Latvian Association of Certified Auditors

Member | Established: 1994 | Member since 2009

LACA is an independent professional corporation that was founded in 1994 according to the Law on Certified Auditors. It is the professional body of Latvian certified auditors and confers the certified auditor title under the oversight of the MoF. LACA has a wide range of responsibilities in accordance with the audit law, including: (i) organizing professional education courses and examinations for its certification; (ii) issuing licenses for audit firms and certified auditors and conducting quality assurance of their work; (iii) ensuring compliance with professional standards, ethical standards and regulatory enactments applicable to the profession; (iv) organizing continuing professional education; (v) reviewing disputes; and (vi) maintaining registers for Certified Auditors, Commercial Companies of Certified Auditors, and Third Country Auditors.

Apart from IFAC membership, LACA is a member of Accountancy Europe.

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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.

Last updated: 12/2020
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SMO Action Plan

Status of Fulfillment by SMO

  • SMO 1: Quality Assurance

    LACA has played a leading role in the establishment and development of a quality assurance (QA) review system in Latvia since 2005. Under the previous 2004 Law on Sworn Auditors, LACA had primary responsibility for the review of audits of all listed entities through the association’s Quality Control Committee.

    As a result of the EU Audit Reform and its transposition into the recent 2017 Law on Audit Services, responsibility for QA reviews will be shared between the Ministry of Finance (MoF) and LACA, with the MoF performing reviews of audits of all public interest entities (PIEs) and LACA performing reviews of audits of non-PIEs. Accordingly, the MoF is in the process of establishing a unit which will undertake direct reviews of individual auditors and companies of auditors which audit PIEs on a three-year rolling basis. Operation of the MoF quality review unit is expected to commence in 2018. Until this time, LACA will continue to cooperate with the MoF to ensure an inspection of all audit services’ quality control for individual auditors and audit companies and will inform the MoF regarding the results thereof, including findings and conclusions made. LACA maintains an ongoing close collaboration with the MoF and regularly participates in MoF working groups to provide technical guidance on the processes to review PIE audits.

    In addition, LACA’s Quality Control Committee and Education Committee provide annual training on QA topics to its members performing the reviews with its latest training conducted during the summer of 2017.

    LACA’s Quality Control Committee publishes annual reports of its QA reviews and also regularly reviews its QA methodology and review processes to ensure that it remains in line with SMO 1 requirements. In December 2017, the committee also began a project to update its internal regulation on quality control including matters involving the review cycle, reporting, corrective and disciplinary actions and consideration of public oversight. The project is expected to conclude by the end of 2018.

    Current Status: Sustain

  • SMO 2: International Education Standards

    As the association responsible for the implementation of initial and continuing professional development (IPD and CPD) requirements—which are set in the Law on Audit Services of January 1, 2017—for certified auditors in Latvia, LACA states that it works to ensure that its accountancy education programming continues to be aligned with the requirements of the IES with the latest education rules approved in August 2017.

    LACA has an annual reporting and monitoring system in place for the actual education activities undertaken (in hours and subjects) of its members. Furthermore, LACA also has an Education Center that provides training and CPD courses to its members and utilizes the education statistics gathered from the trainings to verify its members’ CPD compliance. In addition, the association has also implemented a quality control mechanism over members’ compliance with CPD requirements.

    Additionally, the association reports that it has established an ongoing process to promote and disseminate information about IES and other IAESB pronouncements to its members. For example, translated and approved IES by the LACA Board were posted on the members’ area of LACA’s website; although these are from 2007.

    While the association indicates it has not yet adopted the 2015 revised IES, LACA’s Education Committee has established a process to review the new requirements and consider how to incorporate the new requirements for its members.

    In its next update, LACA should elaborate on the activities its Education Committee has undertaken in regards to the incorporation of the revised IES requirements for its members. LACA may consider utilizing the IES benchmarking tool developed by the World Bank Centre for Financial Reporting Reform (CFRR) as part of the review of its requirements.

    Current Status: Review & Improve

  • SMO 3: International Standards on Auditing

    The Law on Audit Services of January 1, 2017 requires use of ISA in Latvia as approved and translated by LACA with the Ministry of Finance having the final approval on the standards through its Audit Advisory Council. LACA reports that it has adopted the 2016 ISA and has completed translations of the new auditor’s report with a translation of the complete 2016 handbook underway. In addition to standard-setting, LACA also plays an important role in the implementation process by ensuring that auditors are aware of and applying the standards as intended.

    Since 2011, when the association first completed the adoption of the 2009 ISA and offered training to members with the support of the World Bank, LACA’s Education Committee and Education Center has provided regular trainings for its members as well as to the public on areas concerning ISA, International Standards on Review Engagements and other assurance standards. In addition, to facilitate consistent reporting in accordance to ISA, LACA prepares sample independent auditor’s reports and accompanying guidelines to auditors. The association reports the guidelines were last updated in 2017 to address the new auditor’s report.

    Finally, as a member of the AAC—a consultative body to the Ministry of Finance on auditing matters—LACA actively supports the Ministry of Finance in providing technical guidance on the issuance and implementation of ISA and other IAASB pronouncements. For example, it has recently supported the implementation of the EU Audit Reform by providing technical feedback concerning the Law on Audit Services of 2017. In addition, the association reports that it also participated in the development of the oversight rules over auditors of public interest entities .

