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.

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...

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.

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.

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

Lesotho Institute of Accountants (LIA)

The 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.

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 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.

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. Throughout 2017, LIA arranged a partnership with the Public Accountants and Auditors Board (PAAB) of Zimbabwe to continue conducting QA reviews. LIA reports that the PAAB’s first reviews were done in June 2018 with the second round being conducted in December 2018. The LIA affirms that QA reviews are carried out in accordance with SMO 1 requirements.

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. The timeline for the passage of the Act is tenuous.

Current Status: 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 (IPD) 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 also operates a joint qualification scheme with ACCA through an agreement that runs through September 2023 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 IES 7 requirements and monitors non-compliance.

Additionally, LIA has launched a new qualification program—the Lesotho Professional Accountancy Programme (LePAP)—which supports specialization in the private or public sector and designed for the Lesotho context. The LIA states that the LePAP subscribes to the IES requirements and includes learning outcome approaches. The LePAP has accepted its first round of students in July 2018.

Current Status: Adopted

The Companies Act 2011 grants authority to the Lesotho Institute of Accountants (LIA) to set auditing standards and rules and regulations for the conduct of audits. The LIA states that it adopts and publishes ISA as...

The Companies Act 2011 grants authority to the Lesotho Institute of Accountants (LIA) to set auditing standards and rules and regulations for the conduct of audits. The LIA states that it adopts and publishes ISA as issued by the IAASB without modifications on an ongoing basis for application in Lesotho. This includes the new auditor’s reporting standards as issued in 2016.

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 reports its members are required to adhere to the 2016 IESBA Code of Ethics as of 2017 and the institute is preparing for the adoption of the 2018 IESBA Code in June 2019.

Current Status: Adopted

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

The Financial Management and Accountability Act 2010 establishes the 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 reports that the timeline for the implementation of IPSAS is 2021.

Current Status: Partially Adopted

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

The Accountants Act 1977 requires the Lesotho Institute of Accountants (LIA) to establish an investigation and disciplinary (I&D) system for the profession. The institute established a Risk and Compliance Committee to monitor member compliance with laws, regulations, the Code of Ethics, and professional standards and an adhoc investigations committee to investigate reported cases of noncompliance. Subsequently, the Disciplinary Committee is empowered to conduct disciplinary processes and issue sanctions for members that are found guilty of misconduct.

LIA reports that it amended its Disciplinary Procedures to incorporate the revised SMO 6 requirements and put forth the amendment for approval and adoption of by its Council and general membership in 2017.

Current Status: 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 StudiesCouncil on Higher EducationLesotho Institute of Accountants (LIA) Relevant LegislationCompanies Act, 2011Financial Institutions Act, 2012Relevant PublicationsEuropean...

Relevant Organizations

• Center for Accounting Studies
• Council on Higher Education
• Lesotho Institute of Accountants (LIA)

Relevant Legislation

• Companies Act, 2011
• Financial Institutions Act, 2012

Relevant Publications

• European Union, Public Expenditure and Financial Accountability (PEFA): Lesotho, November 2012.
• IFRS Foundation, IFRS Application Around the World, Jurisdictional Profile: Lesotho, 16 June 2016.
• LIA, Lesotho Professional Accountancy Programme (LePAP), May 2017.
• LIA, SMO Action Plan, January 2019.
• World Bank, Report on the Observance of Standards and Codes, Accounting and Auditing: Lesotho, May 2010.