Mongolia

Accounting, auditing, and financial reporting requirements in Mongolia are stipulated in the Company Law of 2011 and the Partnership Law of 1995 as well as the Law of Mongolia on Accounting of 1993 and the Law of Mongolia on Auditing 1997, which were both amended in 2015.

The Company Law obligates companies to keep books of accounts and provides the basic legal framework for accounting. The Law on Accounting establishes accounting standards for all companies and empowers the Accounting and Auditing Standard Committee (AASC), under the oversight of the Ministry of Finance (MoF), to review and confirm the official translations and provide applicable interpretations and recommendations, which are then submitted to the MoF for its review and approval. The Law on Accounting requires the application of IFRS, IFRS for Small- and Medium-sized Entities (SMEs), and IPSAS.

Under the Law on Accounting, listed companies, banks and non-banking financial institutions, insurance companies, other companies specified in the Law on Licensing of Business Activities, state or local government-owned enterprises and enterprises with state ownership participation, public service entities engaged to supply electricity, water and heating, and political parties and non-governmental organizations performing governmental functions are required to apply IFRS. In Mongolia, SMEs are defined within the Law on Supporting Small and Medium Enterprises of 2019 as legally registered business entities with employees of up to 200 and with an annual turnover of up to 2.5 billion Tugrik. These entities are required to apply IFRS for SMEs.

The Law on Auditing establishes ISA as the auditing standards for all companies. The AASC and MoF follow same translation and implementation guidance process as mentioned above for the accounting standards.

In accordance with the Law on Auditing, the financial statements of the following companies are required to be audited: companies applying IFRS as stipulated in the Law on Accounting, companies preparing consolidated financial statements, companies being restructured, liquidated, or proposing to sell all its assets through an auction, foreign invested companies, funds stated in the Civil Code, and companies required by laws and international treaties of Mongolia.

While the MoF is responsible for the overall development of accounting and auditing standards in the country, the Central Bank of Mongolia and Financial Regulatory Commission also issue additional regulations consistent with the MoF directives for banks, listed companies, insurance companies, and non-banking financial institutions.

The accountancy profession in Mongolia is regulated by the Ministry of Finance (MoF) and the Mongolian Institute of Certified Public Accountants (MonICPA) as established in both the Law of Mongolia on Accounting of 1993 and the Law of Mongolia on Auditing of 1997, both amended in 2015.

The Law on Accounting provides the definition for Professional Accountants and Certified Public Accountant (CPA). Professional Accountants are individuals who have attained a degree in accounting, while a CPA is defined as a professional accountant, financier, and economist who has obtained the CPA designation by MonICPA. Membership in MonICPA is mandatory in order to offer auditing services and CPAs are the only individuals in Mongolia who may conduct statutory audits.

Professional Accountants (PA) are authorized to prepare financial statements for tax and financial reporting purposes; however, they do not appear to be subject to regulation. PAs may choose to voluntarily join one of the following professional accountancy organizations (PAOs) in Mongolia—the Mongolian Institute of Internal Auditors; the Mongolian Institute of Management Accountants; and the Association of Mongolian Auditors—and be self-regulated through the membership requirements of the respective PAOs.

The Law on Accounting establishes the requirements for individuals who wish to earn the CPA designation. Candidates who take the CPA examination are required to possess a university degree in accounting, achieve requirements related to practical experience, and complete a final examination.

The Law on Auditing establishes requirements for auditors. Membership with MonICPA is mandatory to offer auditing services. Only audit firms that obtain an audit license from the MoF and are registered with both the Financial Regulatory Commission and MonICPA are authorized to act as statutory auditors of listed and insurance companies.

Under both the Law on Accounting and the Law on Auditing, the MoF is responsible for reviewing and approving auditing and accounting standards presented by the Accounting and Auditing Standard Committee; maintaining a register of CPAs and audit firms; and carrying out quality assurance reviews.

The Law on Accounting establishes the responsibilities of MonICPA, which include implementing IPD and CPD requirements for CPAs; establishing ethical requirements for its members; translating and contributing to the adoption and implementation of international accounting and auditing standards; providing guidelines and materials to support the audit firms; and operating an investigative and disciplinary system for its members who breach the MonICPA Code of Ethics and applicable accountancy standards.

There are no independent audit oversight arrangements in Mongolia.

