report on audited financial statements of citizens
TRANSCRIPT
Auditing and Tax Counselling Firm
""AAddiittoonn"" ddoooo Ul. Vase Pelagića 24-26
BANJA LUKA
REPORT ON AUDITED FINANCIAL STATEMENTS OF CITIZENS’ ASSOCIATION
“TRANSPARENCY INTERNATIONAL BiH” FOR YEAR 2010
- C/O Association’s management -
Banja Luka, June 2011
CA “TRANSPARENCY INTERNATIONAL BiH” Banja Luka – Audit of Financial Statements for 2010
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Auditing and Tax Counselling Firm “ADITON” DOO Banja Luka
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T A B L E O F C O N T E N T S
Page
AUDITOR’S OPINION 2 1 INTRODUCTION 3 2 ASSOCIATION’S BACKGROUND 4 3 RELATED PARTIES 5 4 AUDIT RISK ASSESSMENT 5 5 DETERMINATION OF MATERIALITY 7 6 DOCUMENTATION AND ACCOUNTING 7 7 ACCURACY AND OBJECTIVITY OF PRESENTED
BUSINESS TRANSACTIONS 7
8 COMMENTS ON THE FINANCIAL STATEMENTS 9 9 CONCLUSION 16
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■ e-mail: [email protected] ■ No. of Court Reg. Folio 1-12461-00
■ ID No. with the RS Tax Administration 4401613680003
■ ID No. with the Indirect Taxation Administration 401613680003 ■ MBR 1954601
Transfer account with "NLB Razvojna banka" Banja Luka 5620990001398361
CA “TRANSPARENCY INTERNATIONAL BiH” Banja Luka – Audit of Financial Statements for 2010
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Auditing and Tax Counselling Firm “ADITON” DOO Banja Luka
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OPINION OF INDEPENDENT AUDITOR
CITIZENS’ ASSOCIATION “ANTI-CORRUPTION COMBAT – BOSNIA AND HERZEGOVINA” TRANSPARENCY INTERNATIONAL BiH BANJA LUKA
- C/O Association’s management
Subject of audit
We conducted an audit of financial statements of the Citizens’ association “Anti-Corruption Combat – Bosnia and Herzegovina”, i.e. “Transparency international BIH” Banja Luka, which are comprised of:
- Balance sheet (Statement of financial position), dated 31 December 2010,
- Income statement (Statement of total result), for business year 2010.
Responsibility of the management
The responsibility for producing financial statements, including their adequate and timely publication, rests with the Association’s management. This includes the setting up and maintenance of appropriate accounting records in accordance with applicable laws of the Republic of Srpska, setting up and functioning of internal audits, selection and application of appropriate accounting policies, as well as timely assessment of assets, which is part of the principles contained in the International Audit Standards and International Financial Reporting Standards.
The management’s responsibility also includes compliance with applicable legal regulations, including laws governing the areas of accounting, taxes and other areas relevant to the financial operations of the Association.
The management is also responsible for complying with internal decisions made in accordance with the Association’s regulations, which includes ensuring full integrity of the property.
Responsibility of the auditor
Our responsibility is to issue, based on the audit we conducted, our opinion as to the financial statements produced and presented by the Management.
CA “TRANSPARENCY INTERNATIONAL BiH” Banja Luka – Audit of Financial Statements for 2010
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The audit was conducted in accordance with the Law on Accounting and Audit of the Republic of Srpska, Rulebook on Audit of Financial Statements in the Republic of Srpska and International Auditing Standards. These Standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. The audit entails examination of evidence, based on an inspection of samples justifying the amounts presented in financial statements. This audit also includes the appraisal of the accounting principles applied as well as the appraisal of the general presentation of financial statements. Due to the nature of the audit and other inherent limitations, there is a certain unavoidable risk that a material error may remain undetected. However, we are of the opinion that the use of standardised sampling and inspection methods and analytical procedures has reduced this risk to a reasonable and allowable level.
We believe that the extent of the audit conducted provides reasonable grounds for issuing our audit opinion.
Grounds for issuing positive opinion
In our opinion, the audited financial statements produced by the Association’s management present the assets and the financial standing on 31 December 2010 and business results for the year ending on the said date in an accurate and objective way, in accordance with the International Audit Standards and International Financial Reporting Standards.
Banja Luka, 29 June 2011 No. 57/11-1/11 Authorised auditor
Duško Daničić, MSc. Econ.
