15 3.2. Stakeholder Research Findings ................................................................................................... 15 IV Gap Analysis ........................................................................................................................................ 19 4.1. Comparison between faculties and benchmark ......................................................................... 19 4.2. Gap Map...................................................................................................................................... 27 4.3. Discussion.................................................................................................................................... 41 4.4. Bridging the Gap – A New Competency Framework .................................................................. 43 V Closing Remarks ....................................................................................................................................... 52 5.1. Key gaps & issues ............................................................................................................................. 52 5.1.1. Policy recommendations..................................................................................................... 53 Appendix ..................................................................................................................................................... 54 Belgrade, 2017 2 List of acronyms A&A Accounting and Audit ACCA the Association of Chartered Certified Accountants SAAA Serbian Association of Accountants and Auditors CAA Chamber of Authorised Auditors ERP Enterprise Resource Planning IAS International Accounting Standards IES International Education Standards IFAC International Federation of Accountants IFRS International Financial Reporting Standards ISA International Standards on Auditing MoE Ministry of Education MoF Ministry of Finance NES National Employment Service SOE State – Owned Enterprise 3 Executive Summary Improving Accounting and Audit Curricula for University and Professional Education Programs is a research project conducted under supervision of World Bank. Its objectives are to: 1. Identify the best practice in global accounting and audit education; 2. Understand the existing A&A skills (quality and quantity) in Serbia – through an As–Is analysis; 3. Identify gaps between global best practice solutions and the current state of A&A education at universities and professional education bodies in Serbia; 4. Formulate a modified curriculum in order to bridge the identified gaps. This paper consists of four sections that merge into gap maps and recommendations: Section 1 – Best Practice considers appropriate European and global benchmarks to be used for the analysis. ACCA education standards are selected as the best practice for A&A professional education and IES as the best standard in education of professional accountants. Section 2 – As – IS Analysis of A&A market in Serbia assesses the skills of graduates and professional accountants and auditors in Serbia. Professional accountants and auditors are divided into groups with and without certificate or license. The report analyses Serbian state universities and professional education bodies and organizations, with focus on the number of students/members and the applied standards in education and ethical standards in use. Section 3 – Primary Research is conducted through interviews with representative stakeholders of the A&A profession. 1 The interviews are used to gain information regarding A&A labour market dynamics and to assess the A&A market from multiple perspectives. Section 4 – Gap Analysis identifies gaps in education at universities and professional education bodies in comparison with best practices (presented in first section) and with gaps in the A&A labour market. In this section we offer recommendations for improvement of accounting and education at universities and in professional education programs. Closing remarks cover general issues identified during the course of the program and possible solutions. 1 List of interviewees is presented in Appendix 4 I Best Practice The British Association of Chartered Certified Accountants (ACCA) is the leading global body of professional accountancy and audit. The ACCA qualification is recognized in many countries and treated as equivalent to their local qualification. ACCA has more than 188,000 members and more than 480,000 students in 178 countries. To promote the development of competent professional accountants worldwide, the International Federation of Accountants (IFAC) established the International Accounting Education Standards Board (IAESB), an independent body that develops professional accounting education standards. These International Education Standards (IESs) prescribe technical competence and professional skills, values, ethics, and attitudes. There are currently eight standards which need to be incorporated into the education of a professional accountant. Implementation of IES began in 2014, with IES 1 (Entry Requirements to Professional Accounting Education Programs). The most recent standard, IES 8 (Professional Competence for Engagement Partners Responsible for Audits of Financial Statements), was introduced in 2016. ACCA and IES have been used as the best practice benchmarks for this analysis. The used methodology has been deployed in other countries throughout the world (such as Canada and Poland). All comparable practice analyses also used ACCA and IES as their best practice benchmark. 1.1. ACCA The ACCA certification program is structured into three levels, beginning with fundamental knowledge topics and increasingly focused on practical skills at higher levels. The three levels are: Level 1 Fundamentals – Knowledge: the theoretical foundation for accountants and auditors. Level 2 Fundamentals – Skills: critically review, consolidate and extend a systematic and coherent body of knowledge, utilizing specialized skills across an area of study. Level 3 Professional - Essentials and Options: the highest level, with exams revolving around more advanced topics and representing a significant complexity upgrade over lower levels. 1.2. International Education Standards IFAC’s International Accounting Education Standards Board (IAESB) developed guidance to improve the standards of accountancy education, with focus on two key areas: − Essential elements of accreditation (education, experience, and assessment of professional competence); − Nature and extent of continuing professional education. IESs prescribe standards of generally accepted “good practice” in the education and development of professional accountants. The IESs promote consistency and convergence in accounting education. There are eight international education standards (IES 1 - IES 8), covering a variety of topics. 5 Competencies and abilities required of professional accountants include: − Technical expertise; − Excellent communication skills; − Business advisory skills; − Financial analysis capabilities; − Strong values and ethics; − High integrity and objectivity; − Ability to quickly adapt to a changing environment. IES 8 includes requirements for an audit professional to: − Qualify as a professional accountant; − Hold an undergraduate degree or equivalent; − Gain advanced level knowledge in audit and financial accounting and reporting, and have sufficient IT knowledge; − Possess professional skills expected of an audit professional; − Complete specific practical experience requirements. IFAC’s IESs require a “Learning Outcomes” approach: − A learning outcomes approach focuses on the individual’s demonstrated achievement of the learning outcomes at the targeted level of proficiency and not on the learning process. − Demonstrating the achievement of these outcomes provides evidence of the professional competence of the individual to perform the role of a professional accountant. II As–Is Analysis of A&A Market in Serbia 2.1. State universities in Serbia with faculties of economics Serbia has four state–run universities – University of Belgrade, University of Novi Sad, University of Niš, and University of Kragujevac. All have economics faculties offering undergraduate and master’s studies, with optional majors in accountancy and audit. The public University of Belgrade is the top ranked university in Serbia 2 with a global ranking between 201st and 300th position (ranked 16th in Central and Eastern Europe – CEE), while the University of Novi Sad is ranked second in Serbia (ranked 43rd in CEE). The University of Belgrade economics faculty is the only one in the country with ACCA accreditation for its undergraduate studies. The number of students/graduates of these universities is presented in the following tables: 2 “Academic ranking of world universities”. http://www.shanghairanking.com/ARWU2016.html 6 Table: Number of bachelor graduates in Serbia’s Economics Faculties in 2015/2016 Academic year Enrolment in Enrolment in No. of graduates undergraduate A&A major with A&A major studies University of Belgrade, Faculty of economics 900 181 42 University of Novi Sad, Faculty of economics 855 42 56 University of Niš, Faculty of economics 700 100 78 University of Kragujevac, Faculty of economics 600 48 77 Source: Faculty data Table: Number of bachelor graduates in Serbia’s Economics Faculties in 2015/2016 Academic year Enrolment in Enrolment in No. of master master studies A&A major graduates with A&A major University of Belgrade, Faculty of economics 459 61 12 University of Novi Sad, Faculty of economics 420 33 29 University of Niš, Faculty of economics 245 35 21 University of Kragujevac, Faculty of economics 210 28 19 Source: Faculty data The University of Belgrade Faculty of Economics is the largest of those observed, admitting nine hundred undergraduate students annually. In 2015/2016 Academic year, one hundred and eighty-one chose A&A as their major. Forty-two students graduated with A&A module, which is around 5% of the total enrolled students in undergraduate studies and 23% of those who chose A&A as their major. The faculty’s master’s program has a yearly enrolment quota of 459 students, with 61 of them choosing A&A as their major last year. Low graduate rates can be explained by difficult exams, with low pass rates compared to other majors. The University of Novi Sad economics faculty has a yearly enrolment quota of 855 students in undergraduate studies, with 42 of them choosing A&A as their major program last year. Last year, 56 students graduate with A&A majors. The primary reason for this mismatch is the graduation lag, as some students require more than four years to complete the program. The Faculty has a yearly master’s enrolment of 420 students, of which 33 selected A&A program last year. In the same timeframe, 21 A&A students graduated. These figures reveal that the University of Novi Sad enrols around the same number of A&A master studies students as the University of Belgrade, but with significantly higher graduation rates. Seven hundred students enrol in undergraduate studies at the University of Niš economics faculty each year, 100 chose A&A as their module last year. Graduation rates are much higher than at Belgrade, with 78 A&A module students graduating last year, 78% of students who originally chose A&A as their module. Each year, 245 students enrol in master’s studies at the Faculty and 35 of them chose A&A as their major last year. Last year 21 students graduated with an A&A major at master’s studies, or 58% of those with the A&A major. The University of Kragujevac Faculty of Economics welcomes 600 undergraduate students each year through a fixed enrolment quota, with 48 students selecting the A&A module last year. Seventy-Eight A&A major students graduated last year, 13% of all undergraduate students. As is the case with Novi Sad, more 7 students graduated than enrolled into the program, again reflecting the effects of graduation lag. Two hundred and ten students each year enrol in master’s studies. Last year 28 students selected A&A as their major. Out of all master’s students 19 of them graduated with an A&A major (9%) last year. Out of all graduates last year 68% were A&A majors. The A&A program’s popularity varies from university to university and from bachelor to master studies. The following graph shows the popularity of A&A programs in the economics faculties of state universities, as a rate of student enrolment in A&A program versus total enrolment. Illustration: Popularity of A&A major at bachelor studies Popularity of A&A Major (Undergraduate studies) A&A program Other programs 80% 86% 95% 92% 20% 14% 5% 8% University of Belgrade University of Novi Sad University of Nis University of Kragujevac Source: University data The A&A module is relatively most in demand at the University of Belgrade, with 20% selecting it as their major despite a low graduation rate (23%). The University of Novi Sad produces significantly fewer A&A graduates. The University of Kragujevac has a slightly higher enrolment rate, with The University of Niš behind Belgrade in A&A enrolment, with 14% of all students choosing this specific major. 8 Illustration: Popularity of A&A major at master’s studies Popularity of A&A Major (master's studies) A&A program Other programs 87% 92% 86% 87% 13% 8% 14% 13% University of Belgrade University of Novi Sad University of Nis University of Kragujevac Source: University data When it comes to master’s studies, University of Niš has the same enrolment percentage of students in the A&A program relative to all enrolled students, compared to undergraduate studies. University of Belgrade, relatively, falls to second place, with equal percentages as University of Kragujevac, that has 5 percentage point higher enrolment in their master’s program, compared to undergraduate program. Novi Sad is in the last place. The significant gap between Belgrade’s undergraduate and master’s A&A enrolment may be explained by the difficulty of the undergraduate program, with the low graduation rate (23%) distorting the numbers as the available pool of students who wish to continue with A&A studies falls rapidly when compared to other universities. Another reason could be the program’s extensive and thorough nature, with students failing to see additional value of continuing their education in the same discipline. 