Félag Löggiltra Endurskodenda

The Auditors Oversight Board (ER) is empowered to establish a mandatory quality assurance (QA) review program for all auditors in accordance with the Auditing Act No. 94/2019. Reviews are conducted every three years for public interest entities (PIEs) and every six years for other types of companies. It is unclear whether the existing QA system aligns with the benchmark of SMO 1.

Prior to the adoption of the Auditing Act No. 94/2019, the FLE, under the oversight of ER, carried out a QA review program for all auditors. The FLE noted that its QA review system was based on ISQC 1 and the Eighth EU Directive.

The FLE indicates that it supports its members on an ongoing basis with the implementation of relevant standards by developing training activities and disseminating information.

QA review systems that align with international best practices, such as SMO 1, are a key component to maintaining public trust and confidence in the profession. The FLE is encouraged to work with the ER to ensure that the QA review system incorporates international best practices, including potential changes to review systems of quality control to systems of quality management.

Current Status: Execute

The Auditing Act No. 94/2019 sets the initial and continuing professional development (IPD and CPD) requirements for auditors in Iceland and is implemented by the Auditors Oversight Board (ER). FLE states that the auditors' IPD and CPD requirements align with 2019 IES requirements.

The FLE members must complete at least 120 monitored CPD hours over three years. The FLE has established a system to monitor CPD requirements by its members.

FLE has demonstrated an ongoing process to maintain its fulfillment of the SMO 2 obligations and is committed to continuous improvement.

Current Status: Sustain

The Auditing Act No. 94/2019 states that audits should be carried out in accordance with generally accepted auditing standards (GAAS), and in the discussion following the bill, it is stated that the ISAs are considered to be GAAS.

The FLE reported ongoing processes to support ISA implementation. To assist its members, the FLE has provided an audit software to facilitate the implementation of ISA; developed training activities; and disseminated information on the developments in the international standard-setting area.

The FLE has demonstrated an ongoing process to maintain its fulfillment of the SMO 3 obligations and is committed to continuous improvement.

Current Status: Sustain

According to the Auditing Act No. 94/2019, auditors in Iceland are required to observe the IESBA Code of Ethics.

The FLE reported ongoing processes of implementation support for IESBA ethical principles among its members, including training courses on the Code of Ethics, monitoring new, proposed, and revised international standards, and disseminating information on the changes.

The FLE has demonstrated an ongoing process to maintain its fulfillment of the SMO 3 obligations and is committed to continuous improvement.

Current Status: Sustain

The Government of Iceland is responsible for adopting public sector accounting standards, which are accrual-basis IPSAS modified for the local context. The FLE reports that IPSAS have been adopted into the Icelandic Law by the States Finance Act 123/2015.

Although the FLE is not responsible for adopting public sector accounting standards, the FLE successfully lobbied the government to adopt IPSAS. The FLE also supports the government in implementing the standards.

The FLE has demonstrated an ongoing process to maintain its fulfillment of the SMO 5 obligations and is committed to continuous improvement.

Current Status: Sustain

In accordance with the Auditing Act No. 94/2019, the Auditors Oversight Board (ER) is solely responsible for the investigation and discipline (I&D) of auditors in Iceland. The ER may take up issues on its own initiative if it believes that an auditor or audit firm has violated the Act, the IESBA Code of Ethics, or other rules that apply to the work of auditors. It is not clear to what extent the ER I&D system aligns with the best practices of SMO 6.

The FLE states in its Action Plan that it does not undertake any specific activity related to enforcement, as the Auditing Act states that only ER has a responsibility in this area. The FLE reports that it supports the regulator in the I&D function by maintaining a list of the continuing professional development courses its members take under the supervision of the ER, thus contributing as needed to the ER's I&D process.

I&D procedures that are in line with international best practices, such as SMO 6, are a key component to maintaining public trust and confidence in the profession. The FLE is encouraged to work with the ER to ensure that the I&D procedures incorporate international best practices.

Current Status: Execute

Icelandic accounting standards are set out in the Law on Annual Accounts No. 3/2006. The law dictates that the Ministry of Culture and Business Affairs should establish an accounting board to set uniform accounting rules and regulations for use in Iceland, based on and in addition to the law. The law also dictates that IFRS should be used as additional accounting rules, so that if/when the law does not give enough guidance, IFRS can and should be used.

The FLE reports that it monitors and reviews changes to EU legislation and, subsequently, promotes the necessary changes to the national legislation with the regulatory authorities. To support this process, the FLE supports the translation of IFRS.

To support its members with implementing applicable standards, the FLE organizes continuing professional development courses, develops guidelines on IFRS-related topics, and disseminates IASB pronouncements. 

The FLE has demonstrated an ongoing process to maintain its fulfillment of the SMO 7 obligations and is committed to continuous improvement.

Current Status: Sustain