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CA “TRANSPARENCY INTERNATIONAL BiH” Banja Luka – Audit of Financial Statements for 2010
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The following standard formats of the Balance sheet and Income Statement were submitted to the competent Agency within the required deadline:
BALANCE SHEET (Statement of financial position)
on 31/12/2010 -in Convertible Marks-
Account No. I T E M AOP Code
Current year amounts Previous year
(opening balance) Gross Allowance
Nett (4-5)
1 2 3 4 5 6 7
ASSETS A. NON-CURRENT ASSETS (002+008+015+021+030) 001 87,558 51,785 35,773 21,012
1 I INTANGIBLE ASSETS (003 through 007) 002 0 0 0 0
10 1. Research and development 003 0
11 2. Concessions, patents, licences and similar rights 004 0
12 3. Goodwill 005 0
14 4. Other intangible assets 006 0 015 and
016 5. Advances and intangible assets under
preparation 007 0
2 II PROPERTY, PLANT, EQUIPMENT AND
INVESTMENT PROPERTIES (009 through 014) 008 87,558 51,785 35,773 21,012
20 1. Land 009 0
21 2. Buildings 010 0
22 3. Plant and equipment 011 87,558 51,785 35,773 21,012
23 4. Investment properties 012 0 027 and
028 5. Advances and property, plant, equipment and investment properties under preparation 013 0
29 6. Investment in not one’s own property, plant and equipment 014 0
3 III BIOLOGICAL ASSETS AND CULTURAL
ASSETS (016 through 020) 015 0 0 0 0 30 1. Forests 016 0
31 2. Plantations 017 0
32 3. Livestock 018 0
33 4. Cultural assets 019 0 038 and
039 5. Advances and biological assets and cultural
assets under preparation 020 0
4 IV LONG-TERM FINANCIAL INVESTMENTS (022 Through 029) 021 0 0 0 0
040, part 049 1. Investment in affiliated companies 022 0
041, part 049 2. Investments in associated companies 023 0
042, part 049
3. Long-term loans through associated companies 024 0
043, part 049 4. Long-term loans – domestic 025 0
044, part 049 5. Long-term loans – foreign 026 0
045, part 049 6. Available for sale financial assets 027 0
046, part 049 7. Long-term securities 028 0
048, part 8. Other long-term investments 029 0
CA “TRANSPARENCY INTERNATIONAL BiH” Banja Luka – Audit of Financial Statements for 2010
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049
50 V DEFERRED TAX ASSETS 030 0 B. CURRENT ASSETS (032+039+060) 031 209,611 0 209,611 179,490
10 through 15
I INVENTORIES, NON-CURRENT ASSETS AVAILABLE FOR SALE AND ASSETS OF OPERATIONS BREAK (033 through 038) 032 0 0 0 0
100 through 109 1. Materials on stock 033 0
110 through 112
2. Work in progress, semi-finished products and services in progress 034 0
120 3. Finished products 035 0 130 through
139 4. Goods on stock 036 0 140 through
149 5. Non-current assets available for sale and
assets of operations break 037 0 150 through
159 6. Prepayments 038 0
II SHORT-TERM RECEIVABLES, INVESTMENTS AND CASH (040+046+055+058+059) 039 209,611 0 209,611 179,490
20, 21, 22 1. Short-term receivables (041 through 045) 040 12,644 0 12,644 10,759 200, part
209 a) Trade receivables – associated entities 041 0 201, part
209 b) Domestic trade receivables 042 0 202, part
209 v) Foreign trade receivables 043 0 210 through
219 g) Receivables from specific business operations 044 0 220 through
229 d) Other short-term receivables 045 12,644 12,644 10,759
23 2. Short-term financial investments (047 do 054) 046 0 0 0 0
230, part 239 a) Short-term loans through associated entities 047 0
231, part 239 b) Short-term domestic loans 048 0
232, part 239 v) Short-term foreign loans 049 0
233 and 234
g) Current portions of long-term loan due within one year 050 0
235, part 239
d) Financial assets at fair value through profit or loss held for trading 051 0
236, part 239
đ) Financial assets at fair value through profit or loss 052 0
237 e) Shares buyback for future sale and stakes
buyback of short-term financial investments 053 0 238, part
239 ž) Other short-term financial investments 054 0
24 3. Cash and cash equivalents (056+057) 055 190,756 0 190,756 168,181
240 a) Cash equivalents – securities 056 0 241 through
249 b) Cash 057 190,756 190,756 168,181 270 through
279 4. Value-added tax 058 0 280 through 289, except
288 5. Prepayments and accrued income 059 6,211 6,211 550
288 III DEFERRED TAX ASSETS 060 0
29 V. LOSSES OVER CAPITAL 061 0
G. OPERATING ASSETS (001+031+061) 062 297,169 51,785 245,384 200,502
880 through 888
D. OFF-BALANCE SHEET ASSETS 063 0
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Đ. TOTAL ASSETS (062+063) 064 297,169 51,785 245,384 200,502
Account No. I T E M AOP Code
Current year
amounts
Previous year
(opening balance)
1 2 3 4 5
EQUITY AND LIABILITIES A. EQUITY (102-109+110+111+114+115-116+117-122) 101 0 0
30 I SHARE CAPITAL (103 through 108) 102 0 0 300 1. Share capital – ordinary shares 103
302 2. Stakes in limited liability companies 104
303 3. Cooperatives stakes 105
304 4. Stakes 106
305 5. Capital owned by state 107
306 6. Other initial capital 108
31 II SUBSCRIBED CAPITAL UNPAID 109
320 III ISSUING PREMIUMS 110
part 32 IV RESERVES (112+113) 111 0 0 321 1. Legal reserves 112
322 2. Statutory reserves 113 330, 331 and 334 V REVALUATION RESERVES 114
332 VI UNREALISED GAINS FROM THE FINANCIAL
ASSETS AVAILABLE FOR SALE 115
333 VII UNREALISED LOSSES FROM THE FINANCIAL
ASSETS AVAILABLE FOR SALE 116 34 VIII RETAINED EARNINGS (118 through 121) 117 0 0
340 1. Prior years retained earnings 118
341 2. current year retained earnings 119
342 3. Unallocated surplus of income over expenditure 120
343 4. Net income of entrepreneurs 121
35 IX. LOSS UP TO THE AMOUNT OF CAPITAL (123+124) 122 0 0 350 1. Previous years loss 123
351 2. Current year loss 124
40 B. LONG-TERM PROVISIONS (126 through 131) 125 0 0
400 1. Provisions for costs incurring during the warranty
period 126
401 2. Provisions for evaluations of mineral resources costs 127
402 3. Provisions for retained deposits and caution money 128
403 4. Provisions for cost of restructuring 129
404 5. Provisions for employee salaries and other benefits 130
405 6. Other long-term provisions 131
V. LIABILITIES (133+142) 132 245,384 200,502 41 except
418 I LONG-TERM LIABILITIES (134 through 141) 133 0 0
410 1. Liabilities that can be converted into capital 134
411 2. Liabilities to associated entities 135
412 3. Liabilities for issued long-term securities 136
413 and 414 4. Long-term loans 137
415and 416 5. Long-term liabilities from financial leasing 138
417 6. Long-term liabilities at fair value through profit and loss 139
