In mid-September, changes to the Independent Financial Audit Act were adopted in the Republic of Bulgaria. These legislative changes are driven by the need to align Bulgarian legislation with Directive (EU) 2022/2464 to improve the information security of sustainability reports for large enterprises and small and medium-sized enterprises of public interest, which are not micro-enterprises according to Directive 2013/34/EU and whose securities are traded on a regulated market. Many stakeholders believe the term "non-financial" information is inaccurate because it implies the information is not financially significant. However, this information increasingly holds financial importance, which is one of the reasons for the amendments to Directive 2013/34/EU regarding annual financial statements, consolidated financial statements, and related reports of certain types of enterprises. The amendments to Directive 2013/34/EU aim to ensure better accountability of enterprises, enabling information users, such as investors and the civil society, to engage more actively in social dialogue and understand the risks and opportunities related to sustainability. This will also help enterprises to be more accountable for their impacts on people and the environment.
Sustainability information helps business partners, including customers, understand the risks and impacts related to sustainability. It is used to monitor environmental and social trends and to develop public policies. High-quality information benefits enterprises by improving their access to financial capital and managing risks. The harmonization of sustainability reporting standards in the EU will facilitate this process and reduce ad hoc information requests. The importance of sustainability information is also recognized at the state level for public policies. Directive (EU) 2022/2464 requires sustainability reports to be verified by assurance service providers to ensure compliance with EU standards and Regulation (EU) 2020/852.
The role of external audit is changing significantly to reduce the information risk for users of audited information. Although the main focus has been on financial information, the new requirements expand the scope to more complex aspects of enterprises. Auditors must express an opinion on the compliance of sustainability reports with EU requirements, and from 1 October 2028, this must be based on reasonable assurance. The gradual transition from limited to reasonable assurance will develop the market for auditing services and enterprise practices, although it will increase costs. Member States must allow auditors from other Member States to perform sustainability assurance activities in their territory.
To achieve the above-mentioned goals, it is necessary to establish a national system regulating the duties, rights, and responsibilities related to sustainability assurance: training and certification exams, continuous professional development, a system for quality assurance of professional activities, professional ethics, independence and objectivity, confidentiality, auditor selection, organization of auditors' work, investigations, and sanctions. The Independent Financial Audit Act also includes measures for: aligning terminology with the Accounting Act, regulating the structure and activities of the Institute of Certified Public Accountants, eliminating the requirement for professional stamps, supplementing regulations for the auditors' register, supervisory measures and administrative penalties, auditors' responsibilities, and rotation rules for mandatory audits.