2.2. Professional education bodies and organizations There are two professional education bodies in Serbia: the Serbian Association of Accountants and Auditors (SAAA) and the Chamber of Authorized Auditors (CAA). SAAA, located in Belgrade, is the oldest Serbian association of accounting and professionals. It was established in 1955 with the aim of fostering growth of the accounting profession, education of its members, and harmonization of national legislation with the best practices of developed countries. Association membership comprises of: − 2% of Certified Public Accountants - Certified Auditors; − 61% of Chartered Accountants; − 37% of accountants. SAAA is a full member of the IFAC since 1996. In accordance with the charter of IFAC SAAA has: 9 − Implemented international standards of education IES 1-8, rules and statements of IFAC; − Issued National Educational accounting standard ROS 31 and associated acts for its implementation; − Implemented the IFAC Code of Ethics for Professional Accountants and the decision accompanying documents; − Published rules on the continuing education of members and the Regulation on Disciplinary Responsibility and guidelines for implementation; − Translated and published manuals for acquiring professional titles and professional specializations and associated regulations; − Issued "Glas Računovođa", members’ newsletter of the SAAA, and other educational publications; − Issued professional technical documents widely recognized internationally; − Created and maintains the Directory of Professional Accountants, published annually and updated daily. CAA was founded, according to the Law on Accounting and Audit, in 2006 to improve and advance the development of the accounting and audit profession. It has a broad mandate regarding implementation of international accounting and audit regulation and harmonization with these regulations, as well as organization of exams for professional auditors. Members of the Chamber are certified auditors employed in audit companies and certified internal auditors, as well as audit companies. CAA became an Associate member of IFAC in 2014. The Law on Audit (revised in 2013) defines the obligations of CAA 3 to: − Determine the program and the training of candidates, to organize exams and issue certificates for acquisition of professional titles, as well as to define rules for continuous professional training in accordance with international requirements for vocational training and requirements specified by the law; − Set the requirements for obtaining, renewing and revoking licenses for authorized auditors; − Issue, extend and revoke licenses of authorized financial auditors and maintain a register of issued licenses to authorized auditors of financial statements; − Execute quality control of existing audit firms; − Manage the Directory of Certified Auditors and Audit Companies. Other than SAAA and CAA, there are no other professional organizations in Serbia, like ACCA or CIMA (The Charted Institute of Management Accountants). 2.2.1. Members of professional education bodies and organizations SAAA members include accountants, independent accountants, certified accountants and certified public accountants. Membership is authorized by the Ministry of Finance. The number of licenses issued is in the following table: 3 Law on Audit - http://www.paragraf.rs/propisi/zakon_o_reviziji.html 10 Table: Members of SAAA SAAA License holders in 2017. Accountants 729 Independent 292 Accountants Certified Accountants 1250 Certified Public 70 Accountants Source: SAAA database Members of CAA are authorized auditors, professional certified internal auditors, and professional licensed auditors. Membership is granted based on fulfilment of the following criteria: - Individuals are registered in the CAA register if they have an appropriate professional license issued by the Ministry of Finance. - Audit firms must have an appropriate work license issued by the Ministry of Finance. The number of licenses issued is in following table: Table: Members of CAA CCA License holders in 2017. Authorized auditors 293 Professional certified internal 136 auditors Professional licensed auditors 245 Source: CAA database 2.2.2. Licensing and conditions of obtaining license Professional qualifications and their obtainment are defined in the founding objectives and activities of the SAAA and national education standard (ROS 31), in accordance with the requirements of IFAC’s IES 1-8. The title accountant is granted to a candidate who meets the following conditions: − Has at least a high school degree and at least three years of experience in accounting; − Has passed the professional – technical examinations under the specified professional program. Candidates who fulfil the following sets of conditions acquire the title of certified accountant: A) They must have: − a university degree and at least three years of practical work experience related to bookkeeping and preparation of financial statements; or 11 − a university degree with a duration of at least three years or at least four years of practical work experience related to matters of bookkeeping and preparation of financial statements; − a university degree with a duration of at least two years and at least five years of practical work experience related to matters of bookkeeping and preparation of financial statements; − the professional title of “accountant” and at least five years of practical work experience in this profession; and B) Have passed the professional examinations for the acquisition of professional titles. Alternatively, SAAA also recognizes qualifications granted by other IFAC members, although this is done on a bilateral basis and there are no general guidelines that regulate this process. The professional title certified public accountant is granted to candidates who pass the exams according to the defined program and who meet all the following requirements: − Have a college degree in economics or related disciplines; − Have the professional title of certified accountant and at least three years of practical work experience in this profession; − Have passed the specified exams. 2.2.3. Education standards and exams (i) Standards National accounting educational standard ROS 31 (Professional training of accountants), which is used by SAAA, is based on the Education Standards IES 1-8 published by IFAC and the IFAC Code of Ethics for Professional accountants. Professional titles exams are matched with the requirements of the IES 6 - Evaluation of professional expertise and skills. During the process of evaluation of applicant’s capacity, emphasis is placed on the practical application of skills and knowledge, with exams based on real-life situations and practical examples. (ii) Exams Professional examinations to obtain the license to practice accounting or audit are managed by SAAA and CAA. The Ministry of Finance authorizes them to grant licenses to professional accountants and auditors. Exams for obtaining license for membership in SAAA are divided into 3 levels: 1. Exams for certified accounting technician; 2. Chartered certified accountant; 3. Certified public accountant. The areas examined at each level are below: 12 Illustration: SAAA exams Certified Accounting Chartered Certified Certified Public Accountant Technician Accountant − Recording Financial − Preparing Financial − Audit and Assurance Transactions Statements Services − Information for − Financial Information − Performance Management Control for Management Management − Maintaining Financial − Managing People Records − Strategic Business − Information Systems Planning and − Accounting for Costs − Implementing Audit − Corporate and Development Procedures Business Law − Advanced Corporate − Tax system − Tax system Reporting − Managing People and − Financial − Strategic Financial Systems Management and Management − Drafting Financial Control Statements − Financial Reporting − Planning, Control and − Audit and Internal Performance Review Management Source: SAAA Exams for obtaining CAA membership are separated in two categories, one for certified auditor and the other for certified internal auditor. Illustration: CAA Exams Certified Auditor Certified Internal Auditor − Theory and Accounting − Role and Activities of Internal Principles Auditors in Management, − Framework for Financial Determination of Risk and Control Reporting ( with IFRS and IAS) − Execution of Internal Audit − Financial Analysis − Business Analysis and Information − Management Accounting Technologies − Risk Management and Internal − Business Management Skills Control − Theory of − Audit Methodology − Law for Certified Auditors − Tax System − Business Information Systems − Microeconomics, Basic and Financial Economics − Financial Mathematics and Statistics − Financial Management of Companies Source: CAA 13 The examination has a required syllabus which covers all subjects required by IFAC’s IES 2 (Initial Professional Development – Technical Competence), IES 3 (Initial Professional Development – Professional Skills) and IES 6 (Initial Professional Development – Assessment of Professional Competence). (iii) Programs According to CAA’s program for Continuous Professional Development (CPD), a licensed authorized auditor must attend professional courses, seminars and lectures for a minimum of 120 hours in the period of three years from the date of issuance/renewal of license. During that timeframe, a licensed authorized auditor must attend at least 60 hours at events organized by CAA or academic institutions, professional bodies/professional organizations, audit firms and other legal entities which have Audit Public Oversight Board (APOB) consent/permits for performing the training. For the remaining 60 hours of CPD, a licensed authorized auditor may attend different types of skill enhancement events such as seminars, workshops and other types of activities beyond those of cited institutions/entities, as well as attending international symposiums and reading professional literature. Professional advancement topics are specified in the program determined by CAA and encompass the following: − International Standards on Auditing and International Standards on Quality Controls (ISA and ISQC); − International Financial Reporting Standards(IFRS); − International Financial Reporting Standards for Small and Medium Entities (IFRS for SME); − Code of Ethics for Professional Accountants (IESBA); − Laws and legal regulations/requirements. III Primary Research Research Methodology Primary research was undertaken during May and the first half of June 2017. Broad stakeholder input helped gain an integrated picture of the state of the Serbian A&A market, trends and potential gaps. Semi – structured interviews were conducted with representatives of professional bodies and organizations (SAAA and CAA), professors from state universities, CFOs of private companies, an assistant to the CFO of a state-owned enterprise, professional accountants, auditors and HR managers of big firms with large A&A departments. A questionnaire was administered at a capacity building event held in Belgrade from October 25th to October 27th2017, where draft analysis was presented in order to gain feedback from the academic community and representatives from the Ministry of Finance and professional organizations. The research goal was to encompass the full range of competencies essential for professional accountants and auditors and assess their importance from various points of view. The proficiency levels required are highly dependent on context and need to reflect local industry requirements. 14 3.1. Key Stakeholders Decisions in the A&A market are driven by the Ministry of Finance, the Ministry of Economy, universities, professional education bodies and legacy legislation that regulates the field (Law on Audit and Law on Accounting, both updated in 2013) drive and, along with large companies, represent key stakeholders in the Serbian A&A industry. Key corporate entities are together known as “Big 4”, representing the largest audit firms in Serbia and worldwide. These firms are Deloitte Touche Tohmatsu, PricewaterhouseCoopers, Ernst & Young and KPMG. 3.2. Stakeholder Research Findings Research findings were varied. The key variable of received input was found to be the industry sector of the interviewed party. Interviewees working in A&A firms and those practicing audit or accounting are more likely to identify the importance of technical and soft – skills, such as excellent knowledge of Microsoft Excel and good communication skills. This may be explained by attempts to avoid training costs involved with new graduates and maximizing early career productivity. In contrast, academia and professional bodies strongly reaffirm the necessity for fundamental knowledge, reflected by current faculty syllabuses. Members of academia and professional bodies believe that the A&A profession has been devalued by legislative deregulation and flawed regulation, that emphasizes cost cutting and liberalization of the labour market in this domain. Key issues with the current regulatory framework include the absence of certification requirements for bookkeepers and accountants, which has led to a large influx of unskilled workers into the industry. Most legal entities are free to specify education and other requirements for bookkeepers and accountants, and poor oversight by the Tax Administration does not create adequate incentives to have professionally led accounting and bookkeeping. This was again highlighted as a significant issue at the capacity building event, with most responses related to key issues with A&A regulatory framework being inadequate sanctioning by the authorities and failure to apply laws and regulations. Vast majority of the respondents at the capacity building event agreed that it is necessary to increase certification requirements. The key legislation with the largest impact on A&A are the Law on Accounting (2013) and the Law on Audit (2013). Poor implementation of laws and regulation is highlighted as a prevailing issue. The following articles of the laws are mentioned as especially problematic: (i) Law on Audit, 2013. Serbian Gazette Article 2 Key partner is: 1) Licensed certified auditor that an audit firm or an independent auditor appointed for a