Lao PDR

The Law on Accounting of 2013, the Law on Independent Audit of 2014, and the Enterprise Law of 2022 form the statutory framework for accounting, auditing, and corporate financial reporting in Laos.

Accounting Framework

Under the Law on Accounting, public interest entities (PIEs), which are banks and financial institutions under the control of the Bank of Laos, insurance companies, securities companies, and public companies, are required to apply International Financial Reporting Standards (IFRS) when preparing financial statements. Non-public interest entities (non-PIEs), which comprise other large-, medium- and small- sized enterprises, apply the Laos Financial Reporting Standards for Non-Public Interest Enterprises (LFRS for Non-PIEs) based on the 2009 version of the IFRS for SMEs, to prepare their financial statements. Under the Law on Accounting, the Ministry of Finance (MoF) is responsible for setting accounting standards.

Auditing Framework

The Law on Independent Audit and Enterprise Law establish statutory audit requirements in Laos. According to the Enterprise Law 2022, the requirement for auditing limited liability companies is contingent upon decisions made during shareholders' meetings, aligning with the provisions of the corresponding independent audit regulations. In accordance with the Law on Independent Audit, a mandatory audit is required for all PIEs as indicated above, foreign enterprises, state-owned enterprises, and external loan and grant projects. Under the Law on Independent Audit, the MoF is responsible for setting auditing standards, which are the International Standards on Auditing (ISA). The ISA as issued by the IAASB in English have legal status.

Under the Law on Independent Audit of 2014, accountancy professionals are regulated at the state level by the Ministry of Finance (MoF) and at the professional level by the Laos Chamber of Professional Accountants and Auditors (LCPAA).

Under the law, the MoF is responsible for: (i) issuing audit licenses and maintaining a registry of practitioners who meet initial professional development and continuing professional development requirements outlined in the law; (ii) developing auditing and assurance standards; (iii) setting ethical standards; (iv) conducting quality assurance reviews for all audits; and (v) conducting an investigative and disciplinary system with the Laos Chamber of Professional Accountants and Auditors.

According to the law, all professional accountants are required to complete LCPAA’s certification program, obtain membership, and renew practicing licenses by completing continuing professional development (CPD) requirements.

To qualify as a Certified Public Accountants (Lao CPA), candidates are required to: (i) pass examinations; (ii) attain three years of practical experience; and (iii) attend a professional ethics module. “Accounting Consultants” or persons who qualified under the previous LCPAA certification program (in operation from 1998-2015) are required to pass the Association of Chartered Certified Accountants (ACCA) P- Level papers in order to maintain their licenses.

Under the law, LCPAA is responsible for (i) arranging and delivering the IPD and CPD program for all practitioners; (ii) managing and conducting professional examinations for CPA certifications; and (iii) operating an investigative and disciplinary system with the MoF.

In accordance with Article 52 of the Law on Independent Audit, individuals who seek to become a statutory auditor must first be a CPA and have a position as director or engagement partner of an audit firm. Once the MoF determines that the requirements have been met, it issues a statutory auditor license. The MoF may suspend or withdraw audit licenses.

Articles 78 to 81 of the Law on Independent Audit of 2014 designate the Ministry of Finance as the audit oversight authority in the jurisdiction. Under the law, the MoF is responsible for: (i) issuing audit licenses and maintaining a registry of practitioners who meet initial professional development and continuing professional development requirements outlined in the law; (ii) developing auditing and assurance standards; (iii) setting ethical standards; (iv) conducting quality assurance reviews for all audits; and (v) conducting an investigative and disciplinary system with the Laos Chamber of Professional Accountants and Auditors.

The MoF is not a member of the International Forum of Independent Audit Regulators.

Laos Chamber of Professional Accountants and Auditors (LCPAA)

The LCPAA was established in 1998 with an objective to unite accountancy professionals in Laos. The organization’s recognition is established under the Law on Independent Audit of 2014 and membership is mandatory for all professional accountants. The organization awards Certified Public Accountant (CPA) licenses and is responsible for: (i) arranging and delivering the IPD and CPD program for all practitioners; (ii) managing and conducting professional examinations for CPA certifications; and (iii) conducting an investigative and disciplinary system with the Ministry of Finance.

LCPAA is an Associate member of IFAC and a primary member of ASEAN Federation of Accountants.

The accounting and auditing legislation is currently being amended with propels going to the national assembly in 2023 and early 2024. The legislation will, in part, help to operationalize the investigation and disciplinary procedures in the jurisdiction.

LCPAA has partnerships and mentoring agreements in place with the following PAOs:

• Association of Chartered Certified Accountants (ACCA) – ACCA agrees to support LCPAA to strengthen the Lao professional qualification in consideration of the goal to comply with International Education Standard (IES) and to promote mutual co-operation for advancement of their respective members and students of accountancy and tax professions in Laos. Specifically, ACCA will assist LCPAA to deliver a robust Lao professional qualification by, subject to a separate licensing agreement, providing LCPAA with the updated ACCA syllabus which may license LCPAA the right to translate and use the updated ACCA Syllabus as a basis to update its own, Lao language qualification. This Partnership Agreement came into force and effect on 29 November 2022 and will continue for a period of five (5) years from that date.
• Malaysia Institute of Accountants (MIA) — ASEAN Federation of Accountants (AFA) which is the umbrella organization for the recognized Professional Accountancy Organizations (PAOs) of Association of Southeast Asian Nations (ASEAN) member states has established the working committee for its PAOs capacity building and facilitating mutual sharing of key challenges and best practices. LCPAA has been identified as the mentee and MIA as the mentor for the pilot, with support from the IFAC Professional Accountancy Organization Development & Advisory Group (IFAC PAODAG).
• Federation of Accounting Professions (TFAC) — LCPAA and TFAC discussed possible cooperation due to similarity of languages of both countries of Laos and Thailand. Members of both LCPAA and TFAC would benefit from the training materials created by TFAC. The communication between LCPAA and TFAC is in the process and expect to sign MoU in November 2023.

Under the Law on Independent Audit of 2014, the Ministry of Finance (MoF) is responsible for establishing a mandatory quality assurance (QA) review system for audits and audit firms in Laos.

In April 2017, the MoF operationalized its first QA system in the jurisdiction—the Laos Audit Quality Assurance System (LAQAS). The scope of the LAQAS includes reviewing the performance of audit firms, as well as implementing a multi-year monitoring program that evaluates the quality of audit work being performed. Under this system, QA reviews are undertaken once every three years for firms of public interest entities, and once every four years for all other firms.

In 2019, the MoF issued a specific decree (0974/MoF on Audit Quality Assurance) providing the legal framework for the QA review system to comply with relevant standards issued by the IAASB and IFAC’s SMO 1.

Based on LCPAA’s self-assessment in November 2019 the QA system in Laos aligns with the requirements of SMO 1.

Current Status: Adopted

The Law on Independent Audit of 2014 stipulates initial professional development and continuing professional development (CPD) requirements in Laos and provides authority to the LCPAA, under the oversight of the Ministry of Finance, as the body responsible for setting these requirements.

Under the Law on Independent Audit, all professional accountants are required to complete the LCPAA certification program, obtain membership, and renew an annual license by completing CPD requirements.

The LCPAA renewed a partnership agreement with the Association of Chartered Certified Accountants (ACCA) in November 2022 which allows LCPAA to use the ACCA syllabus and exam as a basis for the Lao CPA qualification. As of January 2023, to qualify as a Lao CPA, candidates are required to: (i) pass examinations; (ii) attain three years of practical experience; and (iii) attend a professional ethics module. “Accounting Consultants” and other individuals who qualified under the previous LCPAA certification program (in operation from 1998–2015) are required to pass ACCA P- Level papers to maintain their licenses.

Article 32 of the Law on Independent Audit of 2014 establishes a CPD requirement of 120 hours over 3 years with a minimum of 20 hours in any one year for all practitioners in the jurisdiction. LCPAA is currently in the process of formulating internal regulations specific to CPD. This draft is anticipated to undergo approval by LCPAA's education committee by the end of 2024.

LCPAA indicates that its syllabus and exams, and regulations on practical experience and on CPD are the same as ACCA.Top of Form

Current Status: Adopted

Under the Law on Independent Audit, the MoF is responsible for setting auditing standards in Laos. The MoF adopts the International Standard on Auditing as issued by the IAASB in English for all mandatory audits.

In accordance with the Law on Independent Audit of 2014, mandatory audits are required for all public interest entities, foreign enterprises, state-owned enterprises, and external loan and grant projects. Under the Enterprise Law of 2022, limited liability companies could be audited depending on the shareholders’ meetings and has to be complied with related independence audit law.

Current Status: Adopted

Under the Law on Independent Audit of 2014, the Ministry of Finance (MoF) is responsible for establishing ethical requirements for all professional accountants in Laos. LCPAA reports that, in October 2016, the MoF adopted and published the Lao Code of Ethics, which is aligned with the principles of the 2015 IESBA Code of Ethics.

The LCPAA and the MoF have plans to review the 2022 International Code of Ethics issued by IESBA for adoption by 2025.

Current Status: Partially Adopted

Under the Law on Accounting of 2013, the Ministry of Finance (MoF) is responsible for setting public sector accounting standards in Laos. Under the law, government entities are required to apply cash-basis IPSAS. While accrual-basis IPSAS is stated in the Law on Accounting, implementation will take significant time. LCPAA reports a pilot application of cash-basis IPSAS was planned for 2019.

Current Status: Partially Adopted

The Law on Independent Audit of 2014 designates the LCPAA and the MoF with the responsibility to establish and conduct an investigative and disciplinary (I&D) system in the jurisdiction. To avoid any overlaps, both the MoF and LCPAA agreed that primary responsibility for management of the system would be undertaken by LCPAA. The MoF would retain its responsibility to impose sanctions.

LCPAA reports that I&D procedures are currently undergoing a review by the Accounting Regulatory Department (ARD). The expected completion date coincides with the revision of both the accounting law and the independent audit law, which are slated to be proposed to the national assembly in 2023 and early 2024.

LCPAA reports that the system will be comprised of a Disciplinary Committee, an Investigations Committee, and an independent Appeals Board. LCPAA has already identified and appointed members of the Disciplinary Committee. LCPAA conducted a self-assessment of the proposed I&D system against the requirements of SMO 6 and concluded that it would be in line with the requirements once operational.

Current Status: Partially Adopted

Under the Law on Accounting of 2013, the MoF is responsible for setting corporate accounting standards.

The MoF has adopted International Financial Reporting Standards (IFRS) to be applied by public interest entities (PIEs), which are banks and financial institutions under the control of the Bank of Laos, insurance companies, securities companies, and public companies. The MoF has also developed accounting standards for non-PIEs which comprise large-, medium- and small- sized enterprises. These companies apply the Lao Financial Reporting Standards for Non-Public Interest Enterprises (LFRS for Non-PIEs) based on the 2009 version of the IFRS for Small- and Medium-sized Entities, to prepare their financial statements.

Current Status: Adopted

Relevant Organizations

• Laos Chamber of Professional Accountants and Auditors
• Laos Ministry of Finance

Relevant Legislation

• Law on Accounting of 2013 (as amended)
• Law on Enterprises of 2013 (as amended)
• Law on Independent Audit of 2014 (as amended)
• Law on Securities of 2012 (as amended)

Relevant Publications

• Lexology, Accounting Operations in the Laos PDR: New Application of International Standards, September 2014.
• LCPAA, Legal Financial Reporting Framework and IFRS in Laos PDR, November 2019.
• LCPAA, SMO Action Plan, 2023.
• OECD, OECD Investment Policy Reviews: Laos PDR, July 2017.
• World Bank, Report on the Observance of Standards and Codes (ROSC), Accounting and Auditing: Lao PDR, January 2009.