Sri Lanka

The financial reporting and auditing framework in Sri Lanka is established through several legislative acts, including the Companies Act No. 7 of 2007, the Sri Lanka Accounting and Auditing Standards Act No. 15 of 1995, the Securities and Exchange Commission Act No. 36 of 1987, the Banking Act No. 30 of 1988, the Finance Business Act No. 42 of 2011, the Regulation of Insurance Industry Act No. 43 of 2000 (as amended), and other sector-specific legislation.

The Companies Act No. 7 of 2007 sets out the general requirements for the preparation and presentation of financial statements for companies incorporated in Sri Lanka, including requirements for maintaining proper accounting records and, where applicable, the audit of financial statements. The Act, however, does not prescribe specific accounting or auditing standards.

Under the Sri Lanka Accounting and Auditing Standards Act No. 15 of 1995, specified business enterprises (SBEs) are required to prepare financial statements in accordance with accounting standards issued by the Institute of Chartered Accountants of Sri Lanka (CA Sri Lanka). CA Sri Lanka has adopted Sri Lanka Financial Reporting Standards (SLFRS), which are based on International Financial Reporting Standards (IFRS). A separate framework, SLFRS for SMEs, based on the IFRS for SMEs Standard, is available for entities that do not meet the definition of SBEs.

Specified business enterprises are defined under the Act to include listed companies, banks, insurance companies, finance companies, and other entities meeting prescribed size and public interest thresholds. These entities are subject to mandatory audit requirements.

The Sri Lanka Accounting and Auditing Standards Act No. 15 of 1995 further stipulates that audits of SBEs must be conducted by Chartered Accountants who are members of CA Sri Lanka and hold a valid certificate to practice. The Act also authorizes CA Sri Lanka to establish auditing standards in the jurisdiction. Accordingly, Sri Lanka Auditing Standards (SLAuS), which are based on International Standards on Auditing (ISA), are applied in practice, subject to any necessary modifications to reflect national legal and regulatory requirements.

In addition to the general framework, sector-specific regulators establish supplementary financial reporting requirements for entities under their supervision. The Securities and Exchange Commission of Sri Lanka regulates listed entities; the Central Bank of Sri Lanka regulates banks, finance companies, and microfinance institutions; and the Insurance Regulatory Commission of Sri Lanka oversees insurance companies. These authorities may impose additional reporting, disclosure, and audit requirements within their respective sectors.

The accountancy profession in Sri Lanka is regulated through a shared framework involving statutory authorities and professional accountancy organizations. Key responsibilities are distributed among the Institute of Chartered Accountants of Sri Lanka (CA Sri Lanka), the Sri Lanka Accounting and Auditing Standards Monitoring Board (SLAASMB), the Institute of Certified Management Accountants of Sri Lanka (CMA Sri Lanka), and the Association of Accounting Technicians of Sri Lanka (AAT Sri Lanka).

Regulation of Auditors and Chartered Accountants

Under the Chartered Accountants Act No. 23 of 1959, CA Sri Lanka is the primary body responsible for regulating Chartered Accountants. Its mandate includes establishing initial professional development (IPD) and continuing professional development (CPD) requirements; setting accounting, auditing, and public sector accounting standards; establishing ethical requirements; and operating an investigative and disciplinary (I&D) system for its students and members.

CA Sri Lanka is also the licensing authority for auditors in Sri Lanka. Only members of CA Sri Lanka who hold a certificate to practice are permitted to conduct statutory audits. In addition, auditors must be registered with the Registrar of Companies in accordance with the Companies Act No. 7 of 2007.

Auditors of specified business enterprises (SBEs) are subject to additional oversight by the Sri Lanka Accounting and Auditing Standards Monitoring Board (SLAASMB), established under the Sri Lanka Accounting and Auditing Standards Act No. 15 of 1995. The SLAASMB is responsible for monitoring and enforcing compliance with accounting and auditing standards and overseeing audit quality for SBEs. Its functions include conducting inspections of audit firms, reviewing financial statements of SBEs, and initiating enforcement actions, including investigation and disciplinary measures where necessary.

Regulation of Management Accountants

The Institute of Certified Management Accountants of Sri Lanka (CMA Sri Lanka) was established under the Institute of Certified Management Accountants of Sri Lanka Act No. 23 of 2009 to regulate the management accounting profession. CMA Sri Lanka is responsible for administering a certification program for management accountants, establishing professional education and training requirements, including CPD, and setting standards of professional conduct and ethics for its members. Membership in CMA Sri Lanka is voluntary and does not confer statutory audit rights.

