The corporate financial reporting framework in Lesotho is governed by two main laws that outline applicable standards for the preparation and audit of financial statements and the scope of entities that are subject to...

The corporate financial reporting framework in Lesotho is governed by two main laws that outline applicable standards for the preparation and audit of financial statements and the scope of entities that are subject to the requirements of the law: the Companies Act 2011 and the Financial Institutions Act 2012.

Accounting Framework

The Companies Act 2011 establishes financial reporting requirements for all companies and requires the application of accounting standards issued by the Lesotho Institute of Accountants (LIA). In 2005, the LIA Council adopted IFRS and IFRS for SMEs as issued by the IASB. That Council decision requires the automatic adoption of all new and revised IFRS. Except for financial institutions, which are required to apply full IFRS, companies may choose to apply either IFRS or IFRS for SMEs.

Auditing Framework

The Companies Act 2011 requires mandatory annual audits of financial statements except for private companies having (i) fewer than 10 shareholders; (ii) none of the shareholders is a company; and (iii) 75% of the shareholders agree that an auditor will not be appointed; or (iv) the company is a single shareholding company.

The Companies Act 2011 grants auditing standard-setting authority to LIA, that is, LIA will adopt, issue, and publish all auditing standards. It also states that the performance of audits must be governed by the rules and regulations prescribed by the institute. LIA has adopted and published ISA as issued by the IAASB without modifications and on an ongoing basis for application in Lesotho.

Section 97 of the Companies Act 2011 stipulates that auditors must be members of LIA, or a professional accountancy organization recognized by LIA, and hold a valid LIA-issued practicing certificate.

The Financial Institutions Act 2012 grants the Central Bank of Lesotho (CBL) the authority to approve auditors of financial institutions. The Act mandates mandatory audit firm rotation after five consecutive years unless the CBL grants an exemption. Additionally, financial institutions are required to appoint an audit committee.

The Accountants Act 1977 established the Lesotho Institute of Accountants (LIA) as the regulator of the accountancy profession. The Act outlines a three-tier qualification framework for entry into the profession: (i)...

The Accountants Act 1977 established the Lesotho Institute of Accountants (LIA) as the regulator of the accountancy profession. The Act outlines a three-tier qualification framework for entry into the profession: (i) Chartered Accountant; (ii) General (Registered) Accountant; and (iii) Technician (Licensed) Accountant, each with specified educational background and practical experience. The three designations are protected under the Act, and only Chartered Accountants are allowed to conduct audits and prepare the financial statements of large companies. Section 97 of the Companies Act 2011 stipulates that auditors must be LIA members and hold a valid practicing certificate issued by LIA. General Accountants may prepare financial reports at medium-sized institutions, while Technician Accountants are qualified for only senior bookkeeping positions.

The institute is responsible for: (i) promoting the interest of the profession of accountancy in Lesotho; (ii) setting private and public sector accounting and auditing standards; (iii) overseeing initial professional development and continuing professional development requirements; (iv) determining ethical standards for members; (v) establishing an investigation and disciplinary system to investigate complaints against its members; (vi) maintaining a publicly available register of auditors and audit firms on its website; and (vii) establishing a quality assurance review system for members.

The audit profession is self-regulated and there is no independent audit oversight arrangement in Lesotho. Auditors are regulated by the Lesotho Institute of Accountants (LIA) in accordance with the Accounting Act 1977...

The audit profession is self-regulated and there is no independent audit oversight arrangement in Lesotho. Auditors are regulated by the Lesotho Institute of Accountants (LIA) in accordance with the Accounting Act 1977. Section 97 of the Companies Act 2011 stipulates that auditors must be members of LIA, or a professional accountancy organization recognized by LIA, and hold a valid LIA-issued practicing certificate.

LIA’s mandate covers: (i) setting auditing standards; (ii) overseeing the initial professional development and continuing professional development requirements; (iii) determining ethical standards for members; (iv) establishing an investigation and disciplinary system to investigate complaints against its members; (v) maintaining a publicly available register of auditors and audit firms on its website; and (vi) establishing a quality assurance (QA) review system for members.

