Lesotho

The statutory framework for corporate financial reporting and auditing in Lesotho is principally set out in the Companies Act 2011 and the Financial Institutions Act 2012. The Companies Act 2011 establishes the general financial reporting, audit, and auditor qualification requirements applicable to companies, while the Financial Institutions Act 2012 sets out additional requirements for licensed financial institutions under the supervision of the Central Bank of Lesotho (CBL).

Under Section 95 of the Companies Act 2011, company financial statements must be prepared in accordance with the accounting standards issued, adopted, and published by the Lesotho Institute of Accountants (LIA). LIA reports that it has adopted International Financial Reporting Standards (IFRS) and the IFRS for Small and Medium-sized Entities as issued by the International Accounting Standards Board, with subsequent amendments adopted on an ongoing basis. The IFRS Foundation jurisdiction profile for Lesotho similarly indicates that IFRS are adopted without modification and are automatically updated as new and revised standards become effective.

The Companies Act 20

11 also establishes the statutory audit framework. Companies are generally required to appoint an auditor, except where a private company meets the exemption conditions set out in Section 98(3), including having fewer than ten shareholders, no corporate shareholders, and the agreement of at least 75 percent of shareholders not to appoint an auditor, or where the company has a single shareholder.

Section 97 of the Companies Act 2011 provides that statutory auditors must be members of LIA and hold a valid practicing certificate issued by LIA, or otherwise be recognized by the institute in accordance with the Act. The Act further grants LIA authority to prescribe auditing standards and related rules governing the conduct of audits. LIA states that it has adopted International Standards on Auditing (ISA) as issued by the International Auditing and Assurance Standards Board and applies them on an ongoing basis in the jurisdiction.

The Financial Institutions Act 2012 supplements the general company law framework for banks and other licensed financial institutions. The Act grants the CBL authority to approve auditors of financial institutions and requires such institutions to establish audit committees. It also includes provisions on auditor rotation, including mandatory rotation after five consecutive years unless an exemption is granted by the CBL.

The Accountants Act 1977, as amended, establishes the Lesotho Institute of Accountants (LIA) as the national professional accountancy organization and regulator of the accountancy profession in Lesotho. The Act empowers LIA to regulate the profession, determine qualifications for admission to membership, maintain a register of members, issue practicing certificates, and establish rules and bye-laws relating to professional conduct and practice.

LIA currently operates a three-tier qualification framework for entry into the profession comprising Technician Accountant, General Accountant, and Chartered Accountant. Admission requirements vary by category and include recognized academic or professional qualifications together with specified practical experience requirements. Technician Accountants are generally required to hold a recognized technician or accounting qualification and complete one year of practical experience. General Accountants are generally required to hold an approved accounting qualification and complete two years of relevant practical experience. Chartered Accountants are required to complete a recognized chartered-level professional qualification, including through the LIA and Association of Chartered Certified Accountants (ACCA) joint examination scheme or another qualification recognized under the Accountants Act, together with a minimum of three years of relevant work experience.

To offer public practice services, members must obtain the relevant practice license from LIA. In practice, LIA distinguishes between ordinary membership, practice membership, and attest membership. The institute’s current framework provides that Technician and General Public Accountants may provide accounting and related services within the scope of their designation, while Chartered Public Accountants may provide services to entities of all sizes. Audit and assurance services may only be provided by members holding the relevant audit practicing and attest license issued by LIA.

Under the Companies Act 2011, statutory auditors must be members of LIA and hold a valid practicing certificate issued by the institute, or otherwise be recognized by LIA in accordance with the Act. In accordance with the current licensing framework, only Chartered Registered Auditors are authorized to perform statutory audits and assurance engagements.

LIA is responsible for promoting the interests of the accountancy profession in Lesotho and for regulating professional practice in the public interest. Its responsibilities include establishing and adopting private and public sector accounting and auditing standards, determining initial professional development and continuing professional development requirements, establishing ethical requirements for members, operating an investigation and disciplinary system, maintaining a publicly available register of practitioners and firms, and administering a quality assurance review system.

There is currently no independent public audit oversight authority in Lesotho for the private sector audit profession. External auditors are regulated by the Lesotho Institute of Accountants (LIA) under the Accountants Act 1977, the Companies Act 2011, and the institute’s Practice Bylaws. LIA remains the body responsible for licensing, quality assurance reviews, professional standards, and disciplinary oversight of auditors in the jurisdiction.