specific audit work as the main responsible person for carrying out the statutory audit on behalf of an audit firm or on behalf of the independent auditor and who signs the audit report; 15 2) In the case of audit group - licensed certified auditor who is appointed as the main responsible person for carrying out the statutory audit at the level of the group and who signs the audit report of the group. (ii) Law on Accounting, 2013. Serbian Gazette Article 7 Legal entities and entrepreneurs, in accordance with this law, can structure the organization of accounting in a manner which enables a comprehensive record, as well as to prevent and detect erroneous recorded business changes, regulates an internal accounting control processes, determine accounting policy, determine the person responsible for legality and correctness of business changes and the preparation and control of accounting documents related to business transactions, regulate the flow of accounting documents and set a deadline for their submission for further processing and recording in the accounts. Interviewees believe that these two sections of the laws have undermined the market value of professional accountants and especially professional auditors. They allow company management to, in many cases, deflect responsibility for inaccuracies (sometimes intentionally manipulated) in financial reports. This gives little incentive to hire highly-skilled auditors (or in many cases, accountants) as they provide little to no value to small and mid-size firms. Shallow capital markets provide little to no boost to demand for high level A&A skills, although a number of interviewees do point out that multi-national corporations operating in Serbia have a great need for top level services, considering they are owned by companies which, in most cases, are public and require quality audit of all subsidiaries. In combination with liberalized labour markets, A&A firms focus on attracting candidates with technical skill – sets, implying that fundamental knowledge is less of a necessity. As such, labour markets, in the view of some of our interviewees, fail to adequately value foundation courses taught by universities. The “Big 4” (Deloitte Touche Tohmatsu, PricewaterhouseCoopers, Ernst & Young, and KPMG) are the largest firms by revenue and most recognized firms when it comes to accounting and audit in Serbia and worldwide. They see themselves as clearly differentiated from other A&A firms. Their employee selection process is rigorous and job opportunities generally attract 10 – 25 applicants. The majority of those candidates are already employed and looking for better position, or new graduates. Analysis of the A&A labour market and employment of A&A graduates is conducted by the National Employment Service with contributed data from university faculties. About 79% of new auditors and 71% of new accountants are employed within 6 months of university graduation. All stakeholders highlight state universities as primary recruitment centres for new hires. The data suggests that almost all new graduates are employed within the first year from graduation, or choose not to join the labour market due to further education and/or migration abroad. According to interviewee input, Big 4 recruitment process is structured through internships lasting for 3 - 5 months, where new accountants and auditors learn the basics of the prospective future job. Basic knowledge of Microsoft Office package and accounting are essential for interviewed stakeholders, along with at least an intermediate knowledge of English language. 16 Interviewees from the Big 4 point to a constantly decreasing supply of accountants and auditors, although this has not negatively impacted their recruitment process. Finding good candidates in audit is the easiest, due to purely technical nature of the profession. Advisory hiring is the most problematic, especially in emerging branches (such as IT advisory). The non-technical competences most demanded by employers in the A&A industry are: − Communication skills; − Good organization; − Ability to prioritize problems; − Team work. (iii) Competencies All interviewed parties reaffirm that ACCA is the best pathway and best qualification for working in the A&A field. Regarding technical competencies, stakeholders underline the importance of corporate finance, tax system and law, informatics, knowledge of sales process and marketing (for auditors). Discussion with the stakeholders highlighted that a traditional view still exists of accountants and auditors as conservative and introverted, with no need for soft skills and social intelligence. With rapid changes taking place in business, the modern accountant and auditor needs to adapt to a market that is placing greater importance on the non – technical skill set. Interviewees underline non-technical competencies, including communication skills, ethics, teamwork, willingness to undertake continuous learning and sharing of knowledge, as key competencies for people in A&A. One interviewee stated that an ability to see the whole picture, conceptual thinking, curiosity and commitment to the firm are the most important non -technical competencies. Other necessary non-technical skills depend on the hierarchical level of the accountant/auditor. High level positions require greater knowledge, conceptual thinking and the ability to lead teams and effectively engage clients. (iv) Gaps Universities are seen as conservative institutions with outdated curricula and literature. Industry insiders observe poor coordination between universities and the corporate sector. Universities are not providing enough practical experience of solving the real-life problems of companies, or internships and other interchange programs. Students from universities generally have an excellent theoretical knowledge foundation, but large gaps in their ability to practice A&A. Informatics and knowledge of software related to A&A is becoming more and more important for the labour market of A&A. Accountants and auditors should at least be familiar with widely used platforms, yet some still seem to have problems with basic programs like Microsoft Office and Excel. Knowledge of Enterprise Resource Planning (ERP) software like SAP is becoming more essential for accountants and auditors. One stakeholder emphasized knowledge of working in SAP as the most significant value added technical competence of potential candidates. 17 Feedback from the capacity building event was similar. Majority of answers regarding non – technical competencies revolved around ethics, organizational and interpersonal skills as well as communication skills. Technical competency most frequently mention deficient was IT skill, with an emphasis on MS Office skill. (v) Recommendations Input from key stakeholders is essential to improve curricula at universities and professional education bodies. University curricula should be focused on achieving recognized standards in A&A education (such as the IES). Promoting the development of critical thinking, as opposed to simply replicating study material, is vital to improve students’ learning. All stakeholders highlight the gap between universities and the corporate sector. To bridge this gap, stakeholders advise that students undertake practical work through case studies, have opportunities to tackle real problems and use an interactive studying approach. Internships lasting two or three months do not provide the breadth of exposure to A&A necessary to truly understand the underlying functioning of the industry. There is a view that the accounting profession is too deregulated from a legislative point of view, thus some stakeholders have recommend strengthening the profession by reinforcing institutions related to A&A, such as professional associations (CAA, SAAA). Information and Communications Technology (ICT) plays a specifically significant role, in two ways. First, knowledge of Microsoft Office (especially Excel) is a requirement. It is the most frequently used data analysis program and an integral part of many A&A businesses; for example, audit firms that work with large companies and publicly listed entities use Microsoft Excel for large data set analysis. Second, audit firms are beginning to develop special IT audit and advisory divisions in order to diversify their offering and generate more revenue. As one of the leading growth sectors in Serbia, professionals looking for career advancement are advised to have a thorough understanding of ICT. Soft skills are necessary, for auditors in particular. Their client facing aspect and the perception of their work as being “controlling” requires developed people skills in order to resolve problems or anticipate them and act proactively. Capacity building workshop reaffirmed this position. Majority of the participants agreed that it is necessary to improve the study materials for existing exams or to improve the teaching approach without changing the study materials. Participants which argued that is necessary to supplement existing materials with workbooks with practical cases and to innovate the existing materials. Participants which argued that a change in teaching approach is necessary highlighted working on computers, addition of case studies, guest lecturers and visits to companies as examples of how teaching approach could be improved. A troubling issue was raised during the workshop, where participants argued that the main obstacles to enhancing A&A study plans were resistance of the members of academia to any form of change by default and slow rate at which academic community absorbs changes. 18 IV Gap Analysis The A&A education gap analysis in Serbia compares global best practice, represented by ACCA and IES, with the local education system, consisting of both universities and professional education organizations. In addition, the analysis aims to identify gaps between the supply and demand side of the A&A market in Serbia. Gap analysis provides valuable information for perfecting the accounting and audit curricula of universities and professional education programs. 4.1. Comparison between faculties and benchmark 4 This comparison seeks to profile the content of the education syllabus versus the requirements of international benchmarks covered by the Initial Professional Development program (at university or through the profession) or a Continuing Development Program. The selected international benchmark is ACCA. The benchmarking process is performed by comparing the syllabus at the learning outcomes level. The learning objectives from universities in Serbia were compared to the main learning objectives 5 of the ACCA qualification fundamental level. The main exams at this level are: F1 - Accountant in Business F2 - Management Accounting F3 - Financial Accounting F5 - Performance Management F7 - Financial Reporting F8 - Audit and Assurance F9 - Financial Management Exams at state universities in Serbia that are compared with ACCA benchmark are divided into core and elective exams. According to the 2005 Law on Higher Education, HEIs are free to determine the contents of their study programs and teaching methods. The benchmark coverage ratio reflects only the alignment of analysed learning outcomes at university level to those defined by ACCA. The level of benchmark coverage ratio does not, in any means, imply the level of competence of undergraduates in the respective domains. The coverage level data was compiled by the World Bank in the World Bank Accountancy Education Profiling tool. 4 Data for University of Niš, faculty of economics are unavailable 5 Main learning objectives are listed in appendix at the end of paper 19 Comparison with Faculty of Economics, University of Belgrade The University of Belgrade’s economics faculty has ACCA accreditation for its undergraduate studies, the first higher education institution in the region whose basic studies programs received formal ACCA accreditation. This means that ACCA recognizes exams passed at the Faculty of Economics in Belgrade and provides an automatic waiver of four ACCA exams (F1-F4) for students majoring in A&A (or three exams for other majors). A gap analysis of the difference in coverage of the University of Belgrade’s exams and benchmark ACCA exams is displayed on the following illustration. Illustration: Exams in Faculty of Economics, Belgrade vs ACCA Syllabus Profile against ACCA Benchmark 120% 100% 80% 60% 40% 20% 0% F1 F2 F3 F5 F7 F8 F9 ACCA Papers ACCA Benchmark Actual Source: World Bank - The Accountancy Education Profiling Tool The University’s syllabus falls short of the ACCA benchmark in only two areas. These minor gaps are in F3/Financial Accounting, and in F5/Performance Management. All other exams are ranked higher than 80% of the ACCA benchmark. The best-ranked exam at University of Belgrade is F8/Audit and Assurance, which is higher than the benchmark by almost 20% percentage points. The main subject areas that need to be covered in order to receive the ACCA qualification are: A/ Management and Accounting B/ Management Accounting Techniques C/ Management and Ethics D/ Performance Management and Decision Making E/ Management Techniques F/ Financial Accounting Concepts G/ Recording Transactions and Events H/ Preparation of Financial Statements 20 I/ Analysis and Interpretation of Financial Statements J/ Audit and Assurance Engagements K/ Audit and Reporting L/ Principles of Financial Management M/ Financial Management Techniques Comparison of the main learning objectives at the University of Belgrade and the main learning objectives determined by ACCA is displayed on the following illustration: Illustration: Main Subject Areas, Faculty of Economics, Belgrade vs ACCA Syllabus Profile by Subject Area 120% 100% 80% 60% 40% 20% 0% A B C D E F G H I J K L M Main Subject Areas Benchmark Actual Source: World Bank - The Accountancy Education Profiling Tool The University of Belgrade’s coverage of the main subject areas are all below the ACCA benchmark. The biggest gap is in E/Management Techniques (20% PP). Other large gaps are in H/Preparation of Financial Statements (41% PP), and L/Principles of Financial Management (55% PP). Only 7 of the 13 main subject areas are higher than 80% of benchmark. Comparison with University of Novi Sad, Faculty of Economics The University of Novi