First-hand Assessment of the Ongoing Accounting and Audit Reform in Georgia
Georgian government enacted the Law of Georgia on Accounting, Reporting and Auditing as of June 8, 2016. The lawhas required about 600 firms of first and second categories as well as Public Interest Entities to report their financial statements latest on October 1st, 2018. Groups of the third and fourth categories (about 83.000 firms) shall report their financial statements latest on October 1st, 2019.This is a unique possibility not only for data-seeking ‘poor’ researchers (like us), but also for the regulators and standard-setters in Georgia and within the EU, as the regulation towards massive transparency happens for the first time in the country’s history. 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 of the reporting firms, this research project aims to theoretically review the ongoing reform details, descriptively analyzethe details of already available data of about 600 firms and draw the firstestimations ofthe 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 reform is actively supported (financially and administratively) by international organizations; 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 companieshaveeven voluntarily published their audited financial statements; a high proportion of the reports is audited by large audit companies. These details enable us to expect that the currently ongoing field reform, unlike to previous attempts, will lead to significantly different positive outcomes.
Keywords - Accounting and audit reform; Georgia; Accounting quality; Disclosure; Enforcement.