Accounting and Auditing : Romania

Abstract

This assessment of accounting and
 auditing practices in Romania is part of a joint initiative
 by the World Bank and International Monetary Fund (IMF) to
 prepare Reports on the Observance of Standards and Codes
 (ROSC). The assessment focuses on the strengths and
 weaknesses of the accounting and auditing environment that
 influence the quality of corporate financial reporting, and
 includes a review of both statutory requirements and actual
 practice. It uses International Financial Reporting
 Standards (IFRS) and International Standards on Auditing
 (ISA) as benchmarks and draws on international experience
 and best practices. This assessment updates the findings of
 the previous accounting and auditing ROSC conducted in
 Romania in 2002 and published in 2003. It is important to
 note that there has been significant growth in the credit
 environment including significant increases in the granting
 of foreign currency denominated credit. The proportion of
 loans denominated in foreign currency has risen recently to
 50 per cent of all loans granted. Provisions to convert
 outstanding loan amounts into local currency under certain
 thresholds often exist in foreign currency denominated loan
 contracts. These provisions aim to address the potential
 credit risk arising from the foreign exchange risk borne by
 the borrowers. While the National Bank of Romania is
 monitoring the situation closely and requiring higher bank
 reserves for loans denominated in foreign currency (to curb
 the growth of such loans), these aspects could provide
 significant challenges to the National Bank of Romania in
 future years.