Sad’s economics faculty has not been awarded ACCA accreditation for its undergraduate studies. Comparison of exams at the University of Novi Sad with the main exams of ACCA is presented on the following illustration: Illustration: Exams in Faculty of Economics, Novi Sad vs ACCA 21 Syllabus Profile against ACCA Benchmark 120% 100% 80% 60% 40% 20% 0% F1 F2 F3 F5 F7 F8 F9 ACCA Papers ACCA Benchmark Actual Source: World Bank - The Accountancy Education Profiling Tool Three out of seven exams are below the threshold of 80%. Gaps are in F5/Performance Management, F7/Financial Reporting, and F9/Financial Management. Other exams are close to the benchmark and a little above it. The best-ranked exam is F8/Audit and Assurance. Comparison of the main subject areas gives a different view of gaps in the University syllabus, illustrated below: Illustration: Main Subject Areas, Faculty of Economics, Novi Sad vs ACCA Syllabus Profile by Subject Area Benchmark Actual 120% 100% 80% 60% 40% 20% 0% A B C D E F G H I J K L M MAIN SUBJECT AREAS Source: World Bank - The Accountancy Education Profiling Tool All primary subject areas are below the benchmark, with the exception of K/Audit and Reporting, which has 80% compliance with benchmark. The most significant gaps are in E/Management Techniques (16%), 22 G/Recording Transactions and Events (24%), H/Preparation of Financial Statements (30%), I/Analysis and Interpretation of Financial Statements (33%), and L/Principles of Financial Management (36%). All other main subject areas are in the range of 50% to 80% of the benchmark. Comparison with University of Kragujevac, Faculty of Economics The University of Kragujevac’s economics faculty has not been awarded ACCA accreditation for its undergraduate studies. Comparison of exams at the University of Kragujevac with the main exams of ACCA is presented on the following illustration. Illustration: Exams, Faculty of Economics, Kragujevac vs ACCA Syllabus Profile against ACCA Benchmark 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% F1 F2 F3 F5 F7 F8 F9 ACCA Papers ACCA Benchmark Actual Source: World Bank - The Accountancy Education Profiling Tool Only one exam - F8/Audit and Assurance - is above benchmark. All others are below the benchmark of 80%. The biggest gaps are in F7/Financial Reporting, F5/Performance Management, and F2/Management Accounting. All other exams are close to benchmark. Comparison of the main subject areas is shown on the illustration below: 23 Illustration: Main Subject Areas, Faculty of Economics, Kragujevac vs ACCA Syllabus Profile by Subject Area 120% 100% 80% 60% 40% 20% 0% A B C D E F G H I J K L M Main Subject Areas Benchmark Actual Source: World Bank - The Accountancy Education Profiling Tool The University of Kragujevac shows the lowest results. Nine out of thirteen areas are below 60% of benchmark. The biggest gaps are E/Management Techniques (5%), H/Preparation of Financial Statements (8%), and G/Recording Transactions and Events (25%). Only K/Audit and Reporting (94%) is higher than 80% of the benchmark. Comparison with University of Niš, Faculty of Economics Same as university of Novi Sad and University of Kragujevac, the University of Niš’s economics faculty has not been awarded ACCA accreditation for its undergraduate studies. Comparison of exams at the University of Niš with the main exams of ACCA is presented on the following illustration: 24 Illustration: Exams, Faculty of Economics, Niš vs ACCA Syllabus Profile against ACCA Benchmark 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% F1 F2 F3 F5 F7 F8 F9 ACCA Papers ACCA Benchmark Actual Source: World Bank - The Accountancy Education Profiling Tool Only one exam - F8/Audit and Assurance - is above benchmark. All others are below the benchmark of 80%. The biggest gaps are in F5/Performance Management and F9/Financial Management. All other exams are close to benchmark. Comparison of the main subject areas is shown on the illustration below: Illustration: Main Subject Areas, Faculty of Economics, Niš vs ACCA Syllabus Profile by Subject Area 120% 100% 80% 60% 40% 20% 0% A B C D E F G H I J K L M Main Subject Areas Benchmark Actual Source: World Bank - The Accountancy Education Profiling Tool 25 At University of Niš eight out of thirteen areas are below 60% of benchmark. The biggest gaps are E/Management Techniques (10%), G/Recording Transactions and Events (23%), I/Analysis and Interpretation of Financial Statements (30%) and H/Preparation of Financial Statements (32%). Only K/Audit and Reporting (91%) and F/Financial Accounting Concepts (83%) are higher than 80% of the benchmark. Overall comparison of state universities in Serbia The purpose of this paper is to find and define gaps and to offer a set of recommendations on how to improve accounting and audit curricula for universities in Serbia. According to the available data, state universities in Serbia have not adopted IES standards of education for the professional accountant, nor the IFAC’s Code of Ethics for the professional accountant. Combining the gaps from the three universities studied (Belgrade, Novi Sad and Kragujevac) gives an overall picture of gaps in Serbian education compared to ACCA standards as best practice. The exams gap analysis shows that the education system in Serbia covers almost all exams defined by ACCA. Faculties in Novi Sad and Kragujevac have the largest gaps in exams F5/Performance Management and F7/Financial Reporting. The Kragujevac and Niš economics faculties, have the most gaps (6 out of 7) of the four universities, Novi Sad has 3 gaps, and Belgrade only 2 minor gaps. This is consistent with the fact that only the Faculty of Economics in Belgrade has received ACCA accreditation. A list of exams with the largest gaps follows: Table: Largest gaps in exams at state economics faculties Exam Benchmark coverage ratio University F7/Financial Reporting 24% University of Kragujevac F5/Performance Management 34% University of Kragujevac F2/Management Accounting 48% University of Kragujevac F5/Performance Management 51% University of Niš F9/Financial Management 60% University of Niš F7/Financial Reporting 64% University of Novi Sad Source: Faculty data The main subject areas gap analysis is summarized in table below: Table: Largest gaps in main subject areas at state economics faculties Main subject areas Benchmark coverage ratio University E/Management Techniques 5% University of Kragujevac H/Preparation of Financial Statements 8% University of Kragujevac E/Management Techniques 10% University of Niš E/Management Techniques 16% University of Novi Sad E/Management Techniques 19% University of Belgrade G/Recording Transactions and Events 23% University of Niš G/Recording Transactions and Events 24% University of Novi Sad G/Recording Transactions and Events 25% University of Kragujevac L/Principles of Financial Management 36% University of Novi Sad Source: Faculty data 26 The main gaps, at all Serbian universities, are in subject areas E/Management Techniques and H/Preparation of Financial Statements. Subject E/Management Techniques is below 20% of benchmark at all universities. There is a noticeable gap in ethics, as none of the state universities include professional ethics as a subject of study. 4.2. Gap Map The following diagrams illustrate the strengths and weaknesses of the current programs in teaching technical competencies for all three cohorts. Strengths of teaching competencies are presented as coverage rates of best practice in education A&A – ACCA. Results are shown below. 27 Illustration: Strengths - Undergraduate vs. ACCA 67% 67% 100% 100% Management Accounting Performance Management Management and Accounting Management and Ethics and Decision Making Techniques 42% 75% 89% 100% Management Techniques Recording Transactions and Preparation of Financial Financial Accounting Concepts Events Statements 67% 78% 83% 100% Analysis and Interpretation of Audit Testing and Reporting Principles of Financial Audit and Assurance Engagements Financial Statements Management 78% Financial Management Techniques 28 Undergraduate studies have good coverage (>80%) in following subjects: 1. Management and Accounting 2. Management Accounting Techniques 3. Financial Accounting Concepts 4. Recording Transactions and Events 5. Audit and Assurance Engagements 6. Audit Testing and Reporting Some undergraduate competencies are not as good as ACCA, but still reach the yellow zone (from 60% to 80%): 1. Management and Ethics 2. Performance Management and Decision Making 3. Preparation of Financial Statements 4. Analysis and Interpretation of Financial Statements 5. Principles of Financial Management 6. Financial Management Techniques The lowest coverage ratio is noticeable in the Management Techniques subject, at only 42% of best practice benchmark. 29 Illustration: Strengths – Certified Public Accountant vs. ACCA 48% 89% 92% 100% Management and Accounting Management Accounting Management and Ethics Performance Management Techniques and Decision Making 44% 96% 100% 100% Management Techniques Recording Transactions and Preparation of Financial Financial Accounting Concepts Statements Events 67% 67% 89% 100% Analysis and Interpretation of Principles of Financial Audit and Assurance Engagements Audit Testing and Reporting Financial Statements Management 73% 92% Financial Management Techniques Strategy 30 Certified Public Accountants have good coverage (>80%) in following subjects: 1. Management and Accounting 2. Management Accounting Techniques 3. Performance Management and Decision Making 4. Financial Accounting Concepts 5. Recording Transactions and Events 6. Preparation of Financial Statements 7. Analysis and Interpretation of Financial Statements 8. Audit and Assurance Engagements 9. Strategy Some competencies of certified public accountants not rated as good as ACCA, but are still in yellow zone (from 60% to 80%): 1. Audit Testing and Reporting 2. Principles of Financial Management 3. Financial Management Techniques The lowest coverage ratio is in Management Techniques (44%) and Management and Ethics (44%). 31 Illustration: Strengths - Certified auditors vs. ACCA 48% 89% 92% 100% Management and Accounting Management Accounting Management and Ethics Performance Management Techniques 44% and Decision Making 96% 100% 100% Management Techniques Financial Accounting Recording Transactions and Preparation of Financial Concepts Events Statements 67% 89% 100% 100% Analysis and Interpretation of Audit and Assurance Audit Testing and Reporting Principles of Financial Financial Statements Engagements Management 77% 92% Financial Management Strategy Techniques 32 Certified auditors have good coverage (>80%) in the following subjects: 1. Management and Accounting 2. Management Accounting Techniques 3. Performance Management and Decision Making 4. Financial Accounting Concepts 5. Recording Transactions and Events 6. Preparation of Financial Statements 7. Analysis and Interpretation of Financial Statements 8. Audit and Assurance Engagements 9. Audit Testing and Reporting 10. Strategy Some competencies of certified auditors are not rated as good as ACCA but are still in the yellow zone (from 60% to 80%): 1. Principles of Financial Management 2. Financial Management Techniques The lowest coverage ratio in comparison with the ACCA best practice is in Management Techniques (44%) and Management and Ethics (48%). All three cohorts have the biggest coverage gap in Management Techniques. There is a complete coverage (100%) for all cohorts in Management Accounting Techniques, Recording Transactions and Events, and Audit and Assurance Engagements. 33 Primary research, stakeholder input and curricula analysis have been used to create a gap map illustrating technical and non – technical (“persuasive”) competency deficiencies when compared to best practices. We have structured the gap map using two dimensions: X – Axis shows the level of proficiency of a given cohort. Proficiency research was based on secondary research and comparisons to benchmark best practices. Y – Axis shows the importance (or essentiality) of each competence. Primary research via interviews and workshops served as the data source to accurately judge importance of each competence. The data, thus, is based on interviewees observations. This data was taken at face value and compiled in order to produce the scores given at each matrix. Taken together, we can map the current proficiency levels measured relative to best practices and stakeholder input. Identified gaps vary across cohorts, with most significant gaps found in the soft – skills competency group. Six gap maps were created, structured around all three surveyed groups: • Undergraduates; • Professional Accountants; • Professional Auditors. In order to analytically identify key gaps, competencies were further grouped into technical and non – technical competencies. The results are shown below. 