Under Section 97 of the Companies Act 2011, statutory auditors must be members of LIA, or of a professional accountancy organization recognized by LIA, and must hold a valid practicing certificate issued by the institute. In practice, statutory audit and assurance services may only be performed by members holding the relevant audit practicing and attest license as prescribed by LIA’s current regulatory framework.

LIA exercises direct oversight over audit practitioners through its regulatory, licensing, quality assurance, and investigation and disciplinary functions. The institute maintains a register of registered audit firms and audit practitioners on its website and operates a quality assurance review system covering audit firms. The Practice Bylaws, issued in 2024, further strengthen the institute’s oversight framework for public practice and audit engagements.

For regulated financial institutions, the Central Bank of Lesotho (CBL) has an additional supervisory role under the Financial Institutions Act 2012, including authority to approve auditors of licensed financial institutions and oversee compliance with sector-specific audit requirements. This oversight is supplementary to LIA’s professional regulation of auditors.

Although an Institute of Chartered Accountants Lesotho Bill has been proposed that would establish an independent Independent Regulatory Board for Auditors and Accountants, this body has not yet been established and the current oversight arrangements remain in place.

Lesotho Institute of Accountants (LIA)

The Lesotho Institute of Accountants (LIA) was established in 1977 under the Accountants Act 1977 as the national professional accountancy organization and regulator of the accountancy profession in Lesotho. LIA is recognized by law and is responsible for regulating the profession in the public interest, including admission to membership, licensing of practitioners, and oversight of professional standards and conduct.

LIA’s membership currently comprises Technician Accountant, General Accountant, and Chartered Accountant categories, with separate pathways for ordinary membership, practice membership, and attest membership for audit practitioners. Under the Companies Act 2011, all statutory auditors must be members of LIA and hold the relevant practicing certificate issued by the institute.

The institute’s mandate includes promoting the interests of the accountancy profession in Lesotho; establishing and adopting private and public sector accounting and auditing standards; determining initial professional development and continuing professional development requirements; establishing ethical requirements for members; operating an investigation and disciplinary system; maintaining a publicly available register of practitioners and firms; and administering a quality assurance review system.

LIA also plays an active role in professional capacity development and regulatory reform within the jurisdiction, including ongoing initiatives to strengthen the legal and institutional framework for the profession.

In addition to being a member of the International Federation of Accountants (IFAC), LIA is a member of the Pan African Federation of Accountants (PAFA).

Although there is no explicit statutory requirement in the Accountants Act 1977 to establish a quality assurance (QA) review system, the Lesotho Institute of Accountants (LIA) has established and operationalized a mandatory QA review framework for firms performing statutory audits in the jurisdiction.

LIA introduced mandatory practice reviews in 2009, initially focused on firms providing audit services to public interest entities. Under contractual arrangements, the Association of Chartered Certified Accountants (ACCA) conducted practice reviews from 2012 to 2014. In 2017, LIA entered into a partnership with the Public Accountants and Auditors Board (PAAB) of Zimbabwe to continue the QA review program, with review rounds conducted in 2018 and 2019.

Following disruption caused by the COVID-19 pandemic and capacity constraints, LIA developed its own in-house QA review methodology and manual. In May 2024, LIA formally approved the quality review methodology and manual for audit firms, which establishes the framework for inspections and confirms that all professional audit firms must participate in a cycle-based review program administered by LIA as a condition of maintaining their license.

The 2024 methodology expressly confirms that the International Standards on Quality Management (ISQM) 1 and ISQM 2 are the benchmark standards against which firms’ systems of quality management are assessed. The methodology further provides for reviews at both the firm quality management level and the engagement performance level.

LIA’s 2024 Practice Bylaws further require that Chartered Registered Auditors document quality management procedures compliant with ISQM 1 and ensure engagement quality management procedures are in accordance with ISQM 2. This confirms that both standards are adopted and operational in the jurisdiction.

The QA review cycle is expressly risk- and cycle-based and is aligned with SMO 1 requirements. The methodology provides for a maximum two-year cycle for firms auditing public interest entities and a maximum six-year cycle for other firms. It also includes reviewer independence requirements, documented inspection procedures, corrective action plans, follow-up reviews, and linkage to the investigation and discipline system for serious deficiencies.

Based on the approved methodology, mandatory inspection cycle, adoption of ISQM 1 and ISQM 2, and formal linkage to disciplinary procedures, the QA review system is aligned with SMO 1 requirements and remains appropriately assessed as Adopted.

