Independent financial audit – the Westminster model

Abstract

The institution of financial auditing was introduced in Hungary back in 1930 and, based on the English model, was called certified audit. This method of control was rejected by the socialist system and thrown into obscurity. The inland private (enterprise) sector's external and independent financial audit could only start operating again, its regulation based on the English approach, during the process called political system change. This means nearly six decades had to pass, until the compulsory audit of public limited companies and limited companies with a turnover above HUF 50 million was introduced and regulated, again, by law (Companies Act 1988). The Parliament introduced laws (twice already) about enterprise (trading) accounting standards, and made declarations regarding reporting and auditing principles. The Chamber of Hungarian Auditors was set up as an independent public body, legitimated also by law, which adopted the IFAC's (International Federation of Accountants) auditing standards.