Panama

In Panama, the Companies Law of 1927 establishes the types of legal companies, while the Code of Commerce of 1916 and subsequent amendments requires companies to keep books of accounts and provides the basic legal framework for accounting.

The Law No. 57 of 1978, amended by the Law 280 of 2021 on the Accounting Profession, authorizes the Technical Board of Accounting (JTC), an agency under the Ministry of Commerce and Industries, to set accounting and auditing standards. For this purpose, the JTC created the Commission of Financial Accounting Standards to recommend regulation regarding the accounting and auditing standards for all companies, aside from regulated companies. The Law No. 6 of 2005 requires the application of IFRS and IFRS for Small- and Medium-sized Entities (SMEs) since 2006. The tax authority also requires IFRS and IFRS for SMEs through modification to the Tax Code of 1956 and amendments for tax purposes.

In addition, financial sector regulators—i.e., the Superintendent of Banks (SBP), Superintendence of Insurance and Reinsurance (SSRP), and the National Securities Commission (SMV)—are empowered to set sector-specific accounting rules for the companies they regulate. Listed companies and financial institutions are required to use IFRS or the U.S. Generally Accepted Accounting Principles, in accordance with the SBP Agreement No. 4 of 1999 and SMV Agreement No. 8 of 2000, respectively. Insurance companies are required to apply IFRS as per SSRP Law No. 12 of 2012.

The Tax Code requires mandatory statutory audits of companies that meet the following criteria: capital exceeding PAB $100,000 or annual sales or gross income greater than PAB $50,000. Audits of these companies must follow auditing standards applicable in Panama and be signed by a Panamanian Certified Public Accountant. The JTC has adopted ISA for all mandatory audits, other than regulated companies, since 2006, in accordance the Law 6 of 2005. Financial institutions are required to use ISA or the U.S. Generally Accepted Auditing Standards issued by the Auditing Standards Board of the American Institute of Certified Public Accountants, in accordance with the SBP Agreement No. 4 of 2010. Listed companies and insurance companies are required to use ISA in accordance with the SMV regulation and SSRP Agreement No. 6 of 2013.

The accountancy profession in Panama is regulated by the Law No. 57 of 1978, amended by the Law 280 of 2021 on the Accounting Profession. The Law recognizes the Technical Board of Accounting (JTC), an agency under the Ministry of Commerce and Industries, as the entity responsible for regulating the accountancy profession. Individuals wishing to qualify as a Panamanian Certified Public Accountant (CPA) and be authorized to practice as a public accountant or auditor must be registered with the JTC. Registration requirements include completing a bachelor’s degree in accounting and not having a criminal record. The local universities set the curriculum for accounting degrees.

The JTC carries out the following regulatory activities: (i) setting accounting and auditing standards; (ii) setting ethical standards for the profession; (iii) issuing professional licenses; (iv) maintaining a registry of CPAs; and (viii) implementing an investigation and discipline system for the profession.

In addition, individual professionals may voluntarily join a professional accountancy organization (PAO) and be self-regulated through the requirements of the PAO. The PAOs in the jurisdiction promote the adoption and implementation of international standards, represent and promote the accountancy profession, develop trainings, and promote improvements to professional practices. The Colegio de Contadores Públicos Autorizados de Panamá and the Association of Women Authorized Public Accountants have established a quality assurance system and mandatory continuing professional development requirements for their members. In addition, other institutions, such as the Association of Authorized Public Accountants (ACONTAP) and the Movement of Independent Public Accountants, also operate in Panama with similar objectives and activities. Still, it is unclear whether the organizations have established membership requirements and regulated their members.

Lastly, the Superintendent of Banks (SBP) and the Superintendence of Insurance and Reinsurance (SSRP) are authorized to: (i) register auditors providing services to entities under its supervision; (ii) establish ethical requirements for their registered auditors; and (iii) prescribe educational requirements, such as relevant practical experience for registered auditors. In addition, the SBP, SSRP, and the National Securities Commission are authorized to set sector-specific accounting and auditing standards for professionals providing services to entities under their supervision.

There are no independent audit oversight arrangements in Panama. According to the Law No. 57 of 1978 on the Accounting Profession, amended by the Law 280 of 2021, the only requirements for becoming a Panamanian Certified Public Accountant (CPA) and thereby authorized to practice as a public accountant or auditor is to register with the Technical Board of Accounting (JTC) after completing a bachelor’s degree in accounting and not having a criminal record.

The Laws recognizes the JTC, an agency under the Ministry of Commerce and Industries, as the entity responsible for regulating the accountancy profession. The JTC carries out the following regulatory activities for auditors: (i) setting auditing standards; (ii) setting ethical standards for the profession; (iii) issuing professional licenses; (iv) maintaining a registry of CPAs; and (viii) implementing an investigation and discipline system for the profession.

The Law 280 of 2021 empowers the JTC, to establish and implement quality assurance (QA) reviews for all audits of financial statements. As the Law was approved in December 2021, the JTC has until June 2022 to incorporate all new regulatory powers, including the QA review system.