Current Status: Adopted

Section 6 of the Accountants Act 1977 establishes that the Lesotho Institute of Accountants (LIA) is responsible for determining initial professional development (IPD) and continuing professional development (CPD) requirements for professional accountants in the jurisdiction.

LIA has established a three-tier qualification framework for entry into the profession comprising Technician Accountant, General Accountant, and Chartered Accountant, each with specified academic and practical experience requirements. Technician Accountants are generally required to hold a recognized technician or accounting qualification and complete one year of practical experience. General Accountants are required to hold an approved accounting qualification or equivalent and complete two years of relevant practical experience. Chartered Accountants are required to complete a recognized professional qualification, including through the Association of Chartered Certified Accountants (ACCA) joint examination scheme or another qualification recognized under Schedule II of the Act, together with a minimum of three years of relevant work experience.

LIA continues to operate its joint qualification arrangement with ACCA, which runs through 2028, and includes Lesotho-specific modules as part of the professional qualification pathway. LIA also works with the Council on Higher Education (CHE) to support alignment of tertiary accounting education programs with the International Education Standards (IES) and to accredit relevant university and training provider programs.

Practical experience requirements are formally embedded within the membership framework and are monitored by LIA through its education and technical functions. In addition, LIA maintains an Approved Training Employers scheme to support structured practical experience and competency development for aspiring professional accountants.

LIA also operates a compulsory CPD program for all members. The current framework requires completion of annual CPD credits and includes monitoring and enforcement mechanisms for non-compliance. Based on the institute’s published requirements and monitoring arrangements, the CPD framework is aligned with IES 7 and IES 8 requirements for professional accountants and engagement partners.

Based on the legal mandate, structured IPD pathways, practical experience requirements, final assessment routes, and compulsory CPD framework, the requirements of the IES are adopted for aspiring and professional accountants in Lesotho and the jurisdiction remains appropriately assessed as Adopted.

Current Status: Adopted

The Companies Act 2011 grants authority to the Lesotho Institute of Accountants (LIA) to prescribe auditing standards and the rules and regulations governing the conduct of statutory audits in the jurisdiction. Under this legal framework, LIA is the body responsible for adopting and issuing International Standards on Auditing (ISA) for application in Lesotho.

LIA confirms on its official regulations page that it has adopted ISA in full for application as the auditing standards in Lesotho and that the standards have been implemented in the jurisdiction. The institute expressly states that it has adopted ISA “in the same manner” as IFRS, that is, in whole and without modification.

There is no indication from current LIA publications or legislation that Lesotho applies an earlier version of ISA. Given LIA’s stated policy of adopting ISA as issued and on an ongoing basis, the applicable handbook should be considered the 2025 Handbook of International Quality Management, Auditing, Review, Other Assurance, and Related Services Pronouncements issued by the International Auditing and Assurance Standards Board (IAASB).

With respect to the International Standard on Auditing for Audits of Financial Statements of Less Complex Entities (ISA for LCE), no separate adoption by LIA could be identified in current legislation, regulations, or technical guidance. Accordingly, there is no evidence at present that ISA for LCE has been separately adopted in Lesotho. This does not affect the jurisdiction’s adoption rating for ISA, as the full suite of ISA continues to be adopted as issued by the IAASB.

Current Status: Adopted

A 1984 amendment to the Accountants Act 1977 grants the Lesotho Institute of Accountants (LIA) the authority to establish ethical requirements for the profession. In line with this mandate and its obligations as a member of the International Federation of Accountants, LIA has adopted the International Code of Ethics for Professional Accountants (including International Independence Standards) issued by the International Ethics Standards Board for Accountants (IESBA).

LIA’s current regulatory framework confirms that practitioners are required to comply with the Code as part of the institute’s Practice Bylaws. The bylaws expressly reference the “International Code of Ethics for Professional Accountants” as a normative source and state that, for undated references, the latest edition including amendments applies.

Based on LIA’s explicit adoption of the Code with automatic incorporation of the latest amendments, the applicable handbook in use is the 2025 International Code of Ethics for Professional Accountants (including International Independence Standards). Accordingly, the jurisdiction remains appropriately assessed as Adopted under the 2026 adoption definitions.

Current Status: Adopted

The Public Financial Management and Accountability Act 2011 establishes the legal framework for public sector financial management and reporting in Lesotho and applies to the Government, local authorities, and public enterprises. The Act provides the basis for the preparation and reporting of government financial statements and assigns responsibility for public financial management to the Ministry of Finance and related public sector institutions.

