Albania’s experience of strengthening audit oversight and financial reporting 

The POB Forum was held in Albania, allowing the host country to showcase their achievements in enhancing audit oversight as part of reforms of corporate financial reporting, supported by the Strengthening Quality of Auditing and Reporting Project (SQARP), funded by the Swiss State Secretariat for Economic Affairs (SECO), and implemented by the World Bank Centre for Financial and Sustainability Reporting Reform (CFRR). Albania outlined how it had successfully addressed the technical, legal, institutional, and educational foundations that enhance the transparency, credibility, and reliability of financial information in the country and are required for alignment with the EU acquis (more details). 

The impact and role of technology, especially AI, in audit oversight and regulation 

The POB Forum considered how auditors are adapting to technological transformation, emphasizing the need for professional skepticism and awareness of automation bias. It was noted that AI tools are increasingly being used in areas such as audit, accounting, insolvency management, and property evaluation. Experiences from different countries, including Portugal and Lithuania, illustrated the growing role of data-driven risk assessment and IT tools in audit oversight. 

The Forum considered both the challenges and opportunities that come with new technologies, emphasizing the need for auditors to understand and mitigate risks associated with clients' use of technology. Discussions reinforced the importance of developing internal controls, robust governance, and continuous investment in talent and technology for both audit firms and oversight authorities. They also touched on the evolving role of auditors in the context of expanding data analytics and sustainability reporting. This evolution will unquestionably have an impact on the extent and nature of public oversight. 

Auditors have a key role working in the public interest in the corporate reporting ecosystem, they should therefore seek to incorporate emerging technologies that can help them perform this role in an effective and efficient manner, abiding by professional ethics. Audit oversight bodies need to be a part of the transformation by aligning their practices and supporting the audit market, particularly smaller size firms. 

The development and use of audit quality indicators (AQIs) in public oversight

The POB Forum considered AQIs and their potential to improve audit quality. Key concepts and different perspectives on AQIs, including those from policymakers, academics, and global standard setters, were presented. The experience of implementing AQIs in Poland was outlined, focusing on the process of selecting indicators, collecting data, and analyzing results. Portugal’s approach to AQIs was discussed, emphasizing the need for data-driven decision-making and the use of AQIs as a tool to enhance audit quality.

Discussions considered the lessons learnt from, and benefits of, AQI implementation. Participants described initial skepticism from audit firms but noted that collaborative efforts had led to positive cooperation and tangible benefits over time. The conversation acknowledged the challenges of data collection, the importance of context when interpreting AQI results, and the potential for AQIs to improve audit quality and transparency. The CEAOB had recently established an AQI Task Force that was working to analyze existing AQI models and gather information from various stakeholders to inform the debate and future decisions on AQIs. 

The POB Forum concluded that AQIs had an important role in audit oversight and would particularly benefit audit committees but should be considered as a means rather than an end. Collaboration between audit firms and oversight bodies would be crucial in developing and implementing AQIs. 

EU audit oversight models and approaches to challenges 

Three established audit oversight bodies from EU countries, with similar backgrounds and size to many of the countries attending, outlined some common challenges faced by audit regulators and how they had tackled them. These challenges were identified in the recent CFRR publication, “Audit oversight in European Union and Western Balkans” and included board member appointments, staff recruitment and retention, remuneration, inspection ratings, and the complexities of conducting first-time inspections. Some key points from the discussions included: 

Oversight Model 

The EU requires public oversight of auditors but allows Member States to tailor the EU Audit Directive and Regulation to their national systems, without mandating a single oversight model. Oversight bodies (or designated competent authorities) are usually accountable to government departments, or other higher-level public authorities, for funding and regulatory robustness. Annual public reports are required, enhancing transparency. Oversight bodies periodically review their frameworks to ensure relevance and effectiveness. Lithuania described its shift from a practitioner-led oversight system to a public authority model, focusing on thorough inspections and robust enforcement actions. Cyprus shared its strategies for maintaining independence, implementing a peer review process, and using risk-based sampling methodology for inspections. It had transitioned to publicly releasing inspection ratings, thereby increasing transparency. 

Boards 

Independence from the audit profession is the primary criterion for board membership. Staff While it is important to recruit staff with audit experience, they do not need to be statutory auditors. Poland has developed an Inspector's Academy to train audit oversight staff, focusing on both technical competence and mediation skills for enforcement proceedings. Lithuania prioritizes audit experience in inspections. Retaining qualified staff is a common challenge, with competitive salaries and ongoing professional development seen as essential. Countries often struggle to match private sector compensation, which can impact the quality and continuity of oversight. To attract quality candidates, Cyprus opted to hire experienced inspectors on contract terms. 

Enforcement

Enforcement varies but generally follows a graduated approach—starting with less strict measures and escalating if necessary. Sanctions are considered crucial for effective oversight. Oversight bodies monitor implementation of inspection findings and action plans. Defending oversight decisions in court and separating duties in the sanctions process are recognized challenges. The enforcement processes used in Cyprus include settlement options, summary procedures, and full enforcement mechanisms. Poland detailed the use of mediation and settlement tools during enforcement proceedings, which can help with addressing a burdensome legal process. 

Updates from participating countries on audit oversight reforms and future plans 

All POB Forum countries presented their progress in improving audit oversight and outlined current challenges they faced. This highlighted some common issues, such as the need for improved legislative frameworks, effective funding models, capacity building of oversight bodies and the auditing profession, and developing digital tools for audit oversight. The relevance of these topics was confirmed by the results of a recent CFRR survey of participating countries’ current progress in the establishment of audit oversight, discussed by the POB Forum. Participants discussed how identified challenges might be addressed. 

Feedback 

Participants valued the opportunity for regional exchange and learning from other countries’ experiences. They noted that sharing information and experiences through platforms such as the POB Forum helped facilitate informed decision-making regarding investment priorities. There was significant engagement on all topics, including the need for audit oversight bodies to adopt advanced technologies, particularly given resource and budget constraints. Participants noted the importance of AQIs, pointing to their potential to enhance effective oversight. They identified it as an area worthy of further exploration, recognizing the need for strategies to collaborate with other stakeholders during AQI implementation and to manage expectations. Feedback from the World Bank, CEAOB, ACCA, Cyprus, Lithuania, and Poland on how to address the various challenges was widely appreciated. 

Next Steps 

The World Bank confirmed that future assistance would be available through the EAASURE and REPARIS for SMEs programs, for both country-specific needs and annual regional events. Participants were encouraged to provide feedback and request technical assistance as required for their audit oversight systems.

About the POB Forum

The POB Forum, established in May 2023, is organized jointly under two flagship programs of the CFRR: the Road to Europe Program for Accounting Reform and Institutional Strengthening for Small and Medium Enterprises (REPARIS for SMEs) and the Enhancing Accounting, Auditing, and Sustainability Reporting (EAASURE) Program. It serves as a platform for sharing international and regional knowledge and experience in the field of public oversight and quality assurance, aiming to enhance audit quality in participating countries through learning, experience exchange, and regional cooperation that supports POBs to address common challenges and progress implementation of key areas of corporate reporting and audit oversight and the further alignment of corporate financial and sustainability reporting frameworks with relevant EU Directives and regulations.