418 7. Deferred tax liabilities 140
419 8. Other long-term liabilities 141 42 through
48 II SHORT-TERM LIABILITIES
(143+148+153+154+155+156+157+158+159+160) 142 245,384 200,502 42 1. Short-term financial liabilities (144 through 147) 143 0 0
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420 through 423
a) Short-term loans and short-term liabilities for issued securities 144
424 and 425 b) Current portion of long-term liabilities due up to one
year 145
426 v) Short-term liabilities at fair value through profit and loss 146
429 g) Other short-term financial liabilities 147
43 2. Liabilities from operations (149 through 152) 148 218,327 186,513 430 a) Received advances, deposits and caution money 149 214,235 184,941
431 b) Trade payables – associated entities 150
432 and 433 v) Other trade payables 151 4,092 1,572
439 g) Other liabilities from operations 152 440 through
449 3. Liabilities from specific operations 153 450 through
458 4. Liabilities for salaries and fringe benefits 154 4,451 460 through
469 5. Other liabilities 155 3,007 470 through
479 6. Value added tax 156 13,601 13,989 48 except
481 7. Liabilities for other taxes, contributions and duties 157
481 8. Profit tax liabilities 158 5,998 49 except
495 9. Accruals and deferred income 159
495 10. Deferred tax liabilities 160
G. OPERATING EQUITY AND LIABILITIES
(101+125+132) 161 245,384 200,502 890 through
898 D. OFF BALANCE SHEET EQUITY AND LIABILITIES 162
Đ. TOTAL EQUITY AND LIABILITIES (161+162) 163 245,384 200,502
Signed for the Citizens’ Association “Anti-corruption Combat in BiH” by Srđan Blagovčanin
CA “TRANSPARENCY INTERNATIONAL BiH” Banja Luka – Audit of Financial Statements for 2010
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Auditing and Tax Counselling Firm “ADITON” DOO Banja Luka
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INCOME STATEMENT (statement of total result in the period)
from 01 January to 31 December 2010
-in Convertible Marks- Account
I T E M AOP code
I Z N O S No. Current Previous
year year 1 2 3 4 5
A. OPERATING INCOME AND EXPENSES I OPERATING INCOME (202+206+210+211-212+213-214+215) 201 715,071 464,290
60 1. Income from sales of merchandise goods (203 through 205) 202 0 0
600 a) Income from sale of merchandise goods to associated legal entities 203
601 b) Income from sale of merchandise goods on domestic market 204
602 v) Income from sale of merchandise goods on foreign market 205
61 2. Income from sale of products (207 through 209) 206 0 0
610 a) Income from sale of products to associated legal entities 207
611 b) Income from sale of products on domestic market 208
612 v) Income from sale of products on foreign market 209
62 3. Income from employment (activation) or consumption of goods, products and services 210
630 4. Increase in value of products in stock 211
631 5. Decrease in value of products in stock 212 640 and
641 6. Increase of the value of investment properties and biological assets that are not subject to depreciation 213
642 and 643
7. Decrease of the value of investment properties and biological assets that are not subject to depreciation 214
650 through
659 8. Other operating income 215 715,071 464,290
II OPERATING EXPENSES (217+218+219+222+223+226+227+228) 216 711,961 469,542 500
through 502 1. Cost of goods sold 217 510
through 513 2. Material costs 218 37,085 13,076
52 3. Employee expenses and benefits (220+221) 219 198,726 75,131 520 and
521 a) Gross salaries and gross fringe benefits 220 155,330 75,131 522 and
529 b) Other employee expenses 221 43,396 530
through 539 4. Services expenses 222 73,066 101,977
54 5. Depreciation and provisions expenses (224+225) 223 19,582 3,697
540 a) Depreciation expenses 224 13,584 3,697 541
through 549 b) Provisions expenses 225 5,998
55 except 555 and
556 6. Immaterial expenses (excluding taxes and contributions) 226 383,048 275,563
555 7. Tax expenses 227 108
556 8. Contribution expenses 228 346 98
B. OPERATING PROFIT (201-216) 229 3,110
V. OPERATING LOSS (216-201) 230 5,252
G. FINANCE INCOME AND EXPENSES 0 5,722
66 I FINANCE INCOME (232 through 237) 231
660 1. Finance income from associated legal entities 232
661 2. Interest income 233 1,257
662 3. Foreign exchange gains 234
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663 4. Incomes from currency clause 235
664 5. Income from joint venture investments 236 4,465
669 6. Other finance income 237 7,348 470
56 II FINANCE EXPENSES (239 through 243) 238
560 1. Finance expenses from relations with associated legal entities 239 4
561 2. Interests expense 240 7,344 460
562 3. Foreign exchange losses 241
563 4. Currency clause expenses 242 10
564 5. Other finance expenses 243 5,252
D. PROFIT FROM REGULAR OPERATION (229+231-238) or (231-238-230) 244
Đ. LOSSES FROM REGULAR OPERATION (230+238-231) or (238-229-231) 245 4,238 0
E. OTHER INCOME AND EXPENSES
67 I OTHER INCOME (247 through 256) 246
670 1. Income from sale of intangible assets, property, plant and equipment 247
671 2. Income from sale of investment property 248
672 3. Income from sale of biological assets 249
673 4. Income from sale of discontinued operations assets 250
674 5. Income from sale of stakes in capital and long-term securities 251
675 6. Income from sale of materials 252
676 7. Surpluses, excluding surpluses of products in stock 253
677 8. Collected written-off receivables 254 4,238
678 9. Incomes from contractually agreed risk protection which cannot be included in the revaluation reserves 255 0 0
679 10. Income from reduction of liabilities, termination of unused long-term provisions and other incomes 256
57 II OTHER EXPENSES (258 through 267) 257
570 1. Losses arising from liquidation and write-off of fixed assets and intangible assets 258
571 2. Losses arising from sale and write off of investment property 259
572 3. Losses arising from sale and write off of biological assets 260
573 4. Losses arising from sale and write off of discontinued operations assets 261
574 5. Losses from sale of stakes in capital and long-term securities 262
575 6. Losses from sale of materials 263
576 7. Deficits, excluding deficits of products in stock 264
577 8. Losses from risk protection 265
578 9. Losses from revaluation and write-offs 266 4,238 0
579 10. Losses from write-off of material and goods and other losses 267 0
Ž. GAIN FROM OTHER INCOMES AND EXPENSES (246-257) 268 0 0
Z. LOSS FROM OTHER INCOMES AND EXPENSES (257-246) 269
I. INCOME AND LOSSES FROM REVALUATION OF PROPERTY VALUE