34 1 Management and Accounting 2 Management Accounting Techniques 3 Management and Ethics 4 Performance Management and Decision Making 5 Management Techniques 6 Financial Accounting Concepts 7 Recording Transactions and Events 8 Preparation of Financial Statements 9 Analysis and Interpretation of Financial Statements 10 Audit and Assurance Engagements 11 Audit Testing and Reporting 12 Principles of Financial Management I 1 13 Financial Management Techniques m p o r t a n c e Proficiency level 35 2,6,7 9 Professional accountant 1 Management and Accounting 2 Management Accounting Techniques 3.00 3 Management and Ethics 8 4 Performance Management and Decision Making 1 11 5 Management Techniques 6 Financial Accounting Concepts 7 Recording Transactions and Events 8 Preparation of Financial Statements 10 9 Analysis and Interpretation of Financial Statements 10 Audit and Assurance Engagements 12 11 Audit Testing and Reporting 3 12 Principles of Financial Management I 13 Financial Management Techniques m 4 14 Strategy p o 2.00 r 13 t a 5 n c e 14 1.00 3.00 2.00 1.00 Proficiency level 36 1 Management and Accounting 2 Management Accounting Techniques 3 Management and Ethics 4 Performance Management and Decision Making 5 Management Techniques 6 Financial Accounting Concepts 7 Recording Transactions and Events 8 Preparation of Financial Statements 9 Analysis and Interpretation of Financial Statements 10 Audit and Assurance Engagements 11 Audit Testing and Reporting 12 Principles of Financial Management I 13 Financial Management Techniques m 14 Strategy p o r t a n c e Proficiency level 37 1 Intellectual Undergraduates 2 Interpersonal and communication 3 Personal 3.00 4 Organizational 1 6 3 5 5 Professional skepticism and professional judgment 6 Ethical principles 7 Commitment to the public interest I m p o 2.00 r 2 t a n 4 c e 7 1.00 3.00 2.00 level Proficiency 1.00 38 1 Intellectual Professional accountant 2 Interpersonal and communication 3 Personal 3.00 4 Organizational 1 3 2 5 6 5 Professional skepticism and professional judgment 6 Ethical principles 7 Commitment to the public interest I m 4 p o 2.00 r t 7 a n c e 1.00 3.00 2.00 level Proficiency 1.00 39 1 Intellectual Professional auditor 2 Interpersonal and communication 3 Personal 3.00 4 Organizational 1 3 2 5 6 5 Professional skepticism and professional judgment 6 Ethical principles 7 Commitment to the public interest I m 4 p o 2.00 r 7 t a n c e 1.00 3.00 2.00 level Proficiency 1.00 40 4.3. Discussion Gap maps illustrate the discrepancy of coverage of technical and non – technical skills from relevant benchmarks for all cohorts. For undergraduates, the largest gaps in technical skills were identified as: • Management and Ethics; • Performance Management and Decision Making; • Management Techniques; • Preparation of Financial Statements; • Audit Testing and Reporting; • Principles of Financial Management. Non – technical skills were all found to be lacking, although people skills, professional scepticism and ethics were lacking in conjunction with being highly rated by stakeholders, which makes them a problem that requires special attention. Although these were the views expressed by mostly industry professionals, it must be stated that IES standards evaluate these skills, which implies that in fact they should be part of the competency framework that undergraduate students’ learning should be based upon. These results are echoed in the of the PISA (Programme for International Student Assessment) international programme, published in 2012. 67 The study measures scholastic performance of 15-year-old pupils in mathematics, reading and science. The results are measured on a standardized scale of 500 points, with standard deviation of 100 points. The results for Serbia showed considerable gaps in performance when compared to OECD average in mathematics (449 points, 45 points lower than OECD average), reading (446 points, 50 points lower than OECD average) and science categories (445 points, 60 points lower than OECD average). This is equivalent to an additional year of studying in OECD countries for both mathematics and reading and an additional 1.5 years of studying of science in OECD countries. Although there is an 8-year age gap between 15-year-old pupil and undergraduates, it can be inferred that gaps in critical thinking in high school pupils stay, to an extent, unresolved even after graduating with university degrees. This is consistent with low levels of IES 3 and IES 4 LO coverage, although this fact does not directly imply that undergraduates have inadequate levels of critical thinking and professional judgement because of the lack of IES 3 and IES 4 LO coverage. Instead, IES 3 and IES 4 LOs should be viewed as instruments to remedy this issue. Workshop and the administered questionnaire at the capacity building event reaffirmed these issues, with ethics and personal skills being highlighted as the biggest gaps in undergraduate competencies. Also, when asked to position students on six levels of cognitive learning outcomes, the overwhelming majority of responders placed at least 50% of students at the first two levels (Remembering and Comprehending). In addition, over a third of responders placed over 70% of students on these two levels, which are correlated to low levels of critical thinking and are outcomes synonymous with teaching approaches that focus on mechanical knowledge repetition. 6 http://pisa.rs/old/images/stories/pdf/PISA_2013_Srbija_prvi_rezultati.pdf 7 http://www.oecd.org/pisa/aboutpisa/republic-of-serbia-pisa.htm 41 When asked to name changes to the study programmes in order to push this allocation towards higher levels of cognitive learning outcomes, responders listed changes to teaching approach, stronger focus on soft skills, increased inclusion of case studies in the study plans and enhancements related to study materials. Professional Accountants Professional level A&A has a somewhat better situation when compared with the undergraduate level, reflecting additional work required for completion of ACCA exams. This can be seen on the gap maps, with Professional Accountants having smaller technical gaps compared to undergraduates. Key technical gaps identified were: • Management and Ethics; • Management Techniques; • Audit Testing and Reporting; • Principles of Financial Management. Non – technical skills were poor, although with a higher proficiency level compared to undergraduates. Lastly, professional auditors differ very little from professional accountants, which is not surprising considering their similar professional level study programs. Key technical gaps in this cohort are: • Management and Ethics; • Management Techniques; • Principles of Financial Management. Soft skills that were found to be lacking were almost identical to the gaps identified for professional accountant. Workshop at the capacity building event confirmed the consensus that ethics, commitment to the public interest, low levels of IT skills and communication skills were the biggest issues regarding competency gaps for professional accountants and professional auditors. Technical competencies gaps were identified in all three groups, but none included many categories. This is related to implementation and coverage of best practice in curricula, which is lacking in certain subjects. We believe that the best solution for this incongruity is fine tuning of existing curriculum to close the identified gaps. Major curriculum corrections, or introduction of a new technical competency framework, is unnecessary and would not give any significant additional benefits. Non – technical competencies have much larger gaps across the entire competency spectrum in all three groups. Major competency gaps for Professional Accountants and Professional Auditors are very similar, given the similarity of their curricula. The most serious gaps were identified in undergraduate curricula. Especially concerning is that some competencies considered most important by stakeholders rated poorly compared to best practice. Even ignoring the importance scale, every non – technical competence was rated below 2, reflecting very poor convergence with the benchmark practice. We propose augmentation of the existing competency framework with an additional layer of learning objectives from IES 3 and IES 4 IFAC standards. These learning standards focus on development of non 42 – technical (“soft skills”), which were rated as essential by key stakeholders. By enhancing the existing competency framework, we have simplified the adoption of the improvements and made them easier to deploy. 4.4. Bridging the Gap – A New Competency Framework Results show significant gaps in soft skills across all cohorts, with undergraduates scoring badly in certain technical competencies as well (with highlights being Audit Testing and Reporting and Principles of Financial Management). Modification of the competency framework can remedy identified issues and give a more holistic approach to the structuring of learning objectives. The existing competency framework has large gaps in the soft – skills areas, such as critical thinking, communication, scepticism and judgment. A modified competency framework would be based on the existing framework but with the addition of a number of learning objectives, dealing primarily with soft skills, while enhancing the technical competencies of both graduates and professionals. It would have a more holistic approach, taking into account both knowledge absorption and intellectual and personal development. This reflects the needs of students to acquire skills that will help them navigate the labour market more easily, while attaining knowledge and intellectual curiosity that will aid them in long - term career development. Three revised competency frameworks are proposed. These have been developed based on the unique requirements of each group. A key change is inclusion of the non – technical competency framework into existing curricula (the main identified deficiency, for which simple modifications would be insufficient). Technical competencies were modified only where the most pressing gaps were identified. Competency framework COMPETENCY FRAMEWORK Technical Non-technical Competencies Competencies 43 Technical competencies are based on the ACCA competency framework. Non – technical competencies are based on IES 3 and IES 4, as these standards are considered best practice in this area. Required proficiency was ranked on an ordinal scale, with three proficiency levels. Importance was ranked using the ratio scale. Required proficiency has the following levels: A = Mastery B = Intermediate C = Awareness Importance was graded on a scale from 1 to 3. A) Competency framework for undergraduates Competency framework for technical competencies Required Undergraduates Importance proficiency 1. Management and Ethics 2.67 B A1. Recognize the principles of authority and leadership and how teams and individuals are recruited, managed, motivated and 2 developed A2. Understand the importance of personal effectiveness as the basis 3 for effective team and organizational behaviour A3. Recognize that all aspects of business and finance should be conducted in a manner which complies with and is in the spirit of 3 accepted professional ethics and professional values 2. Performance Management and Decision Making 2.67 B B1. Explain and apply performance measurements and monitor 3 business performance B2. Identify and discuss performance management information and measurement systems and assess the performance of an organization from both a financial and nonfinancial viewpoint, appreciating the 2 problems of controlling divisionalized businesses and the importance of allowing for external aspects B3. Select and appropriately apply decision-making techniques to facilitate business decisions and promote efficient and effective use of 3 scarce business resources, appreciating the risks and uncertainty inherent in business and controlling those risks 44 3. Management Techniques 1.75 C C1. Explain the scope of procurement, commissioning and contract 1 management activities to sustain service delivery excellence C2. Evaluate techniques for achieving quality and implementing 2 relevant quality control procedures C3. Discuss and apply project management techniques efficiently and 1 effectively C4. Evaluate the issues relating to the acquisition and management of 3 information systems 4. Preparation of Financial Statements 2.75 B D1. Prepare a trial balance 2 D2. Prepare basic financial statements for incorporated and 3 unincorporated entities D3. Prepare simple consolidated financial statements 3 D4. Prepare and Present financial statements for single entities and 3 business combinations in accordance with IFRS 5. Audit Testing and Reporting 3 C E1. Describe and evaluate internal controls, techniques and audit tests, including IT systems, to identify and communicate control risks and 3 their potential consequences, making appropriate recommendations E2. Explain how consideration of subsequent events and the going concern principle can inform the conclusions from audit work and are 3 reflected in different types of audit report, written representations and the final review and report 6. Principles of Financial Management 2.5 B F1. Discuss the role and purpose of the financial management function 3 F2. Assess and discuss the impact of the economic environment on 2 financial management Competency framework for non – technical competencies Competency framework for non – technical Importance Required proficiency 1. Intellectual 3.00 B A1. Evaluate information from a variety of sources and perspectives through research, analysis and 3 integration A2. Apply professional judgment, including identification and evaluation of alternatives, to 3 reach well - reasoned conclusions based on all relevant facts and circumstances A3. Identify when it is appropriate to consult with 3 specialists to solve problems and reach conclusions 45 A4. Apply reasoning, critical analysis and innovative 3 thinking to solve problems A5. Recommend solutions to unstructured, multifaceted 3 problems 2. Interpersonal and communication 2.00 B B1. Display cooperation and teamwork when working 2 towards organizational goals B2. Communicate clearly and concisely when presenting, discussing, and reporting in formal and 2 informal situations, both in writing and orally B3. Demonstrate awareness of cultural and language 2 differences in all communication B4. Apply active listening and effective interviewing 2 techniques B5. Apply negotiation skills to reach solutions and 2 agreements B6. Apply consultative skills to minimize or resolve conflict, solve problems, and maximize 2 opportunities B7. Present ideas and influence others to provide 2 support and commitment 3. Personal 3.00 B C1. Demonstrate a commitment to lifelong learning 3 C2. Apply professional scepticism through questioning 3 and critically assessing all information C3. Set high personal standards of delivery and monitor personal performance, through feedback from 3 others and through reflection C4. Manage time and resources to achieve professional 3 commitments C5. Anticipate challenges and plan potential solutions 3 C6. Apply an open mind to new opportunities 3 4. Professional scepticism and professional judgment 3.00 C D1. Apply a questioning mindset critically to assess financial information and other 3 relevant data D2. Identify and evaluate reasonable alternatives to reach well - reasoned conclusions based on 3 all relevant facts and circumstances 5. Ethical principles 3.00 C E1. Explain the nature of ethics 3 E2. Explain the advantages and disadvantages of rules - based and principles - based approaches 3 to ethics E3. Identify ethical issues and determine when 3 ethical principles apply 46 E4. Analyse