The Lesotho Institute of Accountants (LIA) continues to play a direct role in supporting the adoption and implementation of International Public Sector Accounting Standards (IPSAS) within the jurisdiction, consistent with its statutory mandate to establish public sector accounting standards and support the profession. Current evidence indicates that public sector financial reporting in Lesotho remains based on a modified cash basis / cash receipts and payments framework, rather than full accrual-basis IPSAS. Recent World Bank-supported public financial management reform project financial statements continue to be prepared on a cash receipts and payments basis.

At the same time, public sector reform initiatives continue to reference alignment with IPSAS principles and broader accrual accounting reforms. The Ministry of Finance has been implementing ongoing public financial management reform projects, including modernization of government reporting systems and strengthening external audit and parliamentary oversight functions. These reforms support a gradual transition toward stronger public sector reporting practices, but there is no current evidence that accrual-basis IPSAS in their entirety have been adopted and are effective for all public sector entities.

Based on the currently available legal and operational framework, Lesotho’s public sector reporting remains best assessed as Partially Adopted, as public sector financial statements are still prepared on a cash or modified cash basis and full accrual IPSAS have not yet been implemented across all public sector entities. This remains aligned with the 2026 adoption definitions.

Current Status: Partially Adopted

The Accountants Act 1977, as amended, establishes the legal basis for the investigation and discipline (I&D) system in Lesotho and requires the Lesotho Institute of Accountants (LIA) to establish and operate disciplinary arrangements for its members. The Act provides for the appointment of a Disciplinary Committee by Council, permits the establishment of investigation committees to review complaints and allegations of misconduct, and grants a right of appeal from decisions of the Disciplinary Committee to the High Court.

LIA has established an operational I&D framework for all members under its regulatory authority. The framework includes complaint intake procedures, investigation of reported cases of noncompliance, disciplinary hearings, sanctions, and appeal rights. The published procedures provide for a range of sanctions, including caution, reprimand, fines, suspension from practice, removal from the register, and exclusion from membership. Members subject to proceedings are entitled to representation and appeal.

LIA’s current regulatory framework also links compliance and disciplinary matters to its quality assurance and practice monitoring arrangements. Under the 2024 Practice Bylaws, the Practitioners’ Compliance Committee (PCC) oversees compliance by practicing members with applicable laws, standards, and practice review findings and may refer matters to the Disciplinary Committee where appropriate. This establishes a direct linkage between quality assurance findings and the disciplinary framework, consistent with SMO 6 requirements.

Based on the legal framework, established committees, available sanctions, linkage with quality assurance findings, and operational appeal mechanism, the jurisdiction-level I&D system is aligned with SMO 6 requirements and remains appropriately assessed as Adopted.

Current Status: Adopted

The Companies Act 2011 requires companies to prepare financial statements in accordance with the accounting standards prescribed by the Lesotho Institute of Accountants (LIA).

According to the IFRS Foundation jurisdiction profile for Lesotho, LIA adopted International Financial Reporting Standards (IFRS) in 2001 and the IFRS for Small and Medium-sized Entities (IFRS for SMEs) in 2009, both without modification. The Council’s decision also provides for the automatic adoption of all new and revised standards issued by the International Accounting Standards Board (IASB). Financial institutions, as publicly accountable entities, are required to apply full IFRS, while other eligible entities may apply either full IFRS or IFRS for SMEs. Accordingly, IFRS for SMEs is adopted in the jurisdiction.

As IFRS are adopted as issued by the IASB with automatic incorporation of subsequent amendments, the applicable handbook in use is the 2025 IFRS Accounting Standards. The jurisdiction therefore remains appropriately assessed as Adopted under the 2026 adoption definitions.

Current Status: Adopted

Relevant Organizations

Accountant General, Government of Lesotho

Central Bank of Lesotho

Council on Higher Education

Lesotho Institute of Accountants (LIA)

Ministry of Finance, Kingdom of Lesotho

National University of Lesotho

Relevant Legislation

Accountants Act, 1977 (as amended)

Companies Act, 2011

Financial Institutions Act, 2012

Public Financial Management and Accountability Act, 2011

Relevant Publications

IFRS Foundation, IFRS Application Around the World—Jurisdictional Profile: Lesotho, 16 June 2016

LIA, Annual Report, 2025

LIA, Practice Bylaws, 2024

LIA, Quality Review Methodology and Manual for Audit Firms, 2024

LIA, SMO Action Plan, 2024

Public Expenditure and Financial Accountability (PEFA): Lesotho, 2017

World Bank, Report on the Observance of Standards and Codes—Accounting and Auditing: Lesotho, May 2010