“First-hand Assessment of the Ongoing Accounting and Audit Reform in

Georgia”

Project objectives

The objective of this research project is to provide the first-hand assessment of the ongoing accounting and audit reform in Georgia.

Project activities and outcomes

Georgian government enacted the Law of Georgia on Accounting, Reporting and Auditing as of June 8, 2016. The law has required entities of first and second categories as well as Public Interest Entities (c.a. 600 entities) to report their financial statements latest on October 1st, 2018. Groups of the third and fourth categories (c.a. 83.000 entities) shall report their financial statements latest on October 1st, 2019. As the regulation towards massive transparency takes place for the first time in the country’s history and also quite unusual for the international practice, it is a unique possibility not only for data-seeking researchers (like us), but also for the regulators and standard- setters in Georgia and within the EU. Before the larger dataset enters the playing field by the end of this year and before grasping the roots of financial information quality provided within the financial statements, this research project aims to theoretically review the ongoing reform details, descriptively analyze the already available data of about 600 entities and draw the first estimations of the reform outcomes. Our analysis suggests that the ongoing reform positively differs from any of its predecessor attempts in several regards: the reform’s regulatory window is consistent with the EU framework/experience; the processes are actively (financially and administratively) supported by international organizations; an active focus is given to the increase of interested parties’ awareness and understanding of the accounting fundamentals; monitoring process is stronger and stricter. Findings show that the mandated legislation is well-obeyed; few entities have even voluntarily published their audited financial statements; a high proportion of the reports is audited by large audit firms. These details enable us to expect that the currently ongoing field reform, unlike to previous attempts, will lead to significantly different positive outcomes.

Project starting and finishing dates: 20.06.2018 – 19.12.2019

Coordinator University: Caucasus University, Georgia

The list of Project Partner Universities: Ludwig Maximilian’s University in Munich, Germany

Principal Investigator: Prof. Dr. Erekle Pirveli