Regulation of Accounting Technicians

The Association of Accounting Technicians of Sri Lanka (AAT Sri Lanka) is incorporated under the Companies Act No. 7 of 2007 as a company limited by guarantee. AAT Sri Lanka is responsible for administering the Accounting Technician qualification and regulating its members. Its responsibilities include establishing IPD and CPD requirements, setting ethical standards, and operating an investigative and disciplinary mechanism for Accounting Technicians. Membership in AAT Sri Lanka is voluntary and does not provide authority to conduct statutory audits.

The Sri Lanka Accounting and Auditing Standards Monitoring Board (SLAASMB) was established under the Sri Lanka Accounting and Auditing Standards Act No. 15 of 1995 as the independent audit oversight authority in Sri Lanka.

The SLAASMB is responsible for monitoring and enforcing compliance with applicable accounting and auditing standards for specified business enterprises (SBEs), as well as overseeing audit quality. Its functions include conducting inspections of audit firms, reviewing financial statements, and assessing compliance with auditing standards and ethical requirements.

To implement its mandate, the SLAASMB performs independent reviews of audits at the engagement level based on a sample of audited financial statements submitted by SBEs. The Board is empowered to request information from auditors, including working papers and supporting documentation, and may initiate investigations where non-compliance is identified.

Where appropriate, the SLAASMB refers matters to the relevant professional accountancy organizations for further disciplinary action. The Sri Lanka Accounting and Auditing Standards Act No. 15 of 1995 provides for enforcement measures, including penalties for non-compliance with accounting and auditing standards.

The SLAASMB is a member of the International Forum of Independent Audit Regulators (IFIAR).

There are three national professional accountancy organizations in Sri Lanka.

Institute of Chartered Accountants of Sri Lanka (CA Sri Lanka)

CA Sri Lanka was established in 1959 under the Chartered Accountants Act No. 23 of 1959 and is the primary professional accountancy organization in the jurisdiction. The institute is responsible for regulating Chartered Accountants, including establishing initial professional development (IPD) and continuing professional development (CPD) requirements; setting accounting, auditing, and public sector accounting standards; establishing ethical requirements; and operating an investigative and disciplinary (I&D) system for its members and students.

CA Sri Lanka is also the licensing authority for auditors in Sri Lanka. Only members of CA Sri Lanka who hold a certificate to practice and are registered with the Registrar of Companies are authorized to conduct statutory audits. In addition to its regulatory role, the institute provides technical guidance and professional support to its members and operates in the public interest.

CA Sri Lanka is a member of the International Federation of Accountants (IFAC), the South Asian Federation of Accountants (SAFA), and the Confederation of Asian and Pacific Accountants (CAPA).

Institute of Certified Management Accountants of Sri Lanka (CMA Sri Lanka)

CMA Sri Lanka was established under the Institute of Certified Management Accountants of Sri Lanka Act No. 23 of 2009. It serves as the professional body for management accountants and is responsible for administering a certification program, establishing professional education and training requirements including CPD, and setting standards of professional conduct and ethics for its members. The Certified Management Accountant designation is awarded by CMA Sri Lanka.

CMA Sri Lanka is a member of IFAC, CAPA, and SAFA.

Association of Accounting Technicians of Sri Lanka (AAT Sri Lanka)

AAT Sri Lanka is incorporated as a company limited by guarantee under the Companies Act No. 7 of 2007. The association is responsible for administering the Accounting Technician qualification and supporting the development of accounting technicians in Sri Lanka. Its activities include education and training, member support, and the promotion of the accounting technician profession.

AAT Sri Lanka was admitted as an IFAC Associate in 1989 and is a member of CAPA.

Only members of the Institute of Chartered Accountants of Sri Lanka (CA Sri Lanka) are authorized to conduct statutory audits, including audits of specified business enterprises (SBEs).

The Sri Lanka Accounting and Auditing Standards Monitoring Board (SLAASMB), established under the Sri Lanka Accounting and Auditing Standards Act No. 15 of 1995, is responsible for monitoring compliance with accounting and auditing standards and conducting inspections of audit firms and engagements related to SBEs. These inspections contribute to audit oversight and enforcement in the jurisdiction.