68 I INCOME FROM REVALUATION OF PROPERTY VALUE (271 through 279) 270
680 1. Income from revaluation of intangible assets 271
681 2. Income from revaluation of property, plant and equipment 272
682 3. Income from revaluation of investment property which is subject to depreciation 273
683 4. Income from revaluation of biological assets which are subject to depreciation 274
684 5. Income from revaluation of long-term financial investments and financial assets available for sale 275
685 6. Income from revaluation of materials and goods 276
686 7. Income from revaluation of short-term financial investments 277 0 0
687 8. Income from revaluation of capital value 278
689 9. Income from revaluation of other property value 279
58 II LOSSES FROM REVALUATION OF PROPERTY VALUE (281 through 288) 280
580 1. Impairment of intangible assets 281
581 2. Impairment of property, plant and equipment 282
582 3. Impairment of investment property which is subject to depreciation 283
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583 4. Impairment of biological assets which are subject to depreciation 284
584 5. Impairment of long-term financial investments and financial assets available for sale 285
585 6. Impairment of materials and goods 286 0 0
586 7. Impairment of short-term financial investments 287 0 0
589 8. Impairment of other property value 288
J. GAIN FROM THE REVALUATION OF PROPERTY VALUE (270-280) 289
K. LOSS FROM THE REVALUATION OF PROPERTY VALUE (280-270) 290 0 0 690 and
691 L. Incomes from changes in accounting policies and corrections from previous year 291
590 and 591
LJ. Losses from changes in accounting policies and corrections from previous year 292
M. INCOME AND LOSS BEFORE TAXES
1. Income before taxes (244+268+289 +291-292-245-269-290) 293
2. Loss before taxes (245+269+290+292-291-244-268-289) 294 0 0
N. CURRENT AND DEFERRED INCOME TAX
721 1. Tax expenses of reporting period 295
part 722 2. Deferred tax expenses of reporting period 296 0 0
part 722 3. Deferred tax incomes of reporting period 297
NJ. NET INCOME AND NET LOSS
1. Net income of current year (293-294-295-296+297) 298
2. Net loss of current year (294-293+295+296-297) 299
723 O. Interim dividends and other forms of net income distribution during reporting period 300
P. OTHER GAINS AND LOSSES IN THE REPORTING PERIOD
I GAINS DETERMINED DIRECTLY IN CAPITAL (EQUITY) (302 through 307) 301 0 0
1. Gains from decreasing revaluation reserves for fixed assets, except securities available for sale 302
2. Gains from changes in fair value of securities available for sale 303
3. Gains arising from translation of financial statements in foreign operations 304
4. Actuarial gains from defined-benefit plans
305
5. Effective share of gains arising from cash-flow risk protection 306
6. Other gains determined directly in capital (equity) 307 0 0
II LOSSES DETERMINED DIRECTLY IN CAPITAL (EQUITY) (309 through 313) 308
2. Losses from changes in fair value of securities available for sale 309 0 0
3. Losses arising from translation of financial statements in foreign operations 310 0 0
4. Actuarial losses from defined-benefit plans 311 0 0
5. Effective share of losses arising from cash-flow risk protection 312
5. Other losses determined directly in capital (equity) 313
R. OTHER GAINS AND LOSSES IN THE REPORTING PERIOD (301-308) or (308-301) 314
S. TAX ON THE OTHER GAINS AND LOSSES OF THE PERIOD 315
T. NET RESULT FROM THE OTHER GAINS AND LOSSES OF THE PERIOD (314±315) 316
Ć. TOTAL NET INCOME (RESULT) OF THE PERIOD
I TOTAL NET INCOME OF THE PERIOD (298-299 ±316) 317 715,071 464,290
II TOTAL NET LOSS OF THE PERIOD (299-298±316) 318 0 0
Share of net income/loss which belongs to majority owners 319
Share of net income/loss which belongs to minority owners 320
Basic earnings per share 321
Diluted earnings per share 322 0 0
Average number of employees based on the working hour 323 9 9
Average number of employees according to month ending balance 324 9 9
Signed for the Citizens’ Association “Anti-corruption Combat in BiH” by Srđan Blagovčanin
CA “TRANSPARENCY INTERNATIONAL BiH” Banja Luka – Audit of Financial Statements for 2010
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Auditing and Tax Counselling Firm “ADITON” DOO Banja Luka
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REPORT ON AUDITED FINANCIAL STATEMENTS OF CITIZENS’ ASSOCIATION “ANTICORRUPTION COMBAT – BOSNIA
AND HERZEGOVINA” / “TRANSPARENCY INTERNATIONAL BiH” FOR YEAR 2010
1. INTRODUCTION
The terms and conditions for conducting this audit as well as the responsibilities of the
auditor and the Association’s management are set out in the Audit Contract concluded
on 27 May 2010 between the Citizens’ Association “Transparency International BiH”
Banja Luka and the Auditing and Tax Counselling Firm “Aditon” doo Banja Luka.
As required by the International Audit Standards, before commencing the audit
activities we had an obligation to familiarise ourselves with the basic financial indicators
that are material to the overall activities presented in the financial statements that are
the subject of the present audit as well as with the Association’s organisation,
management, funding and main objectives, if there were any. We also had to
familiarise ourselves with the basic types of expenditures that were approved by the
donors and the persons (project managers) who were in charge of realising them.
All the aforementioned activities were necessary for the auditor to properly plan the
time required for carrying out the audit.
Audit activities include assessment of information about the Association’s business
operation contained in:
- Balance sheet, which was produced on 31 December 2010, and
- Income statement showing the income and expenses in year 2010.
According to the principles of the applicable audit regulations, generally accepted rules
and the Audit Contract, we have the obligation to conduct the audit in accordance with
the International Audit Standards, which require that the auditor should plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free from material misstatement.
Given the nature of the Association’s line of business as well as other limitations, there
is a certain unavoidable risk that a material error may remain undetected. However, we
are of the opinion that the use of standardised sampling and inspection methods and
analytical procedures has reduced this risk to a reasonable and allowable level.