alternative courses of action and 3 determine the ethical consequences of these E5. Apply the fundamental ethical principles of integrity, objectivity, professional competence and due care, confidentiality, and professional 3 behaviour to ethical dilemmas and determine an appropriate approach E6. Apply the relevant ethical requirements to professional behaviour in compliance with 3 standards B) Competency framework for certified public accountant Competency framework for technical competencies Required Professional accountant Importance proficiency 1. Management and Ethics 2.43 A A1. Recognize the principles of authority and leadership and how teams and individuals are recruited, managed, motivated and 2 developed A2. Understand the importance of personal effectiveness as the basis 2 for effective team and organizational behaviour A3. Recognize that all aspects of business and finance should be conducted in a manner which complies with and is in the spirit of 2 accepted professional ethics and professional values C3. Recognize that all aspects of business and finance should be conducted in a manner which complies with and is in the spirit of 3 accepted professional ethics and professional values P1. Explain the role of the accountant in identifying and assessing risk 3 P2. Explain and evaluate the role of the accountant in controlling and 2 mitigating risk P3. Demonstrate the application of professional values and judgement through an ethical framework that is in the best interests of society 3 and the profession, in compliance with relevant professional codes, laws and regulations 3. Management Techniques 1.67 B P1. Evaluate and redesign business processes and structures to implement and support the organization’s strategy taking account of 1 customer and other major stakeholder requirements P2. Integrate appropriate information technology solutions to support 2 the organization’s strategy P3. Advise on the principles of project management to enable the implementation of aspects of the organization’s strategy with the twin 2 objectives of managing risk and ensuring benefits realization 5. Audit Testing and Reporting 2.86 B 47 E1. Describe and evaluate internal controls, techniques and audit tests, including IT systems to identify and communicate control risks and 2 their potential consequences, making appropriate recommendations P1. Identify and formulate the work required to meet the objectives of 3 audit assignments and apply the International Standards on E2. Identify and describe the work and evidence obtained by the auditor and others required to meet the objectives of audit 3 engagements and the application of the International Standards on E3. Explain how consideration of subsequent events and the going concern principle can inform the conclusions from audit work and are 3 reflected in different types of audit report, written representations and the final review and report P2. Identify and formulate the work required to meet the objectives of 3 non - audit assignments P3. Evaluate findings and the results of work performed and draft 3 suitable reports on assignments P4. Understand the current issues and developments relating to the 3 provision of audit related and assurance service 6. Principles of Financial Management 2.5 A F1. Discuss the role and purpose of the financial management function 3 P1. Explain and evaluate the role and responsibility of the senior financial executive or advisor in meeting conflicting needs of 3 stakeholders F2. Assess and discuss the impact of the economic environment on 3 financial management P2. Evaluate the impact of macroeconomics and recognize the role of international financial institutions in the financial management of 1 multinationals Competency framework for non – technical competencies Professional accountant Importance Required proficiency 1. Intellectual 3.00 A A1. Evaluate information from a variety of sources and perspectives through research, analysis and 3 integration A2. Apply professional judgment, including identification and evaluation of alternatives, to 3 reach well - reasoned conclusions based on all relevant facts and circumstances A3. Identify when it is appropriate to consult with 3 specialists to solve problems and reach conclusions A4. Apply reasoning, critical analysis and innovative 3 thinking to solve problems A5. Recommend solutions to unstructured, multifaceted 3 problems 48 2. Interpersonal and communication 3.00 B B1. Display cooperation and teamwork when working 3 towards organizational goal B2. Communicate clearly and concisely when presenting, discussing and reporting in formal and 3 informal situations, both in writing and orally B3. Demonstrate awareness of cultural and language 3 differences in all communication B4. Apply active listening and effective interviewing 3 techniques B5. Apply negotiation skills to reach solutions and 3 agreements B6. Apply consultative skills to minimize or resolve conflict, solve problems and maximize 3 opportunities B7. Present ideas and influence others to provide 3 support and commitment 3. Personal 3.00 A C1. Demonstrate a commitment to lifelong learning 3 C2. Apply professional scepticism through questioning 3 and critically assessing all information C3. Set high personal standards of delivery and monitor personal performance, through feedback from 3 others and through reflection C4. Manage time and resources to achieve professional 3 commitments C5. Anticipate challenges and plan potential solutions 3 C6. Apply an open mind to new opportunities 3 4. Professional scepticism and professional judgment 3.00 A D1. Apply a questioning mind - set critically to assess financial information and other 3 relevant data D2. Identify and evaluate reasonable alternatives to reach well - reasoned conclusions based on 3 all relevant facts and circumstances 5. Ethical principles 3.00 A E1. Explain the nature of ethics 3 E2. Explain the advantages and disadvantages of rules - based and principles - based approaches 3 to ethics E3. Identify ethical issues and determine when 3 ethical principles apply E4. Analyse alternative courses of action and 3 determine the ethical consequences of these E5. Apply the fundamental ethical principles of 3 integrity, objectivity, professional competence 49 and due care, confidentiality, and professional behaviour to ethical dilemmas and determine an appropriate approach E6. Apply the relevant ethical requirements to professional behaviour in compliance with 3 standards C) Competency framework for certified auditor Competency framework for technical Required Professional auditor Importance proficiency 1. Management and Ethics 2.29 A A1. Recognize the principles of authority and leadership and how teams and individuals are recruited, managed, motivated and 2 developed A2. Understand the importance of personal effectiveness as the 2 basis for effective team and organizational behaviour A3. Recognize that all aspects of business and finance should be conducted in a manner which complies with and is in the spirit of 2 accepted professional ethics and professional value C3. Recognize that all aspects of business and finance should be conducted in a manner which complies with and is in the spirit of 3 accepted professional ethics and professional values P1. Explain the role of the accountant in identifying and assessing 2 risk P2. Explain and evaluate the role of the accountant in controlling 2 and mitigating risk P3. Demonstrate the application of professional values and judgement through an ethical framework that is in the best 3 interests of society and the profession, in compliance with relevant professional codes, laws and regulations 3. Management Techniques 1.67 P1. Evaluate and redesign business processes and structures to implement and support the organization’s strategy taking account 1 of customer and other major stakeholder requirements P2. Integrate appropriate information technology solutions to 2 support the organization’s strategy P3. Advise on the principles of project management to enable the implementation of aspects of the organization’s strategy with the 2 twin objectives of managing risk and ensuring benefits realization 6. Principles of Financial Management 2.25 F1. Discuss the role and purpose of the financial management 3 function 50 P1. Explain and evaluate the role and responsibility of the senior financial executive or advisor in meeting conflicting needs of 3 stakeholders F2. Assess and discuss the impact of the economic environment on 2 financial management P2. Evaluate the impact of macroeconomics and recognize the role of international financial institutions in the financial management 1 of multinationals Competency framework for non – technical competencies Required Professional auditor Importance proficiency 1. Intellectual 3.00 A A1. Evaluate information from a variety of sources and perspectives through research, analysis and 3 integration A2. Apply professional judgment, including identification and evaluation of alternatives, to 3 reach well - reasoned conclusions based on all relevant facts and circumstances A3. Identify when it is appropriate to consult with 3 specialists to solve problems and reach conclusions A4. Apply reasoning, critical analysis and innovative 3 thinking to solve problems A5. Recommend solutions to unstructured, multifaceted 3 problems 2. Interpersonal and communication 3.00 A B1. Display cooperation and teamwork when working 3 towards organizational goals B2. Communicate clearly and concisely when presenting, discussing and reporting in formal and 3 informal situations, both in writing and orally B3. Demonstrate awareness of cultural and language 3 differences in all communication B4. Apply active listening and effective interviewing 3 techniques B5. Apply negotiation skills to reach solutions and 3 agreements B6. Apply consultative skills to minimize or resolve conflict, solve problems and maximize 3 opportunities B7. Present ideas and influence others to provide 3 support and commitment 3. Personal 3.00 A C1. Demonstrate a commitment to lifelong learning 3 51 C2. Apply professional scepticism through questioning 3 and critically assessing all information C3. Set high personal standards of delivery and monitor personal performance, through feedback from 3 others and through reflection C4. Manage time and resources to achieve professional 3 commitments C5. Anticipate challenges and plan potential solutions 3 C6. Apply an open mind to new opportunities 3 4. Professional scepticism and professional judgment 3.00 A D1. Apply a questioning mind - set critically to assess financial information and other 3 relevant data D2. Identify and evaluate reasonable alternatives to reach well - reasoned conclusions based on 3 all relevant facts and circumstances 5. Ethical principles 3.00 A E1. Explain the nature of ethics 3 E2. Explain the advantages and disadvantages of rules - based and principles - based approaches 3 to ethics E3. Identify ethical issues and determine when 3 ethical principles apply E4. Analyse alternative courses of action and 3 determine the ethical consequences of these E5. Apply the fundamental ethical principles of integrity, objectivity, professional competence and due care, confidentiality, and professional 3 behaviour to ethical dilemmas and determine an appropriate approach E6. Apply the relevant ethical requirements to professional behaviour in compliance with 3 standards V Closing Remarks 5.1. Key gaps & issues The economics faculties of Serbian universities offer fundamental knowledge to students, but curricula at both undergraduate and professional levels are focused on providing foundational and technical knowledge, with little regard to communication, teamwork, critical thinking and other key skills. The gap analysis points to scope for improving the development of both technical and non - technical competencies to achieve the benchmark learning outcomes. 52 Curricula Competency frameworks for undergraduates, professional accountants, and professional auditors would benefit from revision linked to the unique requirements of each group. Areas of technical competencies need only limited modifications to address identified gaps but the inclusion of non – technical competencies would be a significant change and improvement. Courses at universities should encourage the application of critical thinking, ethics in business, communication, leadership, teamwork, problem solving and other non – technical competencies. The Importance/Proficiency matrix illustrates this with soft skills being positioned in the red areas, indicating their high importance to key stakeholders. Teaching To be most effective, changes to accounting and audit curricula would be accompanied by changes in the educational approach. Traditional education methods focus on knowledge replication, where learning is scored mostly by methods that do not involve proper valuation of judgment or critical thinking. Stakeholders repeatedly claimed that these traditional methods were failing to properly develop critical and conceptual thinking, leading to poor interconnectivity between different courses and poor strategic thinking skills, especially at higher managerial levels. This adds unnecessary costs to employers who must properly train new graduates, which implies that a faculty diploma has less value to graduates. A modern teaching approach focuses on developing a set of professional knowledge, skills, values, ethics and attitudes broad enough to enable adaptation to constant change – encouraging a constant desire to learn and apply what is new. Meeting the needs of the profession There is scope for much greater coordination between universities and the A&A profession. Technical competencies related to ICT were identified as especially lacking among graduates. An almost universal consensus is that Excel skills should be better taught at undergraduate level. In addition, ERP is growing in importance considering the number of corporations that have, or are planning to integrate it. These corporations tend to be high – paying clients and should be able to expect at least a basic understanding of how ERP functions and how it relates to A&A practice. Improved coordination can help ensure that policy gaps on the labour market demand side identified by stakeholders can be addressed, such as the absence of support for employers in providing additional training to new graduates to bridge gaps in graduates’ skills, especially professional competences that the university system is not yet effectively addressing. In return, the labor market could be much more engaged in helping potential and new members of the profession to gain the experience they need. There is an absence of support to graduates in obtaining relevant work experience during their period of university studies, or immediately afterwards, through appropriate work placement and internship programs. A lack of well - organized support to assist university graduates in the transition to labour market means that too often they must rely on personal and family connections. 