The point of annual financial statement and status report is the distribution of information. The reliability, comparability and decision making relevance of information depend, in the first place, on applied accounting rules. In 2004 Bosnia and Herzegovina made a crucial step in the historical development of accounting in the country and established a new Law in accounting and auditing at state level (Accounting and Auditing Framework Law). This law determined the accounting standards which have to be applied in the entire state and by every legal entity, which are the International Financial Reporting Standards (IFRS) or International Accounting Standards (IAS). The International Standards of Auditing (ISA) were established in the same Law as auditing standards in the entire country. This Framework Law was inharmoniously converted in the legal system by both entities and the district. Since Bosnia and Herzegovina is a state with a very complex and complicated political structure, the implementation of this Law and later the enforcement of this Law is in many respects possible but also very problematic. The aim of this work is the compatibility of entity and the district laws, and to analyze the compatibility of IAS/IFRS and ISA standards and EU Directives in order to carefully examine the structure and distinctiveness of Bosnian accounting and auditing systems. This work contains critical analysis in European context. That means a critical comparison of enforcement systems of Bosnia and Herzegovina, Croatia, Serbia and Austria, but only in very specific problem areas.