Lithuanian Chamber of Auditors

LCA played a leading role in the establishment and development of a quality assurance (QA) review system in Lithuania. From 2005–2008, LCA was legally mandated by the Audit Law to supervise the activities of the audit profession and to establish QA reviews for all audit firms. During this time, LCA administered the Audit Quality Control Committee (AQCC), which used a QA review system based on peer reviews. AQCC was an external body composed of members of LCA, the Ministry of Finance, and other organizations.

In 2008, amendments to the Audit Law resulted in the sharing of QA responsibility between the Authority of Audit, Accounting, Property Valuation and Insolvency Management (AAAPVIM) and LCA, with the former having oversight over the entire QA process. AAAPVIM is responsible for conducting QA reviews for all public interest entities (PIEs), while LCA performs the QA reviews for non-PIEs. LCA reports that the QA review system in the jurisdiction is aligned with SMO 1 requirements, inclusive of quality control standards translated in accordance with the IFAC Translation Policy. Close cooperation between the two bodies has been ongoing since the AAAPVIM assumed its oversight responsibilities, particularly regarding efforts to propose improvements to the QA system to Lithuanian Parliament such as requiring a QA review within one year to determine if firms were able to eliminate identified deficiencies.

LCA reports that QA review questionnaires for auditors are updated on a regular basis. In 2019, LCA also issued guidance for auditors related to AML/CTF. The association provides ongoing training and information sessions to auditors on developments in the QA system in addition to organizing CPD training for full implementation of ISQC 1 amongst all types of audit firms. With the upcoming effective date of ISQM 1, LCA indicates that it started a working group to provide implementation support, particularly to small firms, and has provided training on the main changes. LCA is striving to meet firms’ needs for guidance on transitioning from quality control to quality management and has engaged with the AAAPVIM. The AAAPVIM is translating the QM standards into Lithuanian.

Current Status: Sustain

The Audit Law No. XIII-96 of 2017 establishes the IPD and CPD requirements for auditors and authorizes the LCA to implement the requirements under the oversight of Authority of Audit, Accounting, Property Valuation and Insolvency Management (AAAPVIM).

To be eligible for the designation of certified auditor, individuals must have: an academic university master’s degree; an irreproachable reputation; three years practical training; and pass examinations (5 exams on common issues, law, taxes, accounting, audit). LCA has established an Examinations Committee and a Task Committee that is responsible for updating the examinations to reflect the current standards, skills, trends, and assignments that professional accountants will need to know and be able to demonstrate competencies.

Individuals must join the LCA and must fulfill the CPD requirements. The CPD requirements are 120 hours over a 3-year period, which aligns with the input-based approach of IES 7. LCA offers several training courses throughout the year and monitors its members’ completion of required CPD. LCA indicates that its CPD programming is updated annually to reflect trends and expectations of the industry.

LCA states that its respects the IES requirements in the development of IPD and CPD requirements. Under the oversight of AAAPVIM, LCA has also endeavored to translate the IES – notably after the IES were significantly revised in 2015.

Within its remit, it seems that the LCA has adopted the principle-based approach outlined in the IES by updating its examinations to reflect the current demands of auditors. It would be helpful for LCA to clarify if it has made changes to its training and/or raised awareness of universities (responsible for the first stage of IPD) of revised IES 2, 3, 4 and 8 effective January 2021 which enhance the Information and Communications Technologies (ICT) and Professional Skepticism learning outcomes and clarify accompanying explanatory material. If feasible, LCA may consider translating the latest version of the IES Handbook (2019 plus mentioned revisions) to support stakeholder awareness (e.g., universities, employers, other PAOs). The LCA can leverage IFAC’s Accountancy Education e-Tool and the IES Self-Assessment developed by IFAC to take stock and develop plans as necessary.

Current Status: Review & Improve

The Audit Law No. XIII-96 of 2017 adopts ISA as issued by the IAASB and requires statutory audits to be performed according to the standards. The Audit Law also states that the Authority of Audit, Accounting, Property Valuation and Insolvency Management (AAAPVIM), as the public oversight body, is to translate the ISA and publish them on its website. The AAAPVIM has translated and published ISA effective as of December 15, 2019 (i.e. up to the 2018 Handbook).

Recent amendments to the Audit Law authorize the AAAPVIM to translate ISA. Prior to this, LCA was responsible for regularly translating the standards and established an ongoing process to translate and publish new and revised standards – for example, the complete suite of standards for the new auditor’s report.

To facilitate application of ISA, the LCA has an Audit Committee which is responsible for developing guidelines and templates regarding the main important issues that Lithuanian auditors face in everyday practice. It has made IFAC’s SMP guidance available in Lithuanian to support small firms with implementation. The association also cooperates with different regulators (National Commission for Energy Control and Prices, Central Electoral Commission) and has developed special guidelines based on ISA for the audit services in specific sectors including the public sector and energy sector.

In addition, the LCA supports its members’ implementation of the standards by conducting CPD courses and monitors compliance via QA reviews. Finally, with regards to the standard-setting process, LCA encourages their members to provide inputs on exposure drafts and other pronouncements issued by the IAASB.

The 2020 IAASB Handbook is now effective, which includes ISA 315 (revised 2019 and effective December 2021) and conforming amendments arising from the IESBA Code of Ethics. As reasonable, the LCA is encouraged to raise awareness of key stakeholders, such as the AAAPVIM who is authorized to translate the requirements, and ensure auditors continue to have access to implementation support to apply the standards by the effective date.

