Lithuania

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

The Accounting Law No. IX-574 of 2001 (as amended on January 1, 2016) sets the requirements for the preparation of corporate financial statements in Lithuania. The law outlines accounting standards to be applied based on company size and type: EU-endorsed IFRS or Lithuanian Business Accounting Standards (LBAS), which constitute the Lithuanian Generally Accepted Accounting Principles. The Ministry of Finance is responsible for developing accounting legislation and for setting the LBAS which are based on IFRS.

The law requires all public interest entities (PIEs), defined by the EU as listed entities, credit institutions, insurance companies, and other national designated entities, to apply EU-endorsed IFRS in both the consolidated and separate company financial statements. The MoF has expanded the definition of PIEs to include banks, pension funds, brokerage houses, and state and government enterprises, among others. All other companies including small and medium enterprises (SMEs) have the option to apply EU-endorsed IFRS or LBAS in both the consolidated and separate financial statements. IFRS for SMEs has not been adopted in Lithuania.

The auditing requirements are set in the Audit Law No. XIII-96 of 2017, which was updated to transpose the Audit Directive and Regulation (EU) No 537/2014. The law directly adopts ISA as issued by the IAASB and promulgated by the Authority of Audit, Accounting, Property Valuation, and Insolvency Management (AAAPVIM) and requires statutory audits to be performed according to the standard. The law also gives responsibility to AAAPVIM for the translation of ISA and other IAASB pronouncements, as well as other international standards. A mandatory audit is required for PIEs and all public limited liability entities if at least two of the following criteria are met: (i) net revenue from sales exceeds EUR 3.5 million for the financial year; (ii) value of assets in the balance sheet exceeds EUR 1.8 million; and (iii) average number of employees exceeds 50 for the financial year.

The Audit Law No. XIII-96 of 2017 regulates certified auditors in Lithuania by establishing initial and continuing professional development (IPD and CPD respectively) requirements, ethical requirements, quality assurance reviews, and investigation and discipline procedures. The law directly adopts the IESBA Code of Ethics as the code of professional conduct for certified auditors in the jurisdiction.

To be eligible for the designation of certified auditor, individuals must have: an academic university master’s degree; an irreproachable reputation; three years practical training; and pass examinations (5 exams on common issues, law, taxes, accounting, audit). Individuals must then become a member of the Lithuania Chamber of Auditors (LCA) and can obtain an auditor’s certificate.

There are two official bodies involved in the regulation of the auditing profession: the Authority of Audit, Accounting, Property Valuation, and Insolvency Management (AAAPVIM), under the supervision of the Ministry of Finance, and the LCA. AAAPVIM’s scope of responsibilities include the following: (i) audit, ethics, and accounting standard-setting; (ii) carrying out quality assurance procedures and enforcement of sanctions based on the results of inspections and investigations; (iii) translation of the standards issued by the IESBA and the IAASB into Lithuanian; (iv) cooperation with other public audit oversight authorities and standard-setters; and (v) supervision of all activities of the LCA, including quality assurance and enforcement mechanisms; approval, licensing, and registration of certified auditors; and continuing education.

In accordance with the Audit Law, the LCA regulates certified auditors and is responsible for the following: (i) administering the auditor qualification examination; (ii) issuing the auditor’s certificate; (iii) administering and monitoring of the CPD program; (iv) maintaining the registry of certified auditors; and (v) establishing QA and I&D systems for auditors to ensure compliance with standards in cooperation with the AAAPVIM.

Other professional accountants are not regulated at the state level, but they may voluntarily join a professional accountancy organization and be subject to its regulations and guidelines. In Lithuania, there is the Lithuania Association of Accountants and Auditors (LAAA), which offers a Professional Accountant designation. LAAA’s IPD requirements to pursue the designation include: having a bachelor’s degree (if no higher education than ten years’ work experience and at least seven years’ experience in accounting is required); have experience of at least 3 years within the last ten years in areas of accounting, finance, economics or control; pass LAAA’s examinations (3 exam topics); and possess an impeccable reputation. The LAAA undertakes the following activities: (i) establishing educational and professional conduct requirements for members; (ii) administering a “Professional Accountant” examination designed for individuals seeking advanced level qualifications; and (iii) establishing and operating QA and I&D systems for members.

The Authority of Audit, Accounting, Property Valuation and Insolvency Management (AAAPVIM), under the supervision of the Ministry of Finance, empowered by the Act No. 458 of 06-05-2015 and Audit Law No. XIII-96 of 2017 is the public audit oversight entity in Lithuania.

AAAPVIM’s scope of responsibilities include the following: (i) audit, ethics, and accounting standard-setting; (ii) carrying out quality assurance procedures and enforcement of sanctions based on the results of inspections and investigations; (iii) translation of the standards issued by the IESBA and the IAASB into Lithuanian; (iv) cooperation with other public audit oversight authorities and standard-setters; and (v) supervision of all activities of the Lithuania Chamber of Auditors (LCA), including quality assurance and enforcement mechanisms; approval, licensing, and registration of certified auditors; and continuing education.

The AAAPVIM is a member of the International Forum of Independent Audit Regulators.

The Lithuanian Association of Accountants and Auditors (LAAA)

The LAAA is a public, non-profit, non-governmental, voluntary organization uniting professional accountants in Lithuania. The LAAA’s mission is to provide high-quality professional services, raise the knowledge level of accounting specialists, and encourage continuous development in the profession. The LAAA undertakes