Corporate governance has been worldwide over the past decade very attractive and dynamic research area, but also the field of dynamic changes of legislation, internal corporative rules and norms. The challenges of corporate governance in Serbia, that is moving toward EU membership, are particularly serious. Reformers in Serbian government as well as foreign investors view corporate governance as a key factor to develop and improve investment climate in Serbia. In this sense, in the first part of the paper we analyze recent developments in corporate governance practice in Serbia. Having reviewed significant interventions that have been made in corporate and security legislation last years, we analyze recently adopted Code on Corporate Governance. We show that recent reforms include improved legal and regulatory framework, the adoption of the corporate governance guideline as well as the reinforced role of stock exchange and security commission in monitoring of companies’ governance.

In the following we illustrate and discus legal framework of financial reporting practice in Serbia. The new Law on Accounting and Auditing that has come into effect in June 2006, requires appliance of the IASs/IFRSs for precisely defined companies and financial institutions and the ISAs for auditors. We investigate problems incurred by applying these standards since their introduction in Serbian practice. The new Law on Accounting and Auditing contents also new rules concerning auditing and enforcement system which are discussed in the last chapter