We would like to note that the responsibility for production of financial statements and
their adequate and timely publication rests with the Association’s management. This
involves establishment and maintenance of appropriate accounting records,
establishment and proper functioning of internal audits, selection and application of
CA “TRANSPARENCY INTERNATIONAL BiH” Banja Luka – Audit of Financial Statements for 2010
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appropriate accounting procedures, and provision of full protection of the Association’s
and donors’ physical assets.
During the course of the audit, no additional written explanations were sought from the
management in relation to the information presented in financial statements. Instead,
all questions were clarified in direct conversations with either the leaders of specific
projects or the persons charged with keeping accounting records.
Since we had also conducted audit of financial statements in the year preceding the
year being audited, there were no issues with the opening balance values and the audit
procedure was accordingly opened in accordance with the existing procedures applying
to the continuity of auditor’s work, i.e. over a number of reporting periods.
After the audit was conducted, besides issuing the auditor’s opinion, which was our
contractual obligation, we issued the Report on Conducted Audit, which, in addition to
an overview of basic information about the Association’s establishment, organisation
and basic business objectives, contains elaboration of reasons that guided us in
forming the auditor’s opinion.
As part of the audit process, we sought from the management a written confirmation of
statements given to us in connection with the audit.
Our work also entailed establishment of appropriate cooperation with the newly-hired
accountant, which we believe we did in a professional way.
2. ASSOCIATION’S BACKGROUND
“Transparency International BiH” was registered as a non-governmental organisation in
the Register of Citizens’ Associations with the Basic Court in Banja Luka on 28 March
2001 under registration No Rg-23/01 and with the official name:
CITIZENS’ ASSOCIATION “ANTI-CORRUPTION COMBAT – BOSNIA AND HERZEGOVINA”, i.e. “Transparency International BiH”.
According to the Statute, the Association’s main goals and activities are:
- to organise expert seminars, round tables and other forms of public discussions and trainings;
- to collect data on experiences in combating corruption;
- to draft regulations and other legal documents;
- to disseminate information about the Association’s activities through print, electronic and other media;
- to process data on corruption;
- to collect and disclose data on corruption;
CA “TRANSPARENCY INTERNATIONAL BiH” Banja Luka – Audit of Financial Statements for 2010
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- to collaborate with similar institutions in the country and worldwide;
- to perform and conduct various forms of expert and consulting activities.
Mr Emir Ðikić, Chair of the Board of Directors, was entered into the Registry as the
person authorised for representing the Association in the audited year.
According to the Statute, Mr Srđan Blagovčanin, Executive Director, is jointly
responsible for the legality and regularity of the Association’s operation.
There were no changes to the Association’s registration data in 2010.
Accounting records are maintained, as per appropriate contract, by the professional
accounting agency “Libra”, owned by professional accountant Ms Jadranka Volak
B.Sc.Econ. with a certified accountant licence No. SR-0363/10. This person is
considered responsible for proper maintenance and updating of appropriate transaction
records.
The original accounting documentation about business transactions that are the subject
of this audit is kept in the Association’s premises, while the copies of accounting and
financial documents are forwarded to the hired accounting agency.
“Transparency International BiH” conducts its financial transactions in domestic
currency (Convertible Marks) through transaction account No. 555-007-00006307-57
with “Nova banka” AD, Branch Office Banja Luka, while foreign currency transactions
are carried out through account No. 555-00700000000-63, ID No. 01943740, internal
code 006307, opened with the same bank.
In addition to the basic account, the Association also opened sub-accounts to track the
inflow and outflow of funds in each project. For these purposes, transaction sub-
accounts No. 555-007-00006307-73 and No. 555-007-00006307-89 were opened for
the CAPP project and ALAC project, respectively, etc.
The tax authorities assigned 4401564530009 as the Association’s identification
number.
3. RELATED PARTIES
According to the International Audit Standard No. 550 – Related Parties, the auditor
should conduct the procedures that are designed in such a manner as to help obtain
satisfactory audit evidence with regard to the identification and disclosure of related
parties by the management and effects of transactions with related parties that are
material to the audited financial statements.
The responsibility to identify and disclose the related parties and transactions with
these parties lies with the management. This responsibility entails the management’s
obligation to apply the appropriate accounting system and control for the purpose of
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ensuring proper identification of business transactions with the related parties in
accounting records and their disclosure in financial statements.
Based on the conducted standard procedures and replies from the Association’s
management to our questions, we did not find any related parties or conflicts of
interest.
4. AUDIT RISK ASSESSMENT
Inherent risk is the susceptibility of an audit area to error which could be material,
individually or in combination with other errors.
Assessment of inherent risk was carried out at the level of financial statements and
materiality of the Association’s individual key business transactions and their attendant
entries in accounting records.
At the financial statement level, we have also conducted assessment of the integrity of
the Association’s management and managing structure, complexity of the
organisational structure and significance of the factors affecting the Association which
are relevant for the Association’s industry as a whole.
Assessment of inherent risk at the account balance level indicated that such risk was
low.
Control risk is the risk that an error which could occur in an audit area, and which
could be material, individually or in combination with other errors, will not be prevented
or detected and corrected on a timely basis by the accounting system or internal control
system.
Through regular detailed reports that are submitted to donors and audit obligations
stemming from certain programmes, the Association’s control mechanism system
meets the standards for this type of organisation and this volume of business
transactions. We find that the issue that had existed in the previous years in connection
with the fullness and completeness of the correspondence between the Association
and the accountant was solved in full, which is considered a positive step in reducing
control risk.
The control risk is therefore assessed as low.
Detection Risk, through assessment of the inherent risk as low and control risk as low,
leads to the conclusion that the volume of audit procedures must be high, and in certain
segments expanded, if a sufficient amount of audit evidence is to be obtained, based
on which the auditor will form his opinion.
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The detection risk is assessed as medium high.
Overall audit risk, based on the assessment of the inherent, control and detection
risks, is considered to be at an acceptable level. The auditor is of the opinion that the
risk that a material error might remain undetected is reduced to a reasonable and
acceptable level by use of the conducted audit procedures.