    Current Status: Sustain

  • SMO 4: Code of Ethics for Professional Accountants

    While the 2017 Law on Audit Services incorporates various aspects of the IESBA Code of Ethics, LACA has ensured that the entirety of the IESBA Code is applicable to auditors by adopting and translating the IESBA Code for its members since 2007. An up-to-date Latvian translation of IESBA Code of Ethics is available in the members’ area of LACA’s website. The currently effective version is the 2016 IESBA Code of Ethics.

    To ensure effective implementation of the Code, LACA works through its Education Committee, Ethics Committee, and Education Center to regularly update its education and continuing professional development programs on revisions to the IESBA Code of Ethics. The institute highlights the importance of training methods on ethical and moral values as well as the need to continuously improve and understand professional ethics. LACA’s Ethics Committee also facilitates ongoing discussions amongst its members on potential ethical issues during its regular meeting of members.

    LACA is encouraged to participate in the international standard-setting process by providing comments on exposure drafts and other pronouncements issues by the IESBA as part of sharing their perspective and contributing to the international standard-setting process.

    Current Status: Sustain

  • SMO 5: International Public Sector Accounting Standards

    In Latvia, the State Treasury, under the Ministry of Finance is responsible for the development of legislation for public sector accounting standards, which are reportedly in line with accrual-based principles and the financial statements for central and local government and government-related entities are broadly IPSAS compliant.

    While it has no responsibility for the adoption of public sector accounting standards in the jurisdiction, LACA reports that it cooperates closely with the State Treasury under the Ministry of Finance to support standard-setting activities. It actively promotes the adoption of IPSAS with the State Treasury and State Audit Office and provides comments on draft legislation to make improvements to the existing public sector accounting legislation.

    In its next update, LACA is encouraged to provide any new information the Treasury’s plans to directly adopt or further converge national standards with IPSAS, if any, as well as to provide examples of recent activities the association has undertaken to further assist the State Treasury and Ministry of Finance.

    LACA may also consider how it could provide technical assistance and support to public sector accountants to strengthen public financial management in the country, for example, by providing training on specialized areas such as performance audits.

    Current Status: Sustain

  • SMO 6: Investigation and Discipline

    In Latvia, a mandatory investigative and disciplinary (I&D) system for certified auditors is based on the Law on Audit Services of January 1, 2017. Under the law, the I&D function for certified auditors is shared between the Ministry of Finance (MoF), the Audit Advisory Council (AAC), and the LACA. The MoF’s mandate includes the oversight of LACA’s activities in the I&D area and AAC has the right to review and comment on all by-laws and acts prepared by LACA, including those relating to disciplinary proceedings.

    LACA has implemented I&D mechanisms for its members related to misconduct and failure to meet rules and regulations. All of the association’s I&D activities are performed jointly by its Quality and Ethics committees. The Quality Committee is responsible for investigation activities while the Ethics Committee is responsible for decisions on disciplinary actions. LACA further explains that the I&D procedures are defined in three sets of internal rules which are updated on an ongoing basis: (i) Rules of the Quality Committee (the current 2017 version is being updated for 2018); (ii) Rule of the Ethics Committee (the current 2015 version is being updated in 2018); and the (iii) Rules on Disciplinary Case Initiation, Investigation and Prosecution (last revised in 2017). In addition, LACA also reports that the existing I&D arrangements for auditors have been further reviewed with a focus on enhancing the role of the oversight board in line with the amended EU Audit Directive and strengthening its independence.

    According to LACA, the I&D system is in-line with most of the SMO 6 requirements, noting that both complaints-based and information-based approaches are used in practice. Its self-assessment against SMO 6 requirements has identified a few areas to improve its I&D system which include: (i) formalizing the linkage between the I&D system with the results of LACA’s quality assurance reviews; (ii) improving the separation of responsibilities between the Quality and Ethics Committees; (iii) and improving the timeline for disposal of all cases.

    LACA is encouraged to further advance its efforts in the continuous improvement of its I&D system by working with its Quality and Ethics Committees establish strategic plans to address the areas for improvement it has identified in its SMO 6 self-assessment. The overall strategic plan, including a timeline and action steps, should be reported on in its next update. For LACA’s consideration, it may wish to refer to the CAPA’s Maturity Model guidance on investigation and discipline systems to support any next steps in enhancing its I&D system.

    Current Status: Execute

  • SMO 7: International Financial Reporting Standards

    The 2013 EU Accounting Directive was adopted in Latvia and transposed under the 2016 Law on Annual Financial Statements and Consolidated Financial Statements which sets the requirements for the preparation of corporate financial statements in Latvia. It outlines accounting standards to be applied—either EU-endorsed IFRS or Latvian Generally Accepted Accounting Principles (GAAP)—based on company size and type.

    With no responsibility for the adoption of accounting standards, LACA states that it uses its best endeavors to broaden the adoption and mandatory application of IFRS in the jurisdiction. Presently, EU-endorsed IFRS are required or permitted for listed and unlisted companies, development financial institutions, and large state-owned enterprises. The association participates in working groups organized by the Ministry of Finance (MoF) on the development of amendments or new laws on financial reporting. In addition, LACA has also participated in an IFRS translation project organized by the MoF to ensure quality and implementation of the translation in the jurisdiction.

    Through its Education Committee and Education Center, LACA also provides ongoing training on IFRS with materials translated in Latvian. LACA reports that its course curriculum, which includes new updates and common implementation issues, has been recognized by the Ministry of Education.

    Current Status: Sustain


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.



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