Importance of External Audit in Improvement of Financial Reporting in Public Institutions: Evidence from Kosovo

Authors

  • Mimoza Guda University of Prishtina "Hasan Prishtina", Faculty of Economy
  • Hysen Ismajli University of Prishtina, Faculty of Economy
  • Agon Ferati Rochester Institute of Technology

Keywords:

Audit report, Financial reports, IPSAS, Public Institutions.

Abstract

The main purpose of this paper is to analyze the progress and readiness of Kosovo municipalities to address the recommendations of the Auditor General to enhance the quality of financial reporting. Management of public funds is one of the main criticisms faced by Kosovo institutions since their formation in 2001. Great importance in this respect plays the Office of the Auditor General (OAG) which serves as supervisor and controller of how public funds are spent by public institutions. Knowing that managing public funds is a very sensitive process dealing with taxpayers' funds, public institutions are required to adhere to principles derived from the Constitution and laws of the Republic of Kosovo, such as the principle of accountability, transparency, and efficiency in the management of public finances for every use of public funds.

In addition, this paper examines the compliance by municipalities of Kosovo with International Accounting Standards applied in the Public Sector (IPSAS) for cash basis financial reporting and local laws and regulations in preparing financial reports. This paper was conducted based on municipal financial reports of 2011-2012 and interviews held with the responsible persons for these reports.

As a result, main challenges of local government remain the deficiencies in almost all elements of financial reports and stagnation in addressing the recommendations of the OAG. Thus, municipalities are not in compliance with the principles of the Constitution and the laws for accountability, transparency and efficiency in the way public funds are spent.

Based on the results, the final section of this paper presents conclusions and recommendations.

Author Biographies

Mimoza Guda, University of Prishtina "Hasan Prishtina", Faculty of Economy

MSc in Bank, Finance and Accounting Departement from Faculty of Economy, University of Prishtina "Hasan Prishtina".

Enrolled in ACCA (the Association of Chartered Certified Accountants)

Hysen Ismajli, University of Prishtina, Faculty of Economy

Bank, Finance and Accounting Department

Agon Ferati, Rochester Institute of Technology

Management, Public Policy and Economics Department

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Published

2015-01-01

How to Cite

Guda, M., Ismajli, H., & Ferati, A. (2015). Importance of External Audit in Improvement of Financial Reporting in Public Institutions: Evidence from Kosovo. International Journal of Economic Practices and Theories, 5(1), 1-9. Retrieved from http://ijept.eu/index.php/ijept/article/view/Importance_of_External_Audit_in_Improvement_of_Financial_Repor

Issue

Vol. 5 No. 1 (2015)

Section

Articles

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