Current Status: Sustain

The Audit Law No. XIII-96 of 2017 requires all certified auditors to follow the IESBA Code of Ethics for Professional Accountants. The Audit Law also states that the Authority of Audit, Accounting, Property Valuation, and Insolvency Management (AAAPVIM), as the public oversight body, is to translate the IESBA Code and publish it on its website. As of the date of the assessment, the AAAPVIM has translated and published the 2018 International Code of Ethics.

The LCA, as the professional organization for certified auditors, is responsible for ensuring and enforcing implementation of the Code’s principles and requirements. It has an Ethics Committee that is dedicated to supporting ethic-related initiatives at the association. Prior to 2017, it was responsible for the ongoing translation and publication of the Code of Ethics and had translated and published several iterations of the Code – up to the 2016 IESBA Code of Ethics which included the introduction of the significant NOCLAR standard. Now, the association has established an ongoing process for communicating available translations and IESBA pronouncements to its members. LCA invites members to submit inquiries to its Ethics Committee and reports that on an annual basis, it provides training on the implementation of the standards to its members.

LCA also has a system for monitoring member compliance with the Code of Ethics and imposes sanctions for those found in violation of the code. The association has a Court of Honor, composed of two auditors and representatives from the Ministry of Finance, Ministry of Economy and Ministry of Justice. The Court of Honor deals with questions regarding compliance of Code of Ethics and has the right to impose penalties for auditors.

The 2021 version of the International Code of Ethics is now available, which namely differs from the 2018 & 2020 Handbook by including revisions to Part 4B and Parts 1 & 2 on the role and mindset of professional accountants that became effective December 2021. The 2021 Handbook also includes approved revisions that will become effective in December 2022, such as: revisions to non-assurance services, fees, and objectivity of an engagement quality reviewer. As reasonable, LCA is encouraged to raise awareness of key stakeholders, such as the AAAPVIM who is authorized to translate the requirements, and prepare auditors to properly apply the standards at the effective date(s).

Current Status: Sustain

The Ministry of Finance (MoF) is responsible for establishing public sector accounting and reporting standards in Lithuania. Since 2010, all public sector entities on both state and municipal levels have the obligation to implement the National Public Sector Accounting and Reporting Standards (NPSAS). According to the IFAC / CIPFA Public Sector Accountability Index, the NPSAS are accrual-basis IPSAS modified for the national context.

The association has no authority for public sector standards, and it is not within the scope of its members’ remit. It indicates it uses best endeavors to identify opportunities to further assist in the implementation of the standards. Currently, LCA has a representative in the NPSAS Committee and cooperates with the Ministry of Finance by providing comments on the NPSAS through its Accountancy and Tax Committee.

Given the nature of its mandate, membership composition, and the legal and regulatory environment, the LCA is fulfilling the SMO 5 requirements to the best of its capabilities.

Current Status: Sustain

In Lithuania, a mandatory investigative and disciplinary (I&D) system has existed since 2005 as established by the Audit Law. According to the law, responsibility for the implementation of the I&D system is shared between the Authority of Audit, Accounting, Property Valuation, and Insolvency Management (AAAPVIM) and the LCA.

Under the law, both the AAAPVIM and LCA are empowered to initiate sanctions, however, in cases regarding audit quality, only the AAAPVIM has the authority to enforce disciplinary actions. Any deficiencies identified in quality assurance reviews of non-PIEs undertaken by the LCA are forwarded to the AAAPVIM’s Audit Oversight Committee for review and disciplinary decision. In matters related to ethical misconduct and applying corresponding AAAPVIM enforcement decisions, LCA has established the Auditors’ Court of Honor which has the authority to issue sanctions.

The LCA conducted a self-assessment of its enforcement mechanism and reports that the system is aligned with the SMO 6 requirements. Its I&D procedures are also publicly available on its website. The association has established an ongoing process of communication with the AAAPVIM and the Ministry of Finance to ensure that the jurisdiction’s enforcement system for auditors continues to be aligned with SMO 6.

Current Status: Sustain

The Accounting Law No. IX-574 of 2001 sets the requirements for the preparation of corporate financial statements in Lithuania, which are EU-endorsed IFRS or Lithuanian Business Accounting Standards (LBAS). The Ministry of Finance is responsible for developing accounting legislation and for establishing the LBAS.

EU-endorsed IFRS have slight modifications from IFRS but according to the IFRS Foundation, the majority of companies can state full compliance with the IFRS. The law requires all public interest entities (PIEs) to apply EU-endorsed IFRS in both the consolidated and separate company financial statements. The MoF has expanded the definition of PIEs to include banks, pension funds, brokerage houses, and state and government enterprises, among several other types of entities. All other companies including small and medium enterprises (SMEs) have the option to apply EU-endorsed IFRS or LBAS in both the consolidated and separate financial statements. IFRS for SMEs has not been adopted in Lithuania.

The association has no authority for setting accounting standards. LCA indicates it uses best endeavors to identify opportunities to further assist in the implementation of the standards. LCA provides CPD courses on accounting topics in addition to audit. Currently, LCA has a representative in the Accounting Standard Setting Committee and cooperates with the Ministry of Finance through its Accountancy and Tax Committee. LCA also notes that it supports the MoF’s translation efforts of IFRS and indicates that it promotes the adoption of IFRS for SMEs.

Current Status: Sustain