Latvia

Member Organizations

  Member Organization   Associate

  Latvian Association of Certified Auditors
  Association of Accountants of the Republic of Latvia

 

Legal and Regulatory Environment

  • Overview of Statutory Framework for Accounting and Auditing

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

    The accounting framework in Latvia is primarily set out in the Law on Annual Financial Statements and Consolidated Financial Statements, which came into effect on January 1, 2016 following the transposition of the 2013 EU Accounting Directive. The law establishes the requirements for the preparation of financial statements based on the size and type of entity. Entities generally prepare financial statements in accordance with Latvian Accounting Regulations, which constitute Latvian generally accepted accounting principles, while certain entities are required or permitted to apply International Financial Reporting Standards (IFRS) as adopted by the EU. The Ministry of Finance is responsible for developing accounting policy and overseeing the financial reporting framework.

    Entities whose transferable securities are admitted to trading on a regulated market are required to prepare consolidated financial statements in accordance with EU-endorsed IFRS in line with the Financial Instrument Market Law. In addition, financial institutions—including banks, insurance companies, and investment entities—are required to apply IFRS in accordance with sector-specific regulations. Large undertakings and parent companies may also elect to prepare financial statements in accordance with IFRS. IFRS for Small- and Medium-sized Entities has not been adopted in Latvia.

    Certain entities, including credit institutions, insurance companies, and investment firms, are subject to specific financial reporting requirements established by supervisory authorities. Following the integration of the Financial and Capital Market Commission into the Bank of Latvia in 2023, the Bank of Latvia is responsible for financial market supervision and oversight of these entities.

    Auditing requirements are established by the Law on Audit Services, which transposes the EU Statutory Audit Directive and regulates sworn auditors and audit firms. The law requires the application of International Standards on Auditing (ISA) in statutory audits. Mandatory audits are required for medium-sized and large entities, public interest entities, and parent companies preparing consolidated financial statements. Certain small entities exceeding prescribed thresholds are also subject to statutory audit requirements, while others are subject to review engagements. Statutory audits and reviews must be performed by sworn (certified) auditors.

 

Adoption of International Standards

  • Quality Assurance

    The quality assurance (QA) review system in Latvia is established under the Law on Audit Services and supporting regulations, including Cabinet Regulation No. 136 of March 7, 2017, which provide the legal foundation for mandatory QA reviews of audits of financial statements.

    The QA system covers all statutory audits and operates under a shared responsibility model. The Ministry of Finance (MoF), through its Commercial Companies Audit Policy and Oversight Unit (CCAPOU), is responsible for conducting QA reviews of audits of public interest entities, while the Latvian Association of Certified Auditors (LACA) conducts QA reviews for audits of non-public interest entities. LACA’s activities are subject to oversight by the MoF and the Audit Advisory Council (AAC).

    The QA review system is operational and applies to all mandatory audits. LACA has adopted and implemented relevant quality management standards, including the International Standards on Quality Management (ISQM 1 and ISQM 2) and International Standard on Auditing (ISA) 220 (Revised), and has ensured their availability in the Latvian language to support consistent application.

    Current Status: Adopted

  • International Education Standards

    Initial and continuing professional development requirements for auditors in Latvia are established under the Law on Audit Services, which authorizes the Latvian Association of Certified Auditors (LACA) to implement education, practical experience, and continuing professional development (CPD) requirements under the oversight of the Ministry of Finance (MoF).

    Entry requirements for auditors include completion of higher education in economics, finance, or management, a minimum period of practical experience, and successful completion of professional examinations administered by LACA. LACA has established CPD requirements of 120 hours over a three-year period and reports that the International Education Standards (IES) in effect, including the 2019 Handbook, have been adopted and incorporated into its requirements.

    While statutory requirements apply primarily to auditors, the Association of Accountants of the Republic of Latvia (AARL), a voluntary professional accountancy organization, establishes education and CPD requirements for its members through its Certified Professional Accountant qualification. AARL reports that its certification program has been developed and reviewed in alignment with the IES, including requirements for education, practical experience, and professional assessment.

    Accordingly, the requirements of the IES in effect as of the time of the assessment are adopted and applied to professional accountants within the jurisdiction, through both statutory and voluntary frameworks.

    Current Status: Adopted

  • International Standards on Auditing

    Under the Law on Audit Services, statutory audits in Latvia are required to be conducted in accordance with International Standards on Auditing (ISA) as issued by the International Auditing and Assurance Standards Board (IAASB). The Latvian Association of Certified Auditors (LACA) is responsible for the adoption and translation of ISA for application in the jurisdiction, under the oversight of the Ministry of Finance (MoF).