5. DETERMINATION OF MATERIALITY
By accepting the standard methods for determination of materiality, i.e. the limit up to
which the presented error is not considered material from the standpoint of overall
assessment of objectivity and accuracy of financial statements, the auditor decided to
set the amount of preliminary allowable material error based on total assets and the
amount of income generated in 2008:
No. COMPONENT AMOUNT Selected coefficient
Amount of
allowed
material error
that is not
considered
significant in KM
1 Operating assets 245,384 - - 2 Total income 719,309 - - 3 - - 4
SELECTED ITEM: 719,309 0.02 14,386
14,400
Materiality determined in this way had been tested once again before the audit was
concluded. The level of materiality determined during the preliminary assessment did
not change when re-tested.
6. DOCUMENTATION AND ACCOUNTING
All the documentation presented to the auditor, which is related to the Association’s
financial operations in 2010, was properly numbered with project designation and
ordinal number, which was checked with the persons in charge of individual projects
and person who is in charge of finance and records in the office.
The business documentation kept in the Association’s headquarters is sorted by
specific projects and in chronological order by months. In accounting the
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documentation is kept and sorted by types of business transactions – incoming
invoices related to expenses incurred, contracts for special services and service
contracts with the employees and external contractors, commercial bank’s statements
of domestic-currency and foreign-currency accounts as original documents, as well as
internal documents such as payroll accounts, cash documentation, etc.).
The archiving is performed and maintained in line with the applicable standards and
accounting regulations.
The accounting is done through automated data processing by means of appropriate
computer software. The recording of business transactions is done in accordance with
the prescribed chart of accounts.
7. ACCURACY AND OBJECTIVITY OF PRESENTED BUSINESS TRANSACTIONS
7.1. Inventory of assets, receivables and liabilities
In line with the basic principles of the Framework for Producing and Presenting
Financial Statements of the International Accounting Standards and IAS 1 –
Presentation of Financial Statements, each person who has the obligation to maintain
their records by means of the dual accounting system is bound to reconcile the actual
and accounting situation at least once a year, i.e. to make a full inventory of assets,
receivables and liabilities. As far as the associations and organisations such as
Transparency International are concerned, the inventory amounts to making a list of
physical assets (office and ICT equipment), monetary assets, tax liabilities and financial
obligations to employees and business partners. The inventory of the Association’s
assets was drawn entirely in compliance with the general rules contained in the
Standards and was accompanied with the appropriate elaboration report. No
surpluses/deficits were found in fixed assets and the inventory.
The elaboration report on the conducted inventory was produced in line with the
obligations taken up by the inventory commission. The elaboration report provides a
detailed and itemised list of assets, receivables and liabilities.
7.2. Grounds for Recognising Business Transactions
Having conducted standard audit procedures, we ascertained that every payment
effected, whether through bank transfer or in cash, is accompanied with an appropriate
document proving the effected financial transaction (invoice, contract, expense report,
etc.). Part of the expenditures presented as travel costs, per diems, small bills for
postal services, cleaning costs, consumables, etc. were paid in cash (in total KM
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54,616), while other payments, namely those connected with regular operation, were
effected through bank transfers (KM 727,100).
Having inspected an appropriate representative sample of documents, their formal and
accounting accuracy, validity of transactions and presentation in account books, we did
not find anything that would cast doubt on authenticity, accuracy or legitimacy of
transactions and documents. Also, by means of analytical procedures we obtained
additional confirmation that there was no evidence that a transaction not pertaining to
Transparency International or its employees was presented in the inspected
documentation, with the exception of bills for electricity, central heating, gas and
landline telephone, which are all addressed to the physical persons from whom
Transparency International rents its offices in Banja Luka and Sarajevo. Such
arrangements are defined by means of an appropriate contractual relationship.
However, since the bills are addressed to physical persons, and not to Transparency
International, there is a possibility of a special attitude of tax authorities towards these
payments as they can be considered as settlement of personal expenses of third
parties. Also, we are not certain whether some of the copyright (authorship) contracts
should be considered as such due to their nature, for example the contract on
production of a monitoring report for the Publication (Contract No. 05-53-05-10), or the
contract for reviewing the draft anticorruption strategy in BiH (Contract No. 21-02-09).
By their nature, these are professional papers and we are not sure whether they have
the characteristics of a copyright work. However, this is a matter subject to the decision
of the lawyer responsible for drawing up the Association’s legal acts. Delimitation of
professional papers from copyright works affects the amount of tax liabilities that need
to be calculated and paid in the form of tax or contribution to social insurance funds.
For all these payments, the Association’s management calculated the tax on the tax
basis from which recognized expenses were not deducted, as it should be done when
copyright honoraria are concerned. By no means has this decreased the tax liability.
Quite the contrary, because when copyright works were concerned, the tax was
calculated and paid in an amount that was higher than the liability that would be
obtained if recognized expensed were deducted from the tax basis.
Following statistical sampling, inspection and analytical procedures that were
conducted for individual entries of disclosed expenditures (incomes of project
coordinators and external contractors, purchase of computer equipment, rent,
overheads, etc.), we found that the documentation contains documents proving the
disclosed expenditures, purchase of furniture and inventory and liabilities.
8. COMMENTS ON THE FINANCIAL STATEMENTS
Certified and signed forms of standard financial statement templates that refer to
business year 2010 were submitted in a timely fashion to the institution designated to
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receive and process the submitted financial statements on behalf of the Tax
Authorities.
Suggestions presented herein do not contain an imperative attitude towards errors or
material inconsistencies in application of accounting regulations; rather, they are given
with the aim of harmonising the financial reporting with the standards that apply to
associations and foundations founded by citizens which are funded through
subventions, grants, membership fees and other similar sources, without performing
profit activities.
Below are our main comments and observations with regard to some important balance
components, namely income, expenditure, assets and liabilities entries
BALANCE SHEET on 31/12/2008
ITEM Comment No.