Under a contractual arrangement, the Association of Chartered Certified Accountants (ACCA) conducted practice reviews from 2012–2014. LIA’s contract with ACCA expired as of December 2014 and now LIA is arranging a partnership with the Public Accountants and Auditors Board in Zimbabwe to continue conducting QA reviews. LIA reports in its Action Plan that reviews will restart in June 2016.

In addition, auditors of financial institutions are subject to regulations outlined in the Financial Institutions Act 2012. The Act grants the Central Bank of Lesotho (CBL) the authority to approve auditors of financial institutions. The Act mandates mandatory audit firm rotation after five consecutive years unless the CBL grants an exemption.

The Lesotho Institute of Accountants (LIA), a self-regulatory professional accountancy organization, was established in 1977 in accordance with the Accountants Act 1977. Its membership comprises Charted Accountants...

The Lesotho Institute of Accountants (LIA), a self-regulatory professional accountancy organization, was established in 1977 in accordance with the Accountants Act 1977. Its membership comprises Charted Accountants, General (Registered) Accountants, and Technician (Licensed Accountants). Under the Companies Act 2011, all statutory auditors must be LIA members. The institute’s mandate covers: (i) promoting the interest of the profession of accountancy in Lesotho; (ii) setting private and public sector accounting and auditing standards; (iii) overseeing initial professional development and continuing professional development requirements; (iv) determining ethical standards for members; (v) establishing an investigation and disciplinary system to investigate complaints against its members; (vi) maintaining a publicly available register of auditors and audit firms on its website; and (vii) establishing a quality assurance review system for members.

In addition to being a member of IFAC, LIA is a member of the Pan African Federation of Accountants.

As of 2015, the Accountants Act 1977 is being re-drafted to strengthen the authority of the institute with respect to the quality assurance and investigation and discipline systems in the jurisdiction. The revised Act is...

As of 2015, the Accountants Act 1977 is being re-drafted to strengthen the authority of the institute with respect to the quality assurance and investigation and discipline systems in the jurisdiction. The revised Act is expected to be adopted by April 2017.

Although there is no legal mandate to establish a quality assurance (QA) system, the Lesotho Institute of Accountants (LIA), as the regulatory body, introduced mandatory practice reviews in 2009 for audit firms that...

Although there is no legal mandate to establish a quality assurance (QA) system, the Lesotho Institute of Accountants (LIA), as the regulatory body, introduced mandatory practice reviews in 2009 for audit firms that provide audit services to public interest entities. Under a contractual arrangement, the Association of Chartered Certified Accountants (ACCA) conducted practice reviews from 2012–2014. LIA’s contract with ACCA expired December 2014 and now LIA is arranging a partnership with the Public Accountants and Auditors Board of Zimbabwe to continue conducting QA reviews. LIA reports in its Action Plan that reviews will restart in June 2016.

The Accountants Act 1977 is being re-drafted to provide legal backing to the institute’s role in running the QA system in the jurisdiction, and the amended legislation is expected to be adopted by April 2017.

Current Status: Partially Adopted

The Lesotho Institute of Accountants (LIA) shares responsibility for the education and training of the accountancy profession with the Council of Higher Education. The Council of Higher Education is responsible for...

The Lesotho Institute of Accountants (LIA) shares responsibility for the education and training of the accountancy profession with the Council of Higher Education. The Council of Higher Education is responsible for overseeing the curricula and syllabi of tertiary education providers.

Section 6 of the Accountants Act 1977 establishes that LIA is responsible for initial professional development and continuing professional development (CPD) for the profession. LIA has established a three-tier qualification framework and has stipulated the requirements for each qualification.

The institute operates a joint qualification scheme with the Association of Chartered Certified Accountants (ACCA) and states that it is working with ACCA to ensure that the accountancy education syllabus in Lesotho complies with IES. Practical training experience is monitored by the institute’s technical department. LIA also operates a compulsory CPD program for its members which is aligned with the revised IES and monitors non-compliance.

Additionally, LIA has introduced a new qualification program—the Lesotho Professional Accountancy Program—which is intended to establish the profession of public sector accounting. It provides a path to the Chartered Accountancy designation for public sector officials. The program is in a pilot phase and is expected to accept its first students in July 2016.

Although the IES requirements appear to have been incorporated into national requirements, the extent of compliance at the tertiary level is unclear.

