Cyprus

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

Accounting Framework

The Companies Law, Cap. 113 sets the requirements for the preparation of corporate financial statements in Cyprus and transposes the EC Accounting Directive (2013/34/EU). The Companies Law requires all entities to apply EU-endorsed IFRS in their consolidated and separate financial statements. Exemptions from consolidation apply for small and medium-sized entities except where any affiliated enterprise is a public-interest entity or where the obligation to prepare consolidated financial statement arises under other legislation.

Auditing Framework

Previously, the Companies Law required mandatory statutory audits for all companies in Cyprus excluding small firms. The Law was amended in September 2016 and audit for all registered companies regardless of size has been made mandatory.

On June 2, 2017 the Auditors Law of 2017, superseding Law No. 42 (I) of 2009 as amended, was enacted and constitutes the legal framework for the audit profession in Cyprus. The Auditors Law specifies that audits must be carried out in accordance with the international auditing standards as adopted by the European Commission (EC). In Cyprus, the legal adoption of the International Standards on Auditing (ISA) issued by the IAASB is pending upon the endorsement of EC on a European level. Until the EC adopts ISA, the Law requires application of ISA as issued by IAASB in Cyprus. The Cyprus Public Audit Oversight Board (CyPAOB) is the designated competent authority and is granted the power to impose audit procedures or requirements and advise the Council of Ministers on the applicability of ISA in Cyprus.

Under the Auditors Law of 2017, a public interest entity (PIE) is defined as (i) entities, governed by the law of the Republic, whose transferable securities are admitted to trading on an organized or regulated market; (ii) licensed credit institutions; (iii) insurance and reinsurance undertakings; (iv) any other entity that might be defined as such by a decision of the Council of Ministers, after a suggestion from the CyPAOB, that carries the essential traits of Public interest.

The Auditors Law of 2017 transposes into national law the EU Directive 2014/56/EC and Regulation No. 537/2014.

In Cyprus, only auditors are regulated at the state level.

The Auditors Law of 2017 regulates the auditing profession and the public oversight of the audit profession, outlines mandatory quality assurance reviews of statutory audit firms, specifies the requirements for granting license to perform audits and outlines initial and continuing professional development (IPD and CPD respectively) requirements.

The Cyprus Public Audit Oversight Board (CyPAOB) is responsible for the supervision of the audit profession in Cyprus. Based on the Auditors Law of 2017, the CyPAOB is responsible for the following:

(i) determining technical standards and other standards on professional ethics and internal quality control of registered auditors and statutory audit work; (ii) determining the manner in which the above standards are to be applied in practice; (iii) setting criteria for the purpose of determining whether persons are eligible for appointment as registered auditors; (iv) setting procedures for maintaining the competence of persons eligible for appointment as registered auditors; (v) monitoring audits of public interest entities (PIEs); (vi) conducting investigations, adjudication and disciplinary measures arising out of monitoring audits of both PIEs and non-PIEs; (vi) cooperating with competent authorities of other Member States and third countries; (vii) conducting oversight of the Audit Regulation including the Institute of Certified Public Accountants (ICPAC) performance.

According to the Law, ICPAC is explicitly named as a Recognised Body of Auditors (RBA) and all statutory auditors and audit firms must be registered with an RBA. A number of duties have been delegated to ICPAC via a formal agreement initially signed on 12 September 2017 and subsequently revised on 10 July 2020.

ICPAC, as an RBA, was delegated the following duties: (i) application of technical standards and of other standards on professional ethics and internal quality control of registered auditors and statutory audit work, including provision for securing compliance with those standards; (ii) establishing and maintaining the public register of auditors and audit firms; (iii) registration of individuals or firms satisfying the criteria of the Auditors Law of 2017; (iv) implementing procedures for maintaining the competence of registered auditors; (v) monitoring of registered auditors and audit work; and (vi) implementing an investigative and disciplinary (I&D) system for accountants, accounting firms, and students whereas the CyPAOB is responsible for the implementation of an I&D system for all statutory auditors and audit firms.

For individuals, four types of licensing certificates are issued by ICPAC: (i) a general practicing certificate; (ii) an audit practicing certificate; (iii) a certificate for the provision of administrative services; and (iv) an insolvency practitioner certificate. Firms are also issued the same licenses except for the insolvency practitioner certificate.

To perform audits, ICPAC members must obtain a general practicing certificate and an audit practice certificate. For that to happen, it is prerequisite to possess a professional accountancy qualification, an advanced audit education and at least three years of post-qualification experience with an audit firm.

The Cyprus Public Audit Oversight Board (CyPAOB was established in accordance with the Auditors Law of 2017as the supreme public oversight authority to independently oversee and regulate auditors in Cyprus.