Amount in BAM Amount in €
BAM 1.95583 = €1
Amount in 2010. (current year)
Amount in 2009
(opening balance)
2010 2009 Gross
Allowance
Nett
1. 2. 3. 4. 5. 6 7 8
A. ASSETS 297,169 51,785 245,384 200,502 125,463 102,515
I NON-CURRENT ASSETS 87,558 51,785 35,773 21,012 18,290 10,743
Property, plant and equipment 1 87,558 51,785 35,773 21,012 18,290 10,743
II CURRENT ASSETS 209,611 0 209,611 179,490 107,172 91,772
Other accounts receivable 2 12,644 0 12,644 10,759 6,465 5,501
Short-term financial investments 0 0 0 0 0 0
Cash and Cash equivalents 3 190,756 0 190,756 168,181 97,532 85,990
Prepayments and accrued income 4 6,211 0 6,211 550 3,176 281
B SOURCES OF FUNDS 245,384 200,502 125,463 102,515
I. EQUITY OWNED BY OWNERS OF PARENT COMPANY
0 0 0 0
IV. SHORT-TERM LIABILITIES 245,384 200,502 125,463 102,515
Short-term loans and short-term financial liabilities
0 0 0 0
Received advances and other liabilities 5 218,327 186,513 111,629 95,363
Liabilities for salaries 6 4,451 0 2,276 0
Liabilities for other taxes and contributions 7 13,601 13,989 6,954 7,152
Other short-term liabilities 8 3,007 0 1,537 0
Accruals and deferred income 9 5,998 0 3,067 0
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Comment 1 – Non-current assets
In 2010 the Association invested the amount approved by the donor in the procurement
of equipment, which includes computer equipment and office furniture as well as the
personal vehicle “KIA”, the procurement of which was funded from the ALAC-GIF
project
The procurements were recorded on the basis of suppliers’ receipts. The auditor
conducted inspection of the procurement procedure, checked if the relevant
documentation is complete and checked the physical existence of the computers
procured.
Depreciation was calculated on the basis of the purchase value of the equipment and
inventory, in accordance with the rates of the Nomenclature of Depreciating Assets.
Purchases of items of lower value were recorded in the appropriate non-current assets
account. The purchase value of the small inventory was presented as expenditure in
the year of purchase, which is in line with the policy of recognising small inventory
expenditures in 100 per cent amount.
Comment 2 – Other accounts receivable
The “accounts receivable” item refers mostly to debit balances of taxes that were paid
during the period when turnover tax was collected and which were not calculated, i.e.
reconciled with the Tax Administration. This mostly relates to the turnover tax on
services (author’s fees, i.e. honoraria) and special tax for the Railways of RS (KM
10,717). The remaining amount refers to overpaid contributions (account-no. 22301 in
the amount of KM 42). As the return of receivables from taxes can be claimed within 5
days from the day of payment or determination of such receivables, the amount of
overpaid taxes is probably overdue, which requires that an evaluation of this balance
sheet item be done.
Comment 3 – Cash and cash equivalents
We had not been present at the inventory of cash in cash register because we were
hired after the period when the value of individual components of operating assets
could be determined in an alternative way without a risk. As the transactions in the
cash register in 2008 were recorded in a proper way, we can confirm, with a high level
of confidence, that the presented balance in the amount of KM 2,329 is accurate. With
regard to the monetary assets in the bank account in domestic currency (KM) and
foreign currency (€), whose presented balance was in the total amount of KM 189,426 ,
by comparing financial cards and the statements of account provided by the
commercial bank on 31 December 2010, we ascertained that this cash entry was fairly
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presented. Of the total amount of funds, KM 132,032 are funds in Convertible Marks
and the remaining amount of 56,394 are funds in foreign currency. The final balance of
monetary assets in business accounts was additionally verified by checking and
inspecting opening values in the statement of bank account in 2011.
Comment 4 – Prepayments and accrued income
Prepayments and accrued income refer to prepaid future expenses.
Comment 5 – Received Advances and other liabilities
After deduction of sunk costs, eligible costs and depreciation on non-current assets
from approved funds, consistent with the adopted budgets and the dynamics of
implementation of programme activities, one of the most important entries remaining
under funding sources is the donors’ unutilised funds, so the “received advances” item
is formed as liability to the funders of individual projects (TI Secretariat in Berlin, EU,
Civil right defenders of the Kingdom of Sweden, SOROS Foundation, UK Department
for International Development, etc.).
This amount was calculated as difference between the received monetary assets and
eligible current costs in the business year.
Balances were not confirmed with suppliers due to their individually small nominal
values. Based on the payments that are made continuously and information on the
suppliers in question (unpaid bills received in January pertaining to public utilities and
other costs from December 2010 etc.), this liability item is found to be realistically and
objectively presented (total KM 4,092).
Comment 6 – Liabilities for salaries
The item “liabilities for salaries” refers to personal incomes of employees as well as
contributions and calculated tax that is paid when salary is paid out.
Comment 7 – Liabilities for other taxes and contributions
The item “Liabilities for other taxes and contributions” consists largely of the liabilities in
the form of taxes on remunerations under temporary services contracts carried over
from the previous period. It should be noted that it is necessary to reconcile this item
with the item “Other Accounts Receivable” (see Comment 2) and harmonise these with
the tax records maintained by the competent tax authority.
This also contains liability for special water charge.
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Comment 8 – Other liabilities
This liability item refers to outstanding payments to external contractors as well as
calculated but unpaid author’s fees, which was recorded in account No. 465.
Comment 9 – Accruals and deferred income
Accruals and deferred income refers to provisions and expenses of the current year
which are planned for that year, but are still not realised (e.g. future expenses related to
the audit of the projects and office, translation of the audit report, etc.).
INCOME STATEMENT For year 2010
I T E M Comment No.