In parallel, CA Sri Lanka has established a quality assurance (QA) review mechanism through its Audit Quality Assurance Board (QAB), which oversees the institute’s QA-related activities. However, the QA review program operated by CA Sri Lanka has historically been voluntary and is not mandated by law for all audits.

While elements of a QA review system exist through both the SLAASMB’s inspection activities and CA Sri Lanka’s QA initiatives, there is no single, comprehensive QA system that is demonstrably operational for all mandatory audits and fully aligned with the requirements of SMO 1. In particular, the voluntary nature of the QA program and the absence of a unified system covering all audits limit full compliance with SMO 1 requirements.

Accordingly, a QA review system is considered to be partially adopted in the jurisdiction.

Current Status: Partially Adopted

In Sri Lanka, initial professional development (IPD) and continuing professional development (CPD) requirements for professional accountants are established by the three professional accountancy organizations in the jurisdiction: the Institute of Chartered Accountants of Sri Lanka (CA Sri Lanka), the Institute of Certified Management Accountants of Sri Lanka (CMA Sri Lanka), and the Association of Accounting Technicians of Sri Lanka (AAT Sri Lanka).

Under the Chartered Accountants Act No. 23 of 1959, CA Sri Lanka is responsible for establishing IPD requirements for its students and CPD requirements for its members. The institute operates a comprehensive professional education program, including formal education, practical experience requirements, and final assessments.

CMA Sri Lanka, established under the Institute of Certified Management Accountants of Sri Lanka Act No. 23 of 2009, administers a certification program for management accountants and establishes IPD and CPD requirements for its members.

AAT Sri Lanka is responsible for administering the Accounting Technician qualification and establishing IPD and CPD requirements for its members.

While all three professional accountancy organizations have established education and training frameworks that incorporate elements of the International Education Standards, there is no evidence of full adoption of the IES in effect as of the time of the assessment across all segments of the profession. In particular, the extent to which all components of the IES, including continuing professional development and competence requirements for engagement partners, are consistently and demonstrably aligned across the jurisdiction is unclear.

Accordingly, the International Education Standards are considered to be partially adopted in the jurisdiction.

Current Status: Partially Adopted

Under the Sri Lanka Accounting and Auditing Standards Act No. 15 of 1995, the Institute of Chartered Accountants of Sri Lanka (CA Sri Lanka) is responsible for establishing auditing standards in the jurisdiction.

CA Sri Lanka issues Sri Lanka Auditing Standards (SLAuS), which are based on International Standards on Auditing (ISA) issued by the International Auditing and Assurance Standards Board and are applied in the conduct of statutory audits in Sri Lanka.

CA Sri Lanka reports that it has adopted the 2024 edition of the IAASB Handbook, which reflects the latest International Standards on Auditing in effect as of the time of the assessment. The institute is also in the process of adopting the 2025 Handbook.

Accordingly, ISA in their entirety in effect as of the time of the assessment are considered to be adopted and applied in the jurisdiction.

Current Status: Adopted

In Sri Lanka, ethical requirements for professional accountants are established by the three professional accountancy organizations in the jurisdiction: the Institute of Chartered Accountants of Sri Lanka (CA Sri Lanka), the Institute of Certified Management Accountants of Sri Lanka (CMA Sri Lanka), and the Association of Accounting Technicians of Sri Lanka (AAT Sri Lanka). Compliance with ethical requirements is mandatory for members of each respective organization.

CA Sri Lanka has adopted the 2024 edition of the International Code of Ethics for Professional Accountants, reflecting the latest version of the Code in effect as of the time of the assessment. AAT Sri Lanka has adopted a Code of Ethics based on the 2021 version of the IESBA Code, while CMA Sri Lanka continues to apply an earlier version of the Code.

While ethical requirements are established and operational across the profession, the applicable Codes are not aligned with the latest version of the IESBA Code in effect for all professional accountants in the jurisdiction.

Accordingly, the International Code of Ethics for Professional Accountants (including International Independence Standards) is considered to be partially adopted in Sri Lanka.

Current Status: Partially Adopted

Public sector accounting standards in Sri Lanka are established through a shared arrangement between the Ministry of Finance and the Institute of Chartered Accountants of Sri Lanka (CA Sri Lanka), under the Sri Lanka Accounting and Auditing Standards Act No. 15 of 1995.

