Luxembourg

Member Organizations

Member Organization Associate Other PAOs

  Institut des Réviseurs d'Entreprises
  Ordre des Experts-Comptables du Luxembourg

Legal and Regulatory Environment

  • Overview of Statuatory Framework for Accounting and Auditing

    As a member of the European Union (EU), Luxembourg is subject to the accounting, auditing and financial reporting requirements established in EU Regulations and Directives as transposed into national laws and regulations.

    Accounting Framework

    The Luxembourg accounting framework is mainly derived from EU accounting directives and regulations.

    Companies whose securities trade on a regulated market (“listed entities”) are within the scope of the EU Regulation 1606/2002 of 19 July 2002 (“IAS Regulation”) and are therefore required to prepare and publish their consolidated financial statements in accordance with IFRS’s as adopted by the European Union (“IFRS–EU”). This requirement applies to all listed entities regardless of their industries (e.g. banks, insurance, and other undertakings).

    In accordance with Luxembourg law, listed entities are also allowed—but not required—to prepare and publish their statutory annual financial statements under IFRS-EU. If such option is not exercised, statutory annual financial statements of listed entities are prepared in accordance with domestic provisions as described below.

    Non-listed companies, such as banks, insurers, and other undertakings, must prepare and publish their statutory annual financial statements as well as—if applicable—their consolidated financial statements in accordance with respective legislation. For example, non-listed banks must adhere to the provisions of the Law of 17 June 1992 relating to (1) the annual and consolidated accounts of credit institutions governed by the laws of Luxembourg and (2) the obligations regarding publication of the accounting documents of branches of credit institutions and financial institutions governed by foreign laws (“LUX bank accounting law”) derived from EU directive 86/635/EEC of 8 December 1986 while non-listed insurers must comply with provisions of the Law of 8 December 1994 on the annual and consolidated accounts of insurance and reinsurance undertakings governed by Luxembourg law (“LUX insurance accounting law”) derived from EU directive 91/674/EEC of 19 December 1991.

    Other non-listed entities must prepare and file / publish their statutory annual financial statements in accordance with the provisions of the Law of 19 December 2002 on the register of commerce and companies and the accounting and annual accounts of undertakings and—if applicable—their consolidated financial statements in accordance with the provisions of Title XVII of the Law of 10 August 1915 on commercial companies (“LUX accounting law”) derived from EU directive 2013/34/EU of 26 June 2013.

    Despite provisions specific to their industries as well as to the size of the undertakings, LUX accounting law, LUX bank accounting law and LUX insurance accounting law all have in common a structure based on a three-tiered system:

    • a default regime based on prudence and historical cost (“LuxGAAP”);
    • an optional regime consisting of IFRS’s as adopted by the EU (“IFRS–EU”); and
    • an intermediate optional regime consisting of LuxGAAP with fair value and/or other IFRS options (“LuxGAAP modern”).

    Although LuxGAAP is predominantly based on historic cost measurement, there are exceptions for entities such as investment companies for which fair value measurement is the default regime.

    Finally, not-for-profit entities are required to prepare statutory annual financial statements. In the absence of a dedicated accounting framework, these entities generally choose to apply LuxGAAP as applicable to other undertakings.

    Auditing Framework

    Auditing requirements are set in the Law of 23 July 2016 concerning the audit profession, as amended (“Audit Law”), which transposes the Audit Directive 2006/43/EC on statutory audits of annual accounts and consolidated accounts as amended by the Directive 2014/56/EU (“Audit Directive”). It also implements EU Regulation No 537/2014 of 16 April 2014 on specific requirements regarding statutory audit of public-interest entities (“Audit EU Regulation”).

    One of the requirements of the national legislation is the mandatory audit of all public-interest entities (PIEs) as defined in the Audit Law. In Luxembourg, the definition of PIEs covers entities governed by the law of a Member State whose transferable securities are admitted to trading on a regulated market of any Member State, credit institutions, and insurance and reinsurance undertakings.