In addition, individuals that offer audit services may voluntarily join a professional accountancy organization (PAO) and therefore be subject to the membership requirements of the PAO. The Superintendent of Banks (SBP) and the Superintendence of Insurance and Reinsurance (SSRP) are also authorized to: (i) register auditors providing services to entities under its supervision; (ii) establish ethical requirements for their registered auditors; and (iii) prescribe educational requirements, such as relevant practical experience for registered auditors. In addition, the SBP, SSRP, and the National Securities Commission are authorized to set sector-specific accounting and auditing standards for professionals providing services to entities under their supervision.

The Colegio de Contadores Públicos Autorizados de Panamá (CCPAP) has been promoting a legislative reform for the accountancy profession, working with the government, and holding discussions with stakeholders. In 2021, the Law 280 of 2021 on the Accounting Profession was approved, addressing the major regulatory gaps and adopting international best practices. The new Law empowers and mandates the Technical Board of Accounting (JTC) to: establishing a mandatory quality assurance (QA) reviews program; updating the national code of ethics, or adopt the International Code of Ethics for Professional Accountants; modernizing the investigation and discipline system for the profession; modernizing the minimum education requirements to be authorized to practice as a public accountant or auditor and registered at JTC; among others.

The Law No. 57 of 1978 amended by the Law 280 of 2021 on the Accounting Profession empowers the Technical Board of Accounting (JTC), an agency under the Ministry of Commerce and Industries, to establish and implement quality assurance (QA) reviews for all audits of financial statements. As the Law was approved in December 2021, the JTC has until June 2022 to incorporate all new regulatory powers, including the QA review system.

Before the legal foundation, the Colegio de Contadores Públicos Autorizados de Panamá (CCPAP) and the Association of Women Authorized Public Accountants—professional accountancy organizations which include auditors and other professionals that join on a voluntarily basis—created the Alliance for Quality initiative, and since 2016, have introduced a voluntary QA system for their member firms.

As reported by the CCPAP, the QA system partially aligns with the SMO 1 requirements. Gaps include missing the link between the investigation and disciplinary system in the jurisdiction and cooperation with the Technical Board of Accounting, the regulator of the profession, which has not officially endorsed the QA review system.

Current Status: Partially Adopted

The accountancy profession in Panama is regulated by the Law No. 57 of 1978 amended by the Law 280 of 2021 on the Accounting Profession. The Law recognizes the Technical Board of Accounting (JTC), an agency under the Ministry of Commerce and Industries, as the entity responsible for regulating the accountancy profession. Individuals that wish to qualify as a Panamanian Certified Public Accountant and thereby be authorized to practice as a public accountant or auditor must be registered with the JTC after completing a bachelor’s degree in accounting and not have a criminal record. The universities set the curriculum for accounting degrees.

In addition, some of the professional accountancy organizations (PAOs) with voluntary membership operating in the jurisdiction, such as the Colegio de Contadores Públicos Autorizados de Panamá and the Association of Women Authorized Public Accountants, have established mandatory continuing professional development (CPD) requirements for their members. Apart from these organizations, it is unclear whether other PAOs that operate in the jurisdiction have established educational requirements for their members.

Lastly, auditors providing services to financial sector regulators—the Superintendent of Banks, and Superintendence of Insurance and Reinsurance—are subject to additional practical experience requirements established by the regulators.

Although some of the requirements of IES have been incorporated into the national requirements—i.e., university degree, and CPD for PAO members—and practical experience requirements for some auditors providing services to companies subject to the supervision of the regulators, it does not appear that any other national requirements exist that incorporate the 2019 revised IES.

Current Status: Partially Adopted

The Law No. 57 of 1978 amended by the Law 280 of 2021 on the Accounting Profession empowers the Technical Board of Accounting, an agency under the Ministry of Commerce and Industries, to set auditing standards for audits of all companies, aside from regulated companies. The Law No. 6 of 2005 has adopted ISA since 2006, which includes a provision stating the ongoing adoption of all subsequent revisions and updates as issued by the IAASB without modifications and with the IAASB-stated effective date.

In addition, financial sector regulators—the Superintendent of Banks (SBP), Superintendence of Insurance and Reinsurance (SSRP), and the National Securities Commission—are empowered to set sector-specific auditing rules for the companies under their purview. Financial institutions are required to use ISA or the U.S. Generally Accepted Auditing Standards issued by the Auditing Standards Board of the American Institute of Certified Public Accountants in accordance the SBP Agreement No. 4 of 2010. Listed companies and insurance companies are required to use ISA in accordance with the SMV regulation and SSRP Agreement No. 6 of 2013.

Current Status: Adopted

The Law No. 57 of 1978 amended by the Law 280 of 2021 on the Accounting Profession empowers the Technical Board of Accounting (JTC), an agency under the Ministry of Commerce and Industries, to adopt ethical requirements for the accountancy profession in Panama. Through the Decree No. 26 of 1984 the JTC established the Code of Ethics for accountants in Panama. As reported by the Colegio de Contadores Públicos Autorizados de Panamá, the current Code is not based on the IESBA Code of Ethics.