CA Sri Lanka, in collaboration with the Ministry of Finance, issues Sri Lankan Public Sector Accounting Standards (SLPSAS), which are based on International Public Sector Accounting Standards (IPSAS). These standards are applied by public sector entities, including ministries, departments, local authorities, and state-owned enterprises.

Sri Lanka has adopted a number of accrual-based IPSAS through SLPSAS over time as part of a phased convergence approach. Available information indicates that multiple IPSAS have been incorporated into the national framework; however, the full suite of IPSAS in effect as of the time of the assessment has not been adopted in its entirety. SLPSAS are adapted to reflect national circumstances, and differences may exist between IPSAS and the standards applied in practice.

Accordingly, IPSAS are considered to be partially adopted in the jurisdiction.

Current Status: Partially Adopted

In Sri Lanka, investigative and disciplinary (I&D) systems for professional accountants are established by the three professional accountancy organizations (PAOs): the Institute of Chartered Accountants of Sri Lanka (CA Sri Lanka), the Institute of Certified Management Accountants of Sri Lanka (CMA Sri Lanka), and the Association of Accounting Technicians of Sri Lanka (AAT Sri Lanka). Each PAO has established formal I&D mechanisms that include processes for investigation, disciplinary action, and appeals, and compliance is mandatory for their respective members.

In addition, auditors of specified business enterprises are subject to oversight by the Sri Lanka Accounting and Auditing Standards Monitoring Board (SLAASMB), which has the authority to investigate non-compliance and refer matters for disciplinary action.

Taken together, these arrangements provide comprehensive coverage of the profession and support the enforcement of professional standards in the jurisdiction. Accordingly, investigative and disciplinary systems aligned with the requirements of SMO 6 are considered to be adopted in Sri Lanka.

Current Status: Adopted

Under the Sri Lanka Accounting and Auditing Standards Act No. 15 of 1995, the Institute of Chartered Accountants of Sri Lanka (CA Sri Lanka) is responsible for establishing accounting standards in the jurisdiction.

Sri Lanka has adopted Sri Lanka Financial Reporting Standards (SLFRS), which are based on International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board. SLFRS comprise IFRS, International Accounting Standards (IAS), and related interpretations, together with additional guidance issued at the national level.

According to the IFRS Foundation, IFRS Standards are adopted in Sri Lanka and IFRS for SMEs is permitted. However, SLFRS are localized versions of IFRS and may include modifications to reflect national legal and regulatory requirements, as well as differences in the timing of incorporation of new and revised standards.

SLFRS are required to be applied by specified business enterprises (SBEs), while other entities may apply SLFRS for SMEs.

Accordingly, IFRS Accounting Standards in effect as of the time of the assessment have not been fully adopted as issued for all relevant entities, and IFRS are therefore considered to be partially adopted in the jurisdiction.

Current Status: Partially Adopted

Relevant Organizations

• Association of Accounting Technicians of Sri Lanka (AAT Sri Lanka)
• Institute of Chartered Accountants of Sri Lanka (CA Sri Lanka)
• Institute of Chartered Management Accountants of Sri Lanka (CMA Sri Lanka)
• Ministry of Finance and Planning—Sri Lanka
• Sri Lanka Accounting and Auditing Standards Monitoring Board (SLAASMB)

Relevant Legislation

• Act of Incorporation and Regulations of the Institute of Chartered Accountants of Sri Lanka
• Institute of Certified Management Accountants of Sri Lanka Act No. 23 (2009)
• Institute of Chartered Accountants of Sri Lanka Act No. 23 (1959)
• Sri Lanka Standard on Quality Control 1, January 2013
• Sri Lanka Banking Act No. 30 (1988)
• Sri Lanka Companies Act No. 07 (2007)
• Sri Lanka Securities and Exchange Commission Act No. 36 (1987)
• Sri Lanka Accounting and Auditing Standards Act, No. 15 (1995)

Relevant Publications

• IFRS Foundation, “IFRS Application around the World—Jurisdiction Profile: Sri Lanka,” June 2021.
• International Forum of Independent Audit Regulators (IFIAR) Member Profile—Sri Lanka.
• Sri Lanka Accounting and Auditing Standards.
• Sri Lanka Public Sector Accounting Standards.