According to the Law, the primary responsibilities of CyPAOB include the following: (i) determining technical standards and other standards on professional ethics and internal quality control of registered auditors and statutory audit work; (ii) determining the manner in which the above standards are to be applied in practice; (iii) setting criteria for the purpose of determining whether persons are eligible for appointment as registered auditors; (iv) setting procedures for maintaining the competence of persons eligible for appointment as registered auditors; (v) monitoring audits of public interest entities (PIEs); (vi) conducting investigations, adjudication and disciplinary measures arising out of monitoring audits of both PIEs and non-PIEs; (vi) cooperating with competent authorities of other Member States and third countries; (vii) conducting oversight of the Audit Regulation including the Institute of Certified Public Accountants (ICPAC) performance.

A number of duties have been delegated to ICPAC via a formal agreement initially signed on 12 September 2017 and subsequently revised on 10 July 2020. ICPAC, as an RBA, was delegated the duties (i) application of technical standards and of other standards on professional ethics and internal quality control of registered auditors and statutory audit work, including provision for securing compliance with those standards; (ii) establishing and maintaining the public register of auditors and audit firms; (iii) registration of individuals or firms satisfying the criteria of the Auditors Law of 2017; (iv) implementing procedures for maintaining the competence of registered auditors; (v) monitoring of registered auditors and audit work; and (vi) implementing an investigative and disciplinary (I&D) system for accountants, accounting firms, and students whereas the CyPAOB is responsible for the implementation of an I&D system for all statutory auditors and audit firms.

The Institute of Certified Public Accountants (ICPAC)

The ICPAC was established in 1961 in accordance with the provisions of the Companies Law, Cap. 113. ICPAC membership is comprised of practicing and non-practicing accountancy professionals. Practicing professionals are accountants and auditors in public practice who possess a practicing certificate and provide accounting, audit, tax, consulting, company administration services, insolvency and other services. Non-practicing accountancy professionals work in the public and private sectors and are not required. In accordance to the Law, all statutory auditors and audit firms must be registered with a Recognised Body of Auditors (RBA). As of the date of the assessment, ICPAC is the only RBA in Cyprus.

ICPAC, as an RBA, was delegated the following duties: (i) application of technical standards and of other standards on professional ethics and internal quality control of registered auditors and statutory audit work, including provision for securing compliance with those standards; (ii) establishing and maintaining the public register of auditors and audit firms; (iii) registration of individuals or firms satisfying the criteria of the Auditors Law of 2017; (iv) implementing procedures for maintaining the competence of registered auditors; (v) monitoring of registered auditors and audit work; and (vi) implementing an investigative and disciplinary (I&D) system for accountants, accounting firms, and students whereas the CyPAOB is responsible for the implementation of an I&D system for all statutory auditors and audit firms.

In addition to being a member of IFAC, ICPAC is a member of Accountancy Europe, Edinburgh Group, and the Mediterranean Federation of Accountants.

The Cyprus Public Audit Oversight Board (CyPAOB) is responsible for the quality assurance (QA) review system for the audits of financial statements in accordance with the Auditors Law of 2017.

The Law outlines specific obligations for public interest entities (PIEs) and their auditors. PIEs are required to: (i) establish an audit committee; (ii) establish mandatory audit firm quality assurance reviews at least every three years; and (iii) publish a transparency report by audit firms on an annual basis.

CyPAOB signed a formal agreement with the Institute of Certified Public Accountants of Cyprus (ICPAC) on 12 September 2017 which was subsequently revised on 10 July 2020. Under this formal agreement, the CyPAOB is responsible for implementing a mandatory QA review system for firms that audit PIEs, while ICPAC is responsible for conducting a mandatory QA review system for firms that audit non-PIEs.

ICPAC operates the QA review system via an agreement with the Association of Chartered Certified Accountants (ACCA), in which the ACCA conducts monitoring visits of ICPAC’s practicing members.

ICPAC indicates in its 2021 SMO Action Plan that the QA review procedures at the jurisdiction level are fully compliant with the revised SMO 1 requirements.

As of the date of this assessment, ISQM 1 & ISQM 2 are adopted in the jurisdiction.

Current Status: Adopted

In Cyprus, the Law regulates the initial and continuing professional development (IPD and CPD respectively) requirements for auditors.

The Auditors Law of 2017 outlines the IPD requirements for the audit profession and obliges members of the profession to undergo CPD.

The Institute of Certified Public Accountants of Cyprus (ICPAC) is responsible for the certification of the accountancy profession and the implementation of the IPD and CPD education requirements, the latter under the oversight of the Cyprus Public Audit Oversight Board. It operates a Joint Examination Scheme with the Association of Chartered Certified Accountants (ACCA), which is administered by the ACCA and reviewed annually to ensure that it is aligned with revised IES. The joint scheme is modified to incorporate Cyprus Corporate and Business Law, Cyprus Taxation, and Advanced Taxation. ICPAC operates the mandatory CPD program for its members, both auditors and non-auditors. ICPAC reports that the CPD Scheme it maintains, incorporates the requirements of IES 8 for Audit Practicing Certificate Holders.