The Law 280 of 2021 requires the JTC to update the national code of ethics or adopt the International Code of Ethics for Professional Accountants. As the Law was approved in December 2021, the JTC has until June 2022 to address this requirement.

In addition, auditors providing services to companies under the supervision of the Superintendent of Banks (SBP) and the Superintendence of Insurance and Reinsurance are subject to additional ethical requirements. The SBP Agreement No. 4 of 2010 and the SSRP Agreement No. 6 of 2013 adopted the International Code of Ethics for Professional Accountants, by reference, for auditors on their registries. It is unclear if the National Securities Commission has established any other ethical requirements for auditors providing services to companies under their purview.

Current Status: Partially Adopted

In accordance with the Law No. 32 of 1984, the National Comptroller Office (CGR) of Panama is responsible for setting public sector accounting standards. The CGR has developed national standards with reference to IPSAS that are on a partial accrual-basis through Decree No. 288 of 2014 (IFAC/CIPFA International Public Sector Financial Accountability Index 2020). The decree included a provision stating the ongoing adoption of all subsequent revisions and updates as issued by the IPSASB with the IPSAS-stated effective date. The government, municipalities, and state-owned enterprises all adopt these standards.

Current Status: Partially Adopted

The Law No. 57 of 1978 amended by the Law 280 of 2021 on the Accounting Profession empowers the Technical Board of Accounting (JTC), an agency under the Ministry of Commerce and Industries, to establish and implement investigative and disciplinary (I&D) procedures for the accountancy profession in Panama. As reported by the Colegio de Contadores Públicos Autorizados de Panamá (CCPAP) the JTC has implemented an I&D system but it is not in line with the SMO 6 best practices. Differences include information about the types of misconduct that may bring about investigative actions, and the results of the investigative and disciplinary proceedings are not publicly available.

The Law 280 of 2021 requires the JTC to modernize the investigation and discipline system for the profession. As the Law was approved in December 2021, the JTC has until June 2022 to address this requirement.

In addition, the CCPAP—a professional accountancy organization that unites professionals on a voluntary basis— carries out I&D procedures for its respective members. More information is required to assess CCPAP alignment with the main requirements of SMO 6.

Current Status: Partially Adopted

The Technical Board of Accounting, an agency under the Ministry of Commerce and Industries, is responsible for setting accounting standards for all companies, aside from certain regulated companies, in accordance with the Law No. 57 of 1978 amended by the Law 280 of 2021 on the Accounting Profession.

The JTC issued Law No. 6 of 2005 requiring the application of IFRS and IFRS for Small- and Medium-sized Entities (SMEs) since 2006. For tax purposes, the tax authority also requires IFRS and IFRS for SMEs through modification to the Tax Code of 1956 and amendments. The Law No. 6 of 2005 included a provision stating the ongoing adoption of all subsequent revisions and updates as issued by the IASB without modifications and with the IASB-stated effective date.

In addition, financial sector regulators—the Superintendent of Banks, Superintendence of Insurance and Reinsurance and the National Securities Commission—are empowered to set sector-specific auditing rules for the companies they regulate. Listed companies and financial institutions are required to use IFRS or the U.S. Generally Accepted Accounting Principles in accordance with the SBP Agreement No. 4 of 1999 and SMV Agreement No. 8 of 2000, respectively. Insurance companies are required to apply IFRS in accordance the SSRP Law No. 12 of 2012.

Current Status: Adopted

Relevant Organizations

• Alliance for Quality (ALCAPA)
• Association of Authorized Public Accountants (ACONTAP)
• Association of Women Authorized Public Accountants (AMUCOPA)
• Colegio de Contadores Públicos Autorizados de Panamá (CCPAP)
• Movement of Independent Public Accountants (MOVICOP)
• Ministry of Economy and Finance
• Ministry of Commerce and Industries
• National Comptroller Office (CGR)
• National Securities Commission (SMV)
• Superintendent of Banks (SBP)
• Superintendence of Insurance and Reinsurance (SSRP)
• Technical Board of Accounting (JTC)

Relevant Legislation

• Companies Law, 1927
• CGR, Decree No. 288 of 2014
• Code of Commerce, 1916
• JTC, Decree No. 26, 1984
• Law No. 57 on the Accounting Profession, 1978
• Law No. 6 of 2005, adoption of IFRS and ISA
• Law No. 32 of 1984
• Law-Decree No. 26 of May 17, 1984
• Tax Code of 1956
• SBP, Agreement 4, 1999
• SSRP, Law No. 12, 2012
• SMV, Agreement 8, 2000

Relevant Publications

• CCPAP, SMO Action Plan, January 2021.
• IFAC/CIPFA, International Public Sector Financial Accountability Index, 2020
• IFRS Foundation, “IFRS Application Around the World, Jurisdictional Profile: Panama,” November 2016.
• World Bank, Report on the Observance of Standards and Codes (ROSC)—Accounting and Auditing: Panama, April 2009.