The auditing profession in Mongolia is regulated by the Ministry of Finance (MoF) and the Mongolian Institute of Certified Public Accountants (MonICPA) as established in both the Law of Mongolia on Accounting of 1993 and the Law of Mongolia on Auditing of 1997, both amended in 2015.

Under the legislation, the MoF is responsible for reviewing and approving auditing and accounting standards presented by the Accounting and Auditing Standard Committee; maintaining a register of Certified Public Accountants (CPA) and audit firms; and carrying out quality assurance reviews. Only audit firms that obtain an audit license from the MoF and are registered with both the Financial Regulatory Commission and MonICPA are authorized to act as statutory auditors of listed and insurance companies.

MonICPA has regulatory responsibilities related to CPAs under the oversight of the MoF, which are further outlined in the

Mongolian Institute of Certified Public Accountants (MonICPA)

MonICPA was established in 1996 to represent Certified Public Accountants (CPA). The Law on Accounting establishes the responsibilities of MonICPA, which include implementing initial and continuing professional development requirements for CPAs; establishing ethical requirements for its members; translating and contributing to the adoption and implementation of international accounting and auditing standards; providing guidelines and materials to support the audit firms; and operating an investigative and disciplinary system for its members who breach the MonICPA Code of Ethics and applicable accountancy standards.

In addition to being a member of IFAC, the MonICPA is a member of the Confederation of Asian and Pacific Accountants.

In accordance with the Law on Auditing of 1997, as amended in 2015, the Ministry of Finance is responsible for establishing and implementing a mandatory quality assurance review system for all statutory audits. The Law authorizes the Ministry of Finance to conduct quality assurance reviews of audit firms and certified public accountants.

The Ministry of Finance has established a quality assurance review system that applies to all mandatory audits. According to the Mongolian Institute of Certified Public Accountants, the system incorporates the requirements of SMO 1, and International Standards on Quality Management, including ISQM 1 and ISQM 2, have been adopted as part of the applicable quality management framework.

Accordingly, a quality assurance review system incorporating the requirements of SMO 1 has been established and is operational for all mandatory audits in the jurisdiction.

Current Status: Adopted

The Law on Accounting of 1993, as amended in 2015, establishes the requirements for obtaining the Certified Public Accountant designation in Mongolia. The Ministry of Finance, the Ministry of Education, the Mongolian Institute of Certified Public Accountants, and universities share responsibility for the implementation of initial professional development and continuing professional development requirements for Certified Public Accountants.

The Law defines a Professional Accountant as an individual who has attained a degree in accounting, while a Certified Public Accountant is a professional accountant who has obtained the CPA designation issued by MonICPA. Initial professional development requirements for CPAs include completion of a university degree, practical experience, and successful completion of a final examination. MonICPA, under the oversight of the Ministry of Finance, establishes continuing professional development requirements for CPAs.

The latest International Education Standards have been incorporated into the CPA qualification framework. However, Professional Accountants who do not pursue the CPA designation are not subject to a clearly defined regulatory framework aligned with the International Education Standards, and information is limited regarding whether educational requirements for all aspiring and professional accountants meet the requirements of the IES in effect at the time of assessment.

Accordingly, the requirements of the International Education Standards in effect as of the time of the assessment have been adopted for a segment of the profession.

Current Status: Partially Adopted

The Law on Auditing of 1997, as amended in 2015, establishes mandatory audit requirements and prescribes International Standards on Auditing as the applicable auditing standards in Mongolia. The Law authorizes the Accounting and Auditing Standards Committee to review and confirm official translations of ISA and submit them to the Ministry of Finance for approval. The Ministry of Finance holds final authority for the approval of auditing standards.

According to the Mongolian Institute of Certified Public Accountants, the 2020 version of ISA has been translated and is being applied in the jurisdiction. The adoption process requires translation, review, and approval prior to becoming effective.

Currently effective revisions and new ISA issued after the 2020 version have not yet been confirmed as adopted and effective in the application of mandatory audits.

Accordingly, an earlier version of ISA has been adopted and is applied in all mandatory audits.

Current Status: Partially Adopted

Under the Law on Accounting of 1993, as amended in 2015, the Mongolian Institute of Certified Public Accountants (MonICPA) is responsible for establishing ethical requirements for its members, subject to oversight by the Ministry of Finance.