As of the date of this assessment, ICPAC completed a comprehensive review of the existing educational requirements for professional accountants in the jurisdiction against those of revised 2019 IES and confirms alignment.

Current Status: Adopted

The Auditors Law of 2017 specifies that audits must be carried out in accordance with the international auditing standards as adopted by the European Commission (EC). In Cyprus, the legal adoption of the International Standards on Auditing (ISA) issued by the IAASB is pending upon the endorsement of EC on a European level. Until the EC adopts ISA, the Law requires application of ISA as issued by IAASB in Cyprus.

The Cyprus Public Audit Oversight Board has the legal authority to impose audit procedures or requirements and advise the Council of Ministers on the applicability of ISA in Cyprus.

Current Status: Adopted

The Auditors Law of 2017 mandates all statutory auditors and audit firms to be subject to principles of professional ethics. Furthermore, according to the Law, the Cyprus Public Audit Oversight Board may adopt ethical standards for the audit profession in line with the IESBA Code of Ethics for Professional Accountants and relevant decisions of the European Commission. The Law also stipulates that, until the EC issues a decision, auditors in Cyprus must be subject to the requirements of the IESBA Code of Ethics as issued by IESBA.

The Institute of Certified Public Accountants of Cyprus (ICPAC), through its regulations, also requires all of its members, both auditors and non-auditors, to comply with the International Code of Ethics as issued by the IESBA (in English). This is directly incorporated into ICPAC’s Members’ Handbook – revised on an ongoing basis to include the latest requirements.

Current Status: Adopted

The Fiscal Responsibility and Financial Framework Law of 2014 states that the Accountant General determines the accounting standards to be used for the public sector. The Institute of Certified Public Accountants of Cyprus (ICPAC) reports that public sector accounting standards are transitioning from cash-basis IPSAS to accrual-basis IPSAS.

ICPAC reports that the government has set up an action plan and a steering committee to convert to accrual-basis accounting. The time frame of the action plan expands from 2016 and is expected to be completed in 2026. The action plan was launched in April 2016 by the Treasury Department of the government.

Current Status: Partially Adopted

The Auditors Law of 2017 grants authority to the Council of Ministers, with advice from the Cyprus Public Audit Oversight Authority (CyPAOB) to issue regulations for the establishment of a system of investigation and discipline (I&D) for the detection, correction, and prevention of inadequate execution of statutory audits.

The new Auditors Law of 2017 specifies a detailed process of investigation and disciplinary process under the authority of the CyPAOB.

A formal agreement initially signed on 12 September 2017 and subsequently revised on 10 July 2020 requires the Institute of Certified Public Accountants of Cyprus (ICPAC) to transfer all disciplinary cases and other complaints received pertaining to statutory auditors or audit firms to the CyPAOB for processing. ICPAC remains the delegated authority for I&D of accountants, accounting firms, and students.

ICPAC reports in its 2021 SMO Action Plan that the I&D procedures in the jurisdiction are aligned with the requirements of SMO 6.

Current Status: Adopted

The Companies Law, Cap. 113 (article 142) requires all entities to prepare financial statements in accordance with EU-endorsed IFRS.

Exemptions from consolidation apply for small and medium-sized entities except where any affiliated enterprise is a public-interest entity or where the obligation to prepare consolidated financial statement arises under other legislation.

Current Status: Adopted

Relevant Organizations

• Cyprus Public Audit Oversight Board (CyPAOB)
• Institute of Certified Public Accountants of Cyprus (ICPAC)

Relevant Legislation

• Law Providing for Statutory Audits of Annual and Consolidated Accounts by Statutory Auditors and Statutory Audit Firms (L.53 (I) 2017)
• Companies Law (with amendments)
• Law Regulating Companies Providing Administrative Services Consolidated Amendment 2020
• Directive 2014/56/EU Amending Directive 2006/43/EC On Statutory Audits of Annual Accounts and Consolidated Accounts
• Regulation (EU) 537/2014 on Specific Requirements regarding Statutory Audit of Public-Interest Entities and Repealing Commission Decision 2005/909/EC

Relevant Publications

• Accountancy Europe, Structure and Organisation of the Profession - Key Features - 2020 Update, January 2021.
• Deloitte & Touche, IPSAS in Your Pocket, 2021.
• ICPAC, SMO Action Plan, September, 2021.
• ICPAC, “ICPAC Presentation,” 2021.
• ICPAC , ‘‘ICPAC Regulatory Review’’, 2023.
• IFRS Foundation, “IFRS Application Around the World—Jurisdictional Profile: Cyprus,” June 2016.