    Small companies, including cooperative companies, are exempted from an audit if the criteria set by the Law of 19 December 2002 have been met. However, companies subject to the supervision of the Commission de Surveillance du Secteur Financier, the public audit oversight body and financial services regulator (“CSSF”), or the Commissariat aux Assurances, the insurance regulator (“CAA”), must have their annual accounts audited regardless of size and type of the company.

    According to the Audit Law, only approved statutory auditors (“réviseurs d’entreprises agréés”) are allowed to perform statutory audits. Statutory auditors (“réviseurs d’entreprises”) are authorized to perform audits commonly called “contractual audits.”

    The Audit Law stipulates that statutory audits shall be carried out in compliance with International Standards on Auditing (“ISA”) as adopted by the CSSF. The latter is also empowered to adopt standards on professional ethics, internal quality control, and auditing in the field of statutory audit for matters that may not be covered by the ISA. These standards, including ISA, are adopted by way of a CSSF regulation. This regulation comprises add-ons/carve-outs to standards on professional ethics, internal quality control, and ISA.

    The professional auditing organization, the Institut des Réviseurs d’Entreprises (“IRE”), is responsible for issuing standards on various activities except for those applicable to statutory audits. IRE has adopted applicable IAASB pronouncements for assurance engagements, review engagements, and related services (ISAE, ISRE, and ISRS). IRE has also adopted national standards on engagements entrusted exclusively to the audit profession by law.

  • Regulation of Accountancy Profession

    Auditors

    In Luxembourg, statutory auditors are regulated by Audit Law alongside with a number of grand-ducal regulations and the Commission de Surveillance du Secteur Financier (CSSF) regulations. The Audit Law and regulations, including the EU Audit Regulation, outline the regulatory mechanisms and organization of the audit profession including the Institut des Réviseurs d’Entreprises (IRE).

    CSSF is the oversight authority for the audit profession and is also the financial services regulator. The CSSF has the ultimate responsibility for the regulation of the audit profession and the public oversight of approved statutory auditors and approved audit firms (“cabinets de révision agréés”). Its scope of activities includes: (i) the approval and registration of approved statutory auditors and approved audit firms; (ii) the adoption of standards on professional ethics, internal quality control of approved audit firms and auditing; (iii) continuing education; (iv) quality assurance systems; and (v) investigative and administrative disciplinary systems.

    CSSF is also responsible for the approval and licensing of statutory auditors and audit firms (“cabinets de révision”).

    Candidates seeking to become statutory auditors must hold one or more master’s degrees or have undergone equivalent training. The content of those qualifications is governed by the grand-ducal regulation determining the requirements for the professional qualification.

    Candidates must then serve a period of at least three years’ training with an approved statutory auditor or an approved audit firm. In parallel with the traineeship, the candidate follows complementary training courses on Luxembourg laws and specificities at the University of Luxembourg. Each course, 12 in total, culminates in an examination.

    Once the three-year training period and the complementary training examinations are completed, the candidate is authorized by the CSSF to present the professional aptitude examination leading to the award of the statutory auditor title. Should the statutory auditor wish to perform statutory audit, the individual must register with the CSSF to that effect. The practitioner will then be granted the status “approved statutory auditor” ("réviseur d’entreprises agréé"). It is compulsory for the statutory auditors, the approved statutory auditors, the audit firms and the approved audit firms to be members of the IRE.

    Chartered Accountants

    Chartered accountants in Luxembourg are also regulated by Law of 10 June 1999 on the profession of accountant and the certification is issued by the Ministry of Economy. Qualified chartered accountants who are authorized to practice in Luxembourg, whether they are individuals or legal entities, are required to belong to the Ordre des experts-comptables (“OEC”), the professional accountancy organization for certified chartered accountants in the country. While the education requirements are set by law, the education program and the professional examinations are organized by the University of Luxembourg in accordance with the legal requirements. OEC is part of the University of Luxembourg committee which is responsible for the professional education program and the organization of the examinations (test d’aptitude).

    In addition, OEC’s responsibilities include the following: (i) ensure that its members comply with all applicable laws and regulations; (ii) establish ethical requirements for its members; (iii) protect the rights and interest of the profession; (iv) advocate for the profession in legal and technical matters; (v) set and enforce continuing professional development requirements for its members; and (vi) to implement and oversee disciplinary measures of its members.

  • Audit Oversight Arrangements

    The Audit Law grants authority to the Commission de Surveillance du Secteur Financier (CSSF) to oversee the audit profession. The CSSF is a member of the International Forum of Independent Audit Regulators and its scope of activities are as follows: (i) the approval and registration of statutory auditors, approved statutory auditors, audit firms and approved audit firms; (ii) the adoption of standards on professional ethics, internal quality control of approved audit firms and auditing; (iii) continuing education; (iv) quality assurance systems; and (v) investigative and administrative disciplinary systems.

  • Projects or Other Information

Adoption of International Standards

  • Quality Assurance

    The Audit Law provides provisions for the establishment and implementation of a mandatory quality assurance (QA) review system for all statutory audits of financial statements in Luxembourg. The QA review system is administered by the Commission de Surveillance du Secteur Financier (CSSF).

    As mentioned in the Audit Law, CSSF is responsible for the QA reviews of statutory audits of public interest entities (PIEs) every three years and statutory audits of non-PIEs every six years. The QA system complies with the requirements of the Audit Directive, the EU Audit Regulation, and SMO 1 requirements.

    In addition to the CSSF’s QA system and in accordance with the Audit Law, the Institut des Réviseurs d’Entreprises maintains a system of peer review which seek to ensure that members respect their legal obligations and professional rules, other than those related to statutory audits, as well as their professional obligations arising from legislation relating to anti-money laundering and terrorism financing.

    Regarding the certified chartered accountants, the Ordre des Experts-Comptables (OEC) also maintains a peer review which seek to ensure that OEC members respect their legal obligations and professional rules as well as their professional obligations arising from legislation relating to anti-money laundering and terrorism financing. Further information is necessary from the OEC regarding its mechanism’s alignment with the SMO 1 components.

    Current Status: Adopted

  • International Education Standards

    The following law and regulations organize the initial professional development (IPD) and continuing professional development (CPD) requirements for statutory auditors in Luxembourg: (i) the Audit Law, (ii) the grand-ducal regulation determining the requirements for the professional qualification of statutory auditors and approved statutory auditors and (iii) the Commission de Surveillance du Secteur Financier (CSSF) regulation organizing continuing education of statutory auditors and approved statutory auditors.

    The requirements stipulated in the Audit Law and regulations concerning IPD and CPD are compliant with the Audit Directive and are converging to latest IES requirements. The Institut des Réviseurs d’Entreprises (IRE) uses its best endeavors to ensure all the recent IES requirements will, at some point, be incorporated into national legislation and regulation.

    CSSF is responsible for establishing CPD requirements. IRE supports CSSF in the implementation of the CPD requirements, participates in to the monitoring process and is involved in the CSSF working group on education topics.

    For certified chartered accountants, the Law of 10 June 1999 regulates the accounting profession in Luxembourg. The University of Luxembourg organizes and delivers the IPD program, including professional examinations, based on the requirements outlined in the law. The Ordre des Experts-Comptables (OEC), the PAO for certified chartered accountants, is responsible for the implementation of CPD obligations. OEC notes that the CPD requirements are not fully aligned with IES 7 however the association is working to enhance convergence.

    Current Status: Partially Adopted

  • International Standards on Auditing

    The Audit Law stipulates that statutory audits shall be carried out in compliance with ISA as adopted by the Commission de Surveillance du Secteur Financier (CSSF). It also states that the CSSF may issue standards in the field of statutory audit for matters that are not covered by the auditing standards referred to. ISA and other standards are adopted by way of a CSSF regulation. This regulation comprises add-ons/carve-outs to ISA. There is an ongoing process within the CSSF to adopt new and revised ISA although there is a slight delay in the adoption process. Currently in force is the 2016–2017 Handbook of International Quality Control, Auditing, Review, Other Assurance, and Related Services Pronouncements.

    The Audit Law also empowers the Institut des Réviseurs d’Entreprises (IRE) to issue standards on various activities (conferred to by law or other means) except for those applicable to statutory audit. In this regard, IRE has adopted other IAASB pronouncements (ISAE, ISRE, ISRS) for its members. All IAASB Pronouncements are available in the original English text. There is an ongoing process within IRE to adopt new and revised IAASB pronouncements although there might be a slight delay in the adoption process.

    Current Status: Adopted

  • Code of Ethics for Professional Accountants

    In accordance with the Audit Law, the Commission de Surveillance du Secteur Financier (CSSF) has responsibility for the adoption of standards on professional ethics for statutory auditors. The CSSF has adopted the IESBA Code of Ethics by way of CSSF Regulation. In March 2018, CSSF adopted the 2016 IESBA Code of Ethics in the original English text. The Institut des Réviseurs d’Entreprises has published the 2016 IESBA Code of Ethics on its website.

    Under the Law of 10 June 1999, the Ordre des Experts-Comptables (OEC), the professional accountancy organization for certified chartered accountants, is responsible for establishing ethical requirements applicable to its members. The OEC’s “Code de déontologie” has been approved by the General Assembly of its members. Currently, the OEC “Code de déontologie” is based on the 2010 IESBA Code of Ethics. OEC reports that it is in the process of updating its Code to align with the 2015 version of the IESBA Code of Ethics.

    Current Status: Partially Adopted

  • International Public Sector Accounting Standards

    Public sector accounting standards are set by the Ministry of Finance through laws, regulations and circulars. The Luxembourg government is currently using a modified cash accounting system. According to the 2017 OECD Publication entitled “Accrual Practices and Reform Experiences in OECD Countries,” Luxembourg has an ongoing reform process to move to accrual accounting over the medium term, though progress has been limited. Luxembourg is undertaking preparatory work to prepare for a possible adoption of EPSAS (no timeframe available).

    Current Status: Not Adopted

  • Investigation and Discipline

    The Audit Law establishes a mandatory investigative and disciplinary (I&D) system for statutory auditors. The responsibility for the I&D system is shared between the Commission de Surveillance du Secteur Financier (CSSF) and the Institut des Réviseurs d’Entreprises (IRE).

    The CSSF has responsibility to investigate, impose preventive measures, and issue sanctions and other administrative measures for approved statutory auditors and approved audit firms.

    IRE has the power to carry out controls and operate a system which includes investigative, disciplinary, and appeals processes over statutory auditors and audit firms.

    Both systems list the actions leading to investigation and include sanctions which range from monetary fines, suspension from the profession to expulsion. Both systems are compliant with SMO 6 requirements.

    In regard to certified chartered accountants, the Law of 10 June 1999 on the profession of accountant outlines the legal foundation for the I&D system for these professionals, and grants the Ordre des Experts-Comptables (OEC), the PAO for certified chartered accountants, authority to operate the system. OEC’s I&D system includes investigative, disciplinary, and appeals processes. OEC completed a self-assessment of its I&D system and while its procedures are largely aligned with SMO 6 requirements, there are some gaps in areas of public interest considerations and administrative procedures.

    Current Status: Partially Adopted

  • International Financial Reporting Standards

    In accordance with the EU Accounting Directive, EU-endorsed IFRS are mandatory for the preparation of consolidated financial statements of listed entities. In accordance with Luxembourg law, listed entities are also allowed—but not required—to prepare and publish their statutory annual financial statements under IFRS-EU. If such option is not exercised, statutory annual financial statements of listed entities are prepared in accordance with domestic provisions (“LuxGAAP”).

    In addition, non-listed entities are permitted to apply EU endorsed IFRS for their consolidated financial statements. Upon authorization from the Luxembourg accounting advisory board (“Commission des Normes Comptables”, “CNC”), other non-listed entities have the choice between using EU endorsed IFRS or LuxGAAP for the preparation of their statutory financial statements.

    Current Status: Adopted

Disclaimer

IFAC bears no responsibility for the information provided in the SMO Action Plans prepared by IFAC member organizations. Please see our full Disclaimer for additional information.

Methodology

Methodology
Last updated: 11/2018
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