The MonICPA reports that, in 2021, its Board approved a Code of Ethics that is aligned with the 2018 International Code of Ethics for Professional Accountants (including International Independence Standards) issued by the International Ethics Standards Board for Accountants. The Code applies to Certified Public Accountants who are members of MonICPA.

Professional Accountants who do not hold the CPA designation are not subject to the MonICPA Code of Ethics under the current legal framework.

The most recent version of the International Code of Ethics in effect as of the time of the assessment has not been confirmed as adopted in its entirety. Accordingly, an earlier version of the International Code of Ethics has been adopted and applies to a segment of the profession.

Current Status: Partially Adopted

The Law on Accounting of 1993, as amended in 2015, establishes International Public Sector Accounting Standards as the applicable public sector accounting standards in Mongolia. The Law requires budget entities, defined as state or locally owned not-for-profit legal bodies that execute government functions in accordance with an approved budget, to apply IPSAS.

The Accounting and Auditing Standards Committee reviews official translations of IPSAS and submits them to the Ministry of Finance for approval. The Ministry of Finance is responsible for implementation and oversight of public sector financial reporting. The public sector applies accrual-basis accounting.

According to the Mongolian Institute of Certified Public Accountants, the 2021 version of IPSAS has been translated and is being applied in the jurisdiction.

Accordingly, accrual-basis IPSAS have been adopted for application by public sector entities as defined under the Law on Accounting.

Current Status: Adopted

The Law on Accounting of 1993, as amended in 2015, outlines penalties that may be imposed on Certified Public Accountants who breach applicable professional requirements. The Law establishes the authority of the Mongolian Institute of Certified Public Accountants to operate an investigative and disciplinary system for its members, subject to oversight by the Ministry of Finance.

The investigative and disciplinary procedures are set out in MonICPA’s Code of Ethics and related regulations. A Professional Accountability Committee, established under the Board of Directors, is responsible for receiving complaints, conducting investigations, and making recommendations regarding disciplinary actions. The system incorporates a complaints-based approach and has introduced elements of an information-based approach. The disciplinary process permits the imposition of sanctions, including suspension or removal of professional titles and membership.

The investigative and disciplinary system applies to Certified Public Accountants who are members of MonICPA. Professional Accountants who do not hold the CPA designation are not subject to the MonICPA investigative and disciplinary framework under the current legal structure.

Certain elements of the system, including the establishment of an independent appeals body separate from both the investigative and disciplinary functions and comprehensive tracking and public reporting mechanisms, have not been fully aligned with the requirements of SMO 6.

Accordingly, an investigative and disciplinary system has been established and is operational for a segment of the profession but does not fully incorporate all requirements of SMO 6.

Current Status: Partially Adopted

The Law on Accounting of 1993, as amended in 2015, establishes the financial reporting framework in Mongolia and requires the application of International Financial Reporting Standards and IFRS for Small- and Medium-sized Entities. The Law authorizes the Accounting and Auditing Standards Committee to review and confirm official translations of international standards and submit them to the Ministry of Finance for approval. The Ministry of Finance holds final authority for approval of applicable accounting standards.

Under the Law on Accounting, listed companies, banks and non-banking financial institutions, insurance companies, and other entities specified in law are required to apply IFRS. Small and medium-sized entities, as defined under the Law on Supporting Small and Medium Enterprises of 2019, are required to apply IFRS for SMEs.

The Mongolian Institute of Certified Public Accountants supports the standard-setting process by providing translations of the standards and reports that the latest version of IFRS is translated and applicable in the jurisdiction.

Accordingly, IFRS Accounting Standards in effect as of the time of the assessment are adopted and are required for application by domestic publicly accountable entities as defined in the jurisdictional framework.

Current Status: Adopted

Relevant Organizations

• Central Bank of Mongolia
• Financial Regulatory Commission (FRC)
• Ministry of Finance of Mongolia
• Mongolian Institute of Certified Public Accountants (MonICPA)

Relevant Legislation

• Law on Accounting of Mongolia
• Law on Auditing of Mongolia
• Law on Budgets Mongolia
• Law on Licensing of Business Activities

Relevant Publications

• IFRS Foundation, “IFRS Application around the World, Jurisdictional Profile: Mongolia,” 2021.
• MonICPA, SMO Action Plan, June 2017.
• World Bank, Report on the Observance of Standards and Codes (ROSC), Accounting and Auditing: Mongolia, March 2008.