5.1.1. Policy recommendations 53 This paper suggests addressing the most significant competency gaps identified during the practice analysis and highlighted by key stakeholders, by modifying current curricula. This would result in more integrated curricula which emphasize technical and non – technical competencies in a balanced way, with more weight given to non – technical skills, the area found to be most lacking. Technical modifications are related to increasing coverage of the ACCA benchmark, with improvements to subjects incorporating elements of performance management, management techniques and financial management. The non – technical dimension would be addressed by incorporating vital learning objectives from IES – 3 and IES – 4 educational standards. These develop non – technical attributes, such as interpersonal communication, organizational skills and critical thinking skills. The end result would be vastly improved curricula, not only compared to best practice benchmark goals, but which would increase capacity for problem solving and adaptive reasoning while bridging the gaps in the mentioned technical competencies. An integrative approach will allow undergraduates and professional accountants and auditors easier access to the labour market and closer alignment of competencies studied and those required in practice. Appendix IES Standards List IES 1, Entry Requirements to Professional Accounting Education Programs 54 − Provides the entry requirements that should be present in an IFAC member body’s program of professional accounting education and practical experience. − Entry requirements help ensure that students hoping to become professional accountants have an educational background that enables them to have a reasonable probability of success in their education, exams, and experience. − The requirements for entry into a professional accounting education program that leads to membership in an IFAC body should be at least equivalent to the entry requirements for admission into a recognized university degree program. IES 2, Initial Professional Development – Technical Competence − This International Education Standard prescribes the learning outcomes for technical competence that aspiring professional accountants are required to achieve to qualify as professional accountants. Technical competence is the ability to apply professional knowledge to perform a role to a defined standard. − The aim is to ensure that candidates who are ready to become members of an IFAC member body have enough advanced professional accountancy knowledge to function as competent professional accountants in an increasingly complex and changing environment. − The educational program should also help develop intellectual skills including understanding, application, analysis and evaluation. IES 3, Initial Professional Development – Professional Skills − This International Education Standard prescribes the learning outcomes for non – technical competencies that aspiring professional accountants are required to achieve to qualify as professional accountants. Non – technical competencies are: − Intellectual skills; − Technical and functional skills; − Personal skills; − Interpersonal and communication skills; − Organizational and business management. Professional accountant integrates those competencies with technical competence and professional values, ethics, and attitudes to demonstrate professional competence. IES 4, Initial Professional Development – Professional Values, Ethics, and Attitudes − IES 4 prescribes the professional values, ethics and attitudes professional accountants should acquire during the education program leading to qualification. − IFAC has established an international Code of Ethics for Professional Accountants. The program should lead to commitment to: − The public interest and sensitivity to social responsibilities; 55 − Continual improvement and lifelong learning; − Reliability, responsibility, timeliness, courtesy and respect; − Laws and regulation (especially the IFAC Code of Ethics). IES 5, Initial Professional Development – Practical Experience − IES 5 prescribes the practical experience that IFAC member bodies should require their members to obtain before qualification as professional accountants, to ensure they can function competently, and to be able to adapt practical experience requirements to meet (a) their own needs, (b) the requirements of the relevant regulatory authorities, as well as (c) public expectations that professional accountants are competent. − Ongoing experience and learning is required to maintain competence, and additional experience may be required for specialization (such as for auditors). − The period of practical experience should be long enough and intensive enough to permit candidates to demonstrate they have gained the professional knowledge, professional skills and professional values, ethics and attitudes required for performing as a competent professional accountant. To reach this, a minimum of 3 years practical experience should be required. IES 6, Initial Professional Development – Assessment of Professional Competence − IES 6 prescribes the requirements for a final assessment of a candidate’s professional capabilities and competence before qualification. − It deals with the assessment of the professional capabilities (i.e. the professional knowledge, professional skills and professional values, ethics and attitudes) acquired through professional education programs, as detailed in IES 2, 3, and 4. IES 7, Continuing Professional Development − This International Educational Standard (IES) prescribes the continuing professional development (CPD) required for professional accountants to develop and maintain the professional competence necessary to provide high quality services to clients, employers, and other stakeholders, and thereby to strengthen public trust in the profession. IES 8, Professional Competence for Engagement Partners Responsible for Audits of Financial Statements (effective from July 1, 2016.) − This International Education Standard (IES) prescribes the professional competence that professional accountants are required to develop and maintain when performing the role of an Engagement Partner responsible for audits of financial statements. This IES applies IES 7 requirement to the role of an Engagement Partner. It is the responsibility of the professional accountant performing the role of an Engagement Partner to develop and maintain professional competence by undertaking relevant CPD activities, which include practical experience. − Table A: Learning Outcomes for the Professional Competence of an Engagement Partner Competence Area Learning Outcomes Technical Competence 56 (a) Audit (i) Lead the identification and assessment of the risks of material misstatement as part of an overall audit strategy. (ii) Evaluate responses to the risks of material misstatement. (iii) Evaluate whether the audit was performed and documented in accordance with applicable standards (e.g., ISAs) and relevant laws and regulations. (iv) Develop an appropriate audit opinion and related audit report, including a description of key audit matters as applicable. (b) Financial accounting and reporting (i) Evaluate whether an entity has prepared, in all material respects, financial statements in accordance with the applicable financial reporting framework and regulatory requirements. (ii) Evaluate the recognition, measurement, presentation, and disclosure of transactions and events within the financial statements in accordance with the applicable financial reporting framework and regulatory requirements. (iii) Evaluate accounting judgments and estimates, including fair value estimates, made by management. (iv) Evaluate the fair presentation of financial statements relative to the nature of the business, the operating environment, and the entity’s ability to continue as a going concern. (c) Governance and risk management (i) Evaluate corporate governance structures and Risk assessment processes affecting the financial statements of an entity as part of the overall audit strategy. (d) Business environment (i) Analyse relevant industry, regulatory, and other external factors that are used to inform audit risk assessments including, but not limited to, market, competition, product technology, and environmental requirements. (e) Taxation (i) Evaluate procedures performed to address the risks of material misstatement in the financial statements in respect of taxation, and the effect of the results of these procedures on the overall audit strategy. (f) Information technology (i) Evaluate the information technology (IT) environment to identify controls that relate to the financial statements to determine the impact on the overall audit strategy. 57 (g) Business laws and regulations (i) Evaluate identified or suspected non- compliance with laws and regulations to determine the effect on the overall audit strategy and audit opinion. (h) Finance and financial management (i) Evaluate the various sources of financing available to, and financial instruments used by, an entity to determine the impact on the overall audit strategy. (ii) Evaluate an entity’s cash flow, budgets, and forecasts, as well as working capital requirements to determine the impact on the overall audit strategy. Professional Skills (i) Intellectual (i) Resolve audit issues using inquiry, abstract and Logical thought, and critical analysis to consider alternatives and analyse outcomes. (j) Interpersonal and communication (i) Communicate effectively and appropriately with the engagement team, management, and those charged with governance of the entity. (ii) Resolve audit issues through effective consultation when necessary. (k) Personal (i) Promote and undertake lifelong learning. (ii) Act as a role model to the engagement team. (iii) Act in a mentoring or coaching capacity to the engagement team. (l) Organizational (i) Evaluate whether the engagement team, including auditor’s experts, collectively has the appropriate objectivity and competence to perform the audit. (ii) Manage audit engagements by providing leadership and project management of engagement teams. Professional Values, Ethics, and Attitudes (m) Commitment to the public interest (i) Promote audit quality in all activities with a focus on protecting the public interest. (n) Professional scepticism and professional (i) Apply a sceptical mind-set and professional judgment judgment in planning and performing an audit and reaching conclusions on which to base an audit opinion. (o) Ethical principles (i) Apply the ethical principles of integrity, objectivity, professional competence and due care, confidentiality, and professional behaviour in the context of an audit and determine an appropriate resolution to ethical dilemmas. (ii) Evaluate and respond to threats to objectivity and independence that can occur during an audit. 58 (iii) Protect the confidential information of the entity in accordance with ethical responsibilities and relevant legal requirements. − Source: International Accounting Education Standards Board: Handbook of International Education Pronouncements, 2017. Edition. 59 ACCA Exam Structure Level 1 Fundamentals – Knowledge Exams Aim Main capabilities Topics include F1 Accountant in Business To introduce knowledge and − Understand the purpose and types of businesses − Business stakeholders and understanding of the business and and how they interact with key stakeholders and external environment its environment. the external environment. Understand business − Business structure organization structure, functions and the role of − Accounting and reporting corporate governance systems, controls and − Recognize the function of accountancy and audit compliance in communicating, reporting and assuring financial − Leadership and teamwork information and in effective financial control and − Personal effectiveness and compliance. communication − Recognize the principles of authority and − Ethics in accounting and leadership and how teams and individuals are business recruited, managed, motivated and developed. − Understand the importance of personal effectiveness as the basis for effective team and organizational behavior. − Recognize that all aspects of business and finance should be conducted in a manner that complies with and is in the spirit of accepted professional ethics and professional values. F2 Management Accounting To develop knowledge and − Management information understanding of management − Cost accounting techniques accounting techniques to support − Budgeting management in planning, − Standard costing measuring, controlling and − Performance measurement monitoring business performance in a variety of business context. 