Amount in BAM Amount in €
BAM 1.95583 = € 1
2010 2009 2010 2009
1 2 3 4 5 6
Other operating income 10 715,071 464,290 365,610 237,388
Finance income 0 5,722 0 2,926
Other income 10a 4,238 0 2,167 0
TOTAL INCOME 719,309 470,012 367,777 240,314
Material costs 11 37,085 13,076 18,962 6,686
Employee expenses and benefits 12 198,726 75,131 101,607 38,414
Services expenses 13 73,066 101,977 37,358 52,140
Depreciation expenses 14 19,582 3,697 10,012 1,890
Immaterial expenses 15 383,048 275,563 195,849 140,893
Tax and contributions expenses 454 98 232 50
Finance expenses 16 7,348 470 3,757 240
TOTAL EXPENSES 719,309 470,012 367,777 240,313 SURPLUS OF INCOME OVER EXPENDITURE – GAIN 17
0 0 0 0
SURPLUS OF EXPENDITURE OVER INCOME – LOSS
0 0 0 0
Comment 10 and 10a – Income
Donor funds account for almost the only source of TI BiH’s income (with the exception
of rather insignificant interests accrued from the money deposited on the transaction
account).
The table below provides a list of donors and projects which were implemented in full or
in part in the audited year:
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DONOR PROJECT
USAID CAPP
Embassy of Netherlands in BiH CAPP - “Advocacy Fund“
Foundation for the Development of Great Britain
ALAC – GTF
British Embassy in BiH Anticorruption Strategy 2009-2014
Ministry of Foreign Affairs of Norway ACDC – Delivering Changes
Civil Rights Defenders Stockholm Sweden Advocacy and Legal Advice Centre
National Endowment for Democracy SAD NED Grant No. 2009-605
European Commission Turn on the light
Network for Affirmation of NGO sector (MANS)
Open society Fund BiH
Transparency – Freedom of Access to Information Act as a Tool for Curbing Corruption in BiH
National Endowment for Democracy SAD NED Grant No. 2010-402
TI Secretariat Auswäriges Amt Advocacy and Legal Advice Centre 2009/2010
TI Secretariat Auswäriges Amt Advocacy and Legal Advice Centre 2010/2011
Utilisation of funds follows the dynamics of the approved budget and recognised
expenditures.
It should be noted that the incomes in 2010 are also connected with the implementation
of certain projects that had not been completed in 2009, but a portion of income was
recognised for projects whose implementation continued in the current year (2011).
Finance income includes income from interests on deposits in the commercial bank
and other incomes which were recorded in account-no. 6799.
Comment 11 – Material and energy costs
Material costs include the recognised expenses for office supplies, hygiene products
and other operating supplies used in the office’s daily activities as well as the fuel
expenses for the newly-purchased car. These expenses are recorded on the basis of
individual receipts issued by suppliers for the delivered products.
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Accuracy, justification of the presented expenditures, qualification and demarcation of
expenses entries as well as other expenses items contained in the Income Statement,
were verified on the basis of a statistical sample of documents pertaining to particular
expenses.
We did not find any expenses that had not been incurred by TI BiH, any inconsistency
in accounts or any documents failing to identify the type of transaction, place, time and
persons involved in the particular transaction.
Energy costs consist of the expenses recorded on the basis of bills for consumed
electricity issued by the Power Supply Company, bills for consumption of central
heating issued by the City Heating Plant as well as bills for consumed natural gas. As
has already been mentioned above in connection with these costs, due to the fact that
they are associated with the owners of the offices rented by the Association, the bills
for these expenses are not addressed to “Transparency International BiH” but to
physical persons.
Comment 12 – Employee expenses and benefits
Wages, income benefits and other personal incomes are calculated in accordance with
employment contracts and the applicable regulations governing tax and contribution
liabilities. Operating costs were charged based on these liabilities.
Comment 13 – Services expenses
This group of expenses refers to, telecommunication costs, transport costs, costs of
renting business offices, as well as costs of maintenance and repair of the Associations
equipment and other property.
Comment 14 – Depreciation expenses
In the audited year, depreciation was calculated absolutely correctly and in accordance
with the depreciation rates set out in the Rulebook on the Application of the Law on
Income Tax.
Comment 15 – Immaterial expenses
Costs of the promotion of overall TI BiH’s work as well as costs of the public campaign
in the media (such as daily papers and periodicals, etc.) represent a significant group of
expenses in the audited year.
The most significant immaterial expenses are author’s fees, followed by promotion and
public campaign expenses. Other significant costs include rent, business trip
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allowances (accommodation and travel costs), payment operation costs, administrative
and court fees, etc.
Each payment of author’s fees is accompanied with a contract concluded between
“Transparency International BiH” and the author. However, it is necessary to produce a
calculation of taxes as a document confirming how the amount of paid tax has been
determined. So, regardless of the fact that the tax has been paid duly and in a timely
fashion, it is necessary to produce the appropriate calculation.
Temporary and periodical services include cleaning services and certain administrative
jobs as well as accounting services.
Relevant taxes on all the aforementioned personal incomes (author’s fees and fees for
temporary and periodical services) are paid into the appropriate Budget account.
The auditor checked if income taxes on author’s fees and fees for temporary and
periodical services had been paid in accordance with the law by inspecting a selected
number of contracts concluded with authors and contractors. Taxes on author’s fees
and fees for temporary and periodical services were paid in appropriate amounts.
Comment 14 – Business Result – surplus/deficit of income over expenditure
The non-profit nature of the Association’s work necessitates the income to be
recognised only in the amount of expenditures that the donor or funder provided for in
the approved budget for the given calendar year or a particular part of it. The received
funds are justified per individual projects, and annual incomes are recognised only in
the amount of the approved expenditures, with predefined tolerance. This allows
equalisation of incomes and expenditures, so the surplus incomes are not presented.
9. CONCLUSION
The present Report on Audit of the Association’s Financial Statements contains
auditor’s beliefs regarding the items presented in the official Balance Sheet and
Statement of Income forms for year 2010.
If the Association’s management accepts the Report as well as the auditor’s opinion as
to whether the Association’s financial statements provide an accurate and objective
presentation of the financial balance, i.e. the operating results in the stated period, it is
proposed that the management disclose the auditor’s opinion and present it to the
founder for consideration.
Banja Luka
29 June 2011 Authorised auditor
Duško Daničić, MSc. Econ.
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