    LACA has adopted ISA in their entirety and ensures their availability in the Latvian language through an ongoing translation process. Recent standards have been translated and implemented for application in audits. This includes the International Standards on Quality Management (ISQM 1 and ISQM 2) and International Standard on Auditing (ISA) 220 (Revised).

    Accordingly, ISA in their entirety in effect as of the time of the assessment are adopted and required for application in all statutory audits in Latvia.

    Current Status: Adopted

  • Code of Ethics for Professional Accountants

    Ethical requirements for auditors in Latvia are established under the Law on Audit Services, which incorporates key provisions of the International Code of Ethics for Professional Accountants (including International Independence Standards) (IESBA Code). Certified auditors are required to comply with the IESBA Code as adopted and translated by the Latvian Association of Certified Auditors (LACA), under the oversight of the Ministry of Finance (MoF).

    LACA has translated and implemented the 2023 edition of the IESBA Code for application in the jurisdiction. In addition, both LACA and the Association of Accountants of the Republic of Latvia (AARL) have adopted the Code in full and support its implementation through guidance, training, and member communications.

    While a recent version of the IESBA Code has been adopted and is applied in practice, the version in use is not the most current version in effect as of the time of the assessment. Accordingly, an earlier version of the IESBA Code has been adopted for application in the jurisdiction.

    Current Status: Partially Adopted

  • International Public Sector Accounting Standards

    Public sector accounting standards in Latvia are developed by the State Treasury under the Ministry of Finance (MoF). The applicable framework is based on national standards that follow accrual-based principles and are broadly aligned with International Public Sector Accounting Standards (IPSAS).

    Financial reporting by central and local government entities is prepared using accrual-based national standards that incorporate elements of IPSAS; however, certain areas, including the recognition of tax revenues, continue to be based on cash accounting principles. As such, the national framework does not fully comply with IPSAS in their entirety.

    Accordingly, accrual-based national standards with reference to IPSAS are applied in the jurisdiction.

    Current Status: Partially Adopted

  • Investigation and Discipline

    An investigative and disciplinary (I&D) system for certified auditors in Latvia is established under the Law on Audit Services. The system operates under a shared responsibility model between the Ministry of Finance (MoF) and the Latvian Association of Certified Auditors (LACA).

    The MoF is responsible for investigation and disciplinary procedures related to audits of public interest entities and provides oversight of LACA’s activities. LACA is responsible for administering the I&D system for auditors of non-public interest entities. The framework includes procedures for investigation, discipline, and appeal, and has been strengthened to enhance independence and oversight in accordance with EU requirements.

    While the I&D system for auditors is operational and largely aligned with the requirements of SMO 6, gaps remain in ensuring full alignment across all professional accountants in the jurisdiction. In particular, the Association of Accountants of the Republic of Latvia (AARL), which regulates its members on a voluntary basis, does not yet fully meet all SMO 6 requirements, including the separation of investigative and disciplinary functions, and is in the process of enhancing its system.

    Accordingly, an I&D system has been established and is operational; however, it does not yet fully incorporate all the requirements of SMO 6 for all professional accountants.

    Current Status: Partially Adopted

  • International Financial Reporting Standards

    Corporate financial reporting in Latvia is governed by the Law on Annual Financial Statements and Consolidated Financial Statements, which establishes the applicable accounting framework based on the size and type of entity. The Ministry of Finance is responsible for developing accounting policy and overseeing financial reporting requirements.

    Entities whose transferable securities are admitted to trading on a regulated market are required to prepare consolidated financial statements in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union (EU), in line with the Financial Instrument Market Law. In addition, banks, insurance companies, and other supervised financial institutions are required to apply EU-endorsed IFRS in both their consolidated and separate financial statements.

    Other entities may apply Latvian Accounting Regulations, which constitute Latvian generally accepted accounting principles, or may elect to apply EU-endorsed IFRS in specified circumstances, including for large companies and parent entities preparing consolidated financial statements.

    IFRS as adopted by the EU include limited modifications to IFRS Accounting Standards; however, these modifications affect a narrow set of entities and do not preclude entities from asserting full compliance with IFRS where applicable.

    Accordingly, IFRS Accounting Standards as adopted by the EU are required for application by publicly accountable entities and are therefore adopted in the jurisdiction.

    Current Status: Adopted

 

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Methodology

Methodology
Last updated: 03/2026
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