60 F3 Financial Accounting To develop knowledge and − On successful completion of this paper, candidates − Financial reporting understanding of the underlying should be able to: − Qualitative characteristics of principles and concepts relating to − Explain the context and purpose of financial financial information financial accounting and technical reporting − Double-entry and accounting proficiency in the use of double − Define the qualitative characteristics of financial systems entry accounting techniques information − Recording transactions including the preparation of basic − Demonstrate the use of double-entry and − Trial balance financial statements. accounting systems − Preparing basic financial − Record transactions and events statements − Prepare a trial balance (including identifying and − Preparing simple consolidated correcting errors) financial statements − Prepare basic financial statements for incorporated − Interpreting financial and unincorporated entities. statements − Prepare simple consolidated financial statements − Interpretation of financial statement Level 2 Fundamentals – Skills Exams Aim Main capabilities Topics include F4 Corporate and business To develop knowledge and skills in − Essential elements of the law the understanding of the general legal system legal framework and of specific − Obligations legal areas relating to business, − Employment law recognizing the need to seek − Formation and constitution further specialist legal advice where of business organizations necessary. − Financing companies − Management, administration, and regulation of companies − Insolvency − Corporate fraudulent and criminal behaviour 61 F5 Performance To develop knowledge and skills in − Explain and apply cost accounting techniques − Specialist management management the application of management − Select and appropriately apply decision-making accounting accounting techniques to techniques to facilitate business decisions and − Decision-making quantitative and qualitative promote efficient and effective use of scarce − Budgeting information for planning, decision- business resources, appreciating the risks and − Performance measurement making, performance evaluation, uncertainty inherent in business and controlling and control. those risks − Identify and apply appropriate budgeting techniques and methods for planning and control and use standard costing systems to measure and control business performance and to identify remedial action − Identify and discuss performance management information and measurement systems and assess the performance of an organization from both a financial and nonfinancial viewpoint, appreciating the problems of controlling divisionalized businesses and the importance of allowing for external aspects F6 Taxation To develop knowledge and skills − The tax system relating to the tax system as − Income tax and NIC applicable to individuals, single − Chargeable gains for companies, and groups of individuals companies. − Inheritance tax − Corporation tax − VAT F7 Financial reporting To develop knowledge and skills in − Discuss and apply a conceptual and regulatory − The conceptual and understanding and applying framework for financial reporting regulatory framework for accounting standards and the financial reporting 62 theoretical framework in the − Account for transactions in accordance with − Accounting for transactions preparation of financial statements International accounting standards in financial statements of entities, including groups and − Analyse and interpret financial statements. − Analysing and interpreting how to analyse and interpret those − Prepare and present financial statements for single financial statements financial statements. entities and business combinations in accordance − Preparation of financial with International accounting standards statements F8 Audit and assurance To develop knowledge and − Explain the concept of audit and assurance and the − Audit framework and understanding of the process of functions of audit, corporate governance including regulation carrying out the assurance ethics and professional conduct, describing the − Planning and risk assessment engagement and its application in scope and distinguishing between the functions of − Internal control the context of the professional internal and external audit − Audit evidence regulatory framework. − Demonstrate how the auditor obtains and accepts − Review and reporting audit engagements, obtains an understanding of the entity and its environment, assesses the risk of material misstatement (whether arising from fraud or other irregularit1) and plans an audit of financial statements − Describe and evaluate internal controls, techniques and audit tests, including IT systems to identify and communicate control risks and their potential consequences, making appropriate recommendations − Identify and describe the work and evidence obtained by the auditor and others required to meet the objectives of audit engagements and the application of the International Standards on Auditing (ISAs) − Explain how consideration of subsequent events and the going concern principle can inform the conclusions from audit work and are reflected in different types of auditor’s report, written representations and the final review and report. 63 F9 Financial management To develop the knowledge and skills − Discuss the role and purpose of the financial − Financial management expected of a finance manager, in management function function relation to investment, financing, − Assess and discuss the impact of the economic − Financial management and dividend policy decisions. environment on financial management environment − Discuss and apply working capital management − Working capital techniques management − Carry out effective investment appraisal − Investment appraisal − Identify and evaluate alternative sources of − Business finance business finance − Business valuations − Discuss and apply principles of business and asset − Risk management valuations − Explain and apply risk management techniques in business. Level 3 Professional – Essentials and Options Exams Aim Main capabilities Topics include P1 Governance, risk and To apply relevant knowledge, skills − Define governance and explain its function in the − Governance and ethics and exercise professional effective management and control of organizations responsibility judgement in carrying out the role and of the resources for which they are − Internal control and review of the accountant relating to accountable − Identifying and assessing governance, internal control, − Evaluate the Professional Accountant’s role in risk compliance and the management internal control, review and compliance − Controlling risk of risk within an organization, in the − Explain the role of the accountant in identifying − Professional values, ethics context of an overall ethical and assessing risk and social responsibility framework. − Explain and evaluate the role of the accountant in controlling and mitigating risk − Demonstrate the application of professional values and judgement through an ethical framework that is in the best interests of society and the profession, in compliance with relevant professional codes, laws and regulations. 64 P2 Corporate reporting To apply knowledge, skills and − Discuss the professional and ethical duties of the − The professional and ethical exercise professional judgement in accountant duty of the accountant the application and evaluation of − Evaluate the financial reporting framework − The legal and financial financial reporting principles and − Advise on and report the financial performance of reporting framework practices in a range of business entities − Reporting the financial contexts and situations. − Prepare the financial statements of groups of performance of entities entities in accordance with relevant accounting − Financial statements of standards groups of entities − Explain reporting issues relating to specialized − Specialized entities and entities specialized transactions − Discuss the implications of changes in accounting − Implications of changes in regulation on financial reporting accounting regulation on − Appraise the financial performance and position of financial reporting entities − The appraisal of financial − Evaluate current developments performance and position of entities − Current developments P3 Business analysis To apply relevant knowledge, skills, − Assess the strategic position of an organization − Strategic position, choices and exercise professional − Evaluate the strategic choices available to an and action judgement in assessing strategic organization − Business and process position, determining strategic − Discuss how an organization might go about its change choice, and implementing strategic strategic implementation − Information technology action through beneficial business − Evaluate and redesign business processes and − Project management process and structural change; structures to implement and support the − Financial analysis coordinating knowledge systems organization’s strategy taking account of customer − People and information technology and by and other major stakeholder requirements effectively managing processes, − Integrate appropriate information technology projects, and people within solutions to support the organization’s strategy financial and other resource − Advise on the principles of project management to constraints. enable the implementation of aspects of the 65 organization’s strategy with the twin objectives of managing risk and ensuring benefits realization − Analyse and evaluate the effectiveness of a company’s strategy and the financial consequences of implementing strategic decisions − Assess the role of leadership and people management in formulating and implementing business strategy. P4 Advanced financial To apply relevant knowledge, skills − Explain and evaluate the role and responsibility of − Role and responsibility management and exercise professional the senior financial executive or advisor in meeting towards stakeholders judgement as expected of a senior conflicting needs of stakeholders and recognize the − Economic environment for financial executive or advisor, in role of international financial institutions in the multinational organizations taking or recommending decisions financial management of multinationals − Advanced investment relating to the financial − Evaluate potential investment decisions and appraisal management of an organization in assessing their financial and strategic consequences, − Acquisitions and mergers private and public sectors. both domestically and internationally − Corporate reconstruction and − Assess and plan acquisitions and mergers as an re-organization alternative growth strategy − Treasury and advanced risk − Evaluate and advise on alternative corporate re- management techniques organization strategies − Emerging issues in finance − Apply and evaluate alternative advanced treasury and financial management and risk management techniques P5 Advanced performance To apply relevant knowledge, skills − Use strategic planning and control models to plan − Strategic planning and control management and exercise professional and monitor organizational performance − External influences on judgement in selecting and applying − Assess and identify key external influences on organizational performance strategic management accounting organizational performance − Performance measurement techniques and approaches in − Identify and evaluate the design features of effective systems and design different business contexts and to performance management information and − Strategic performance contribute to the evaluation of the monitoring systems measurement performance of an organization and − Apply appropriate strategic performance − Performance evaluation and its strategic development. measurement techniques in evaluating and corporate failure improving organizational performance 66 − Advise clients and senior management on strategic − Current developments and business performance evaluation and on recognizing emerging issues performance vulnerability to corporate failure management P6 Advanced taxation To apply relevant knowledge, skills − The syllabus for this exam and exercise professional changes depending on the judgement in providing relevant region you are based in information and advice to individuals and businesses on the impact of the major taxes on financial decisions and situations. P7 Advanced audit and To analyse, evaluate and conclude − Recognize the legal and regulatory environment and − Regulatory Environment assurance on the assurance engagement and its impact on audit and assurance practice − Professional and Ethical other audit and assurance issues in − Demonstrate the ability to work effectively on an Considerations the context of best practice and assurance or other service engagement within a − Practice Management current developments. professional and ethical framework − Audit of historical financial − Assess and recommend appropriate quality control information policies and procedures in practice management and − Reporting recognize the auditor’s position in relation to the − Current Issues and acceptance and retention of professional Developments appointments − Identify and formulate the work required to meet the objectives of audit assignments and apply the International Standards on − Identify and formulate the work required to meet the objectives of non-audit assignments − Evaluate findings and the results of work performed and draft suitable reports on assignments − Understand the current issues and developments relating to the provision of audit related and assurance services 67 Interviewees List of conducted Interviews with representative stakeholders of A&A profession is presented in following table: Table: Interviews with representative stakeholders of A&A profession 8 Sector Company Position SAAA Education Director Professional organizations CAA General Secretary NES Director of the Branch Office Faculty of Economics Belgrade 2 Professors Faculties Faculty of Economics Belgrade 2 Teaching Assistants Victoria Group HR Manager Victoria Group Chief Accounting Officer Victoria Group CEO Fashion company General Manager Fashion company CFO Novkol General Manager Novkol Chief Accounting Officer Private local companies Deus Business Group General Manager Deus Business Group CFO Atos Fructum General Manager Artinvest General manager Artinvest CFO Frikom CFO Frikom HR Manager Pharmaswiss CFO Asterpharm General Manager Asterpharm Chief Accounting Officer Private multinational JTI CFO JTI HR Manager SBB HR Manager JKP Infostan General Manager JKP Infostan CFO SOE JKP Drugi oktobar Vrsac General Manager Elektromreza Srbije CFO Elektromreza Srbije HR Manager Deloitte Senior Audit and Advisor KPMG Senior Audit and Advisor BDO 2 Seniors Audit and Advisor TPA Horwath Senior Audit and Advisor Audit and accounting companies Small audit & accounting 5 auditors companies Small audit & accounting 3 accountants companies Total number of interviewees 46 8 Please note that interviews are anonymous to allow our respondents to speak with candor. 68 69