Current Status: Partially Adopted

The Companies Act 2011 grants authority to the Lesotho Institute of Accountants to set auditing standards and rules and regulations for the conduct of audits. The Institute states in its 2016 SMO Action Plan that it...

The Companies Act 2011 grants authority to the Lesotho Institute of Accountants to set auditing standards and rules and regulations for the conduct of audits. The Institute states in its 2016 SMO Action Plan that it adopts and publishes ISA as issued by the IAASB without modifications on an ongoing basis for application in Lesotho.

Current Status: Adopted

A 1984 amendment to the Accountants Act 1977 grants the Lesotho Institute of Accountants (LIA) the authority to set ethical standards for the profession. LIA adopted the IESBA’s Code of Ethics in 2010 with minor...

A 1984 amendment to the Accountants Act 1977 grants the Lesotho Institute of Accountants (LIA) the authority to set ethical standards for the profession. LIA adopted the IESBA’s Code of Ethics in 2010 with minor modifications and implemented processes to adopt subsequent amendments to the Code on an ongoing basis. LIA members are required to adhere to the 2014 IESBA Code of Ethics and LIA is preparing for the adoption of the 2015 IESBA Code when it becomes effective in April 2016.

Current Status: Adopted

The Financial Management and Accountability Act 2010 establishes Lesotho Institute of Accountants (LIA) as the public sector accounting standard setter. The Act requires government financial statements to be prepared in...

The Financial Management and Accountability Act 2010 establishes Lesotho Institute of Accountants (LIA) as the public sector accounting standard setter. The Act requires government financial statements to be prepared in accordance with IPSAS, on a cash basis initially with eventual transition to accrual basis. As a result, LIA states in its Action Plan that it has adopted IPSAS.

LIA is working with the Lesotho Government to implement the standards and indicates in its 2016 Action Plan that the implementation of IPSAS is expected to be completed by 2020.

Current Status: Partially Adopted

The Accountants Act 1977 requires Lesotho Institute of Accountants (LIA) to establish an investigative and disciplinary (I&D) system for the profession. The institute established a Risk and Compliance Committee to...

The Accountants Act 1977 requires Lesotho Institute of Accountants (LIA) to establish an investigative and disciplinary (I&D) system for the profession. The institute established a Risk and Compliance Committee to monitor and investigate member compliance with laws, regulations, the Code of Ethics, and professional standards. This committee has the authority to sanction members that are found guilty of misconduct.

LIA reports that it amended its Disciplinary Procedures to incorporate the revised SMO 6 requirements and expects the approval and adoption of the revised I&D procedures by its Council and general membership by April 2016.

Current Status: Partially Adopted

The Companies Act 2011 requires companies to prepare financial statements in accordance with the accounting standards prescribed by the Lesotho Institute of Accountants (LIA). In 2005, the LIA Council adopted IFRS and...

The Companies Act 2011 requires companies to prepare financial statements in accordance with the accounting standards prescribed by the Lesotho Institute of Accountants (LIA). In 2005, the LIA Council adopted IFRS and IFRS for SMEs as issued by the IASB. This Council decision requires automatic adoption of all new and revised IFRS. Except for financial institutions, which are required to apply full IFRS, companies may choose to apply IFRS or IFRS for SMEs.

Current Status: Adopted

Relevant OrganizationsCenter for Accounting StudiesLesotho Institute of Accountants (LIA) Relevant LegislationCompanies Act, 2011Financial Institutions Act, 2012Relevant PublicationsDeloitte & Touche, IPSAS in Your...

Relevant Organizations

• Center for Accounting Studies
• Lesotho Institute of Accountants (LIA)

Relevant Legislation

• Companies Act, 2011
• Financial Institutions Act, 2012

Relevant Publications

• Deloitte & Touche, IPSAS in Your Pocket, 2015.
• European Union, “Public Expenditure and Financial Accountability (PEFA): Lesotho,” November 2012.
• IFRS Foundation, “IFRS Application Around the World—Jurisdictional Profile: Lesotho,” March 2015.
• LIA, SMO Action Plan, March 2016.
• World Bank, “Report on the Observance of Standards and Codes—Accounting and Auditing: Lesotho,” May 2010.