Félag Löggiltra Endurskodenda
Member | Established: 1935 | Member since 1977
The Institute of State Authorized Public Accountants in Iceland (FLE) was established on July 16, 1935. FLE membership is voluntary and it is exclusively comprised of auditors. Under the Auditing Act No. 94/2019, FLE is entrusted with the following tasks in consultation with the Public Auditors Oversight Board (ER): (i) establish a Code of Ethics for its members; (ii) develop continuing professional development (CPD) courses; and (iii) keep CPD records.
In addition to being an IFAC member, FLE is a member of Accountancy Europe and the Nordic Federation of Public Accountants.
Statements of Membership Obligation (SMO)
The Statements of Membership Obligations form the basis of the IFAC Member Compliance Program. They serve as a framework for credible and high-quality professional accountancy organizations focused on serving the public interest by adopting, or otherwise incorporating, and supporting implementation of international standards and maintaining adequate enforcement mechanisms to ensure the professional behavior of their individual members.
SMO 1: Quality Assurance
The Auditors Oversight Board (ER) is empowered to establish a mandatory quality assurance (QA) review program for all auditors, in accordance with the Auditing Act No. 94/2019. Reviews are conducted every three years for public interest entities (PIEs) and every six years for other types of companies. It is not clear whether the existing QA system is in line with the requirements of SMO 1.
Prior to the adoption of the Auditing Act No. 94/2019, under the Auditing Act No. 79/2008, the FLE, under the oversight of ER, carried out a QA review program for all auditors. The FLE noted that its QA review system is based on ISQC 1 and the Eighth EU Directive. After the Auditing Act No. 94/2019, the FLE is working with ER to support implementing the changes, including potentially conduction QA reviews for non-PIEs.
The FLE indicates that it supports on an ongoing basis its members with the implementation by developing training activities and disseminating information on developments in the international standard-setting area.
QA review systems that are in line with international best practices such as SMO 1, are foundational to maintaining public trust and confidence in the profession. The FLE is encouraged to clarify the role it plays on QA reviews after the changes introduced by the Auditing Act No. 94/2019. The FLE is encouraged to work with the ER to ensure that the QA review system incorporates international best practices.
In addition, as part of its continuous efforts, the FLE is encouraged to continue monitoring and preparing members for the changes from quality control standards to quality management standards that being proposed and reviewed by the IAASB.
SMO 2: International Education Standards
The Auditing Act No. 94/2019 sets the initial and continuing professional development (IPD and CPD) requirements for auditors in Iceland and implemented by the Auditors Oversight Board (ER). FLE states that the auditors’ IPD and CPD requirements are in line with 2019 IES requirements.
Previously, all auditors were required to be members FLE, but since 2020 membership is voluntary. FLE members are required to complete at least 120 monitored CPD hours over a three-year period. FLE has established a system to monitor CPD requirements by its members.
SMO 3: International Standards on Auditing
The Auditing Act No. 94/2019 states that audits should be carried out in accordance with generally accepted auditing standards (GAAS). The Act does not specify what constitutes GAAS and only generally refers to international standards, even though, as indicated by Accountancy Europe, ISA as issued by the IAASB are in practice applied in audits.
The FLE reported ongoing processes for ISA implementation. To support its members, the FLE has provided an audit software to facilitate the implementation of ISA; developed training activities; and disseminated information on the developments in the international standard-setting area.
The FLE is encouraged to provide information on planned actions or initiatives related to promoting the legal adoption of ISA for all auditors in the jurisdiction. If deemed feasible and relevant, it would be beneficial for the FLE to participate in the international standard-setting process by providing comments on exposure drafts and other IAASB pronouncements.
SMO 4: Code of Ethics for Professional Accountants
According to the Auditing Act No. 94/2019, auditors in Iceland are required to observe the Code of Ethics for Auditors issued by the Auditors Oversight Board (ER). The Act does not specify a Code of Ethics or references the International Code of Ethics for Professional Accountants. As of 2020, it remains to be established whether ER has adopted a Code of Ethics for Auditors and the degree of alignment of the Code with the 2018 International Code of Ethics for Professional Accountants.
Prior to the adoption of the Auditing Act No. 94/2019, auditors were subject to the requirements of the Code of Ethics issued by the Institute of State Authorized Public Accountants (FLE). The FLE reports that its Code of Ethics is based on the 2009 IESBA Code of Ethics and that the Code has not been updated since 2010. No plans to update FLE’s Code of Ethics have been reported.
Although FLE states that it supports its members with the implementation of the ethical standards, no recent activities have been indicated. The FLE reported ongoing processes for the implementation of ethical principles for its members, including training courses on the Code of Ethics and monitoring of new, proposed, and revised international standards and disseminating information on the changes.
The FLE is encouraged to provide information in its SMO Action Plan on its activities to update its Code of Ethics, in alignment with the 2018 International Code of Ethics for Professional Accountants. In addition, the FLE is encouraged to work with ER to promote legal adoption of the 2018 International Code of Ethics for Professional Accountants for all auditors in the jurisdiction
If deemed feasible and relevant, it would be beneficial for the FLE to participate in the international standard-setting process by providing comments on exposure drafts and other IESBA pronouncements.
SMO 5: International Public Sector Accounting Standards
The Government of Iceland is responsible for adopting public sector accounting standards, which are cash-basis transitioning to accrual. The FLE reports that IPSAS have been adopted into the Icelandic Law by the States Finance Act 123/2015.
Although the FLE has no responsibility for adopting public sector accounting standards, no recent activities have been indicated. The FLE successfully lobbied the government to adopt IPSAS. The FLE also supports the government in implementing the standards.
SMO 6: Investigation and Discipline
In accordance with the Auditing Act No. 94/2019, the Auditors Oversight Board (ER) is solely responsible for the investigation and discipline (I&D) of auditors in Iceland. The ER may take up issues on its own initiative if it believes that an auditor or audit firm has violated the Act, the Code of Ethics, or other rules that apply to the work of auditors. It is not clear to what extent the ER I&D system complies with the best practices of SMO 6.
The FLE states in its Action Plan that it does not undertake any special activity to promote the I&D requirements, as the Auditing Act, that only ER has a responsibility in this area. The FLE reports that to support the regulator in the I&D function, and maintains a list of the continuing professional development its members take, under the supervision of the ER, thus contributing to the ER’s I&D process.
I&D procedures that are in line with international best practices such as SMO 6, are foundational to maintaining public trust and confidence in the profession. The FLE is encouraged to work with the ER to ensure that the I&D procedures incorporate international best practices.
SMO 7: International Financial Reporting Standards
Icelandic accounting standards are set out in the Law on Annual Accounts No. 3/2006. The Law dictates that the Ministry of Culture and Business Affairs should establish an accounting board to set uniform accounting rules and regulations for use in Iceland, based on and in addition to the Law.. The Law also dictates that IFRS should be used as additional accounting rules, so that when the Law does not give enough guidance, IFRS can and should be used.
The FLE reports that it monitors and reviews changes to EU legislation and, subsequently, promotes with the regulatory authorities the necessary changes to the national legislation. To support this process, the FLE supports the translation of IFRS.
To support its members with the implementation of applicable standards, the FLE organizes continuing professional development courses and develops guidelines on IFRS-related topics, and disseminates IASB pronouncements.
The FLE has regularly demonstrated that it has an ongoing process in place to maintain its level of fulfillment with the SMO 7 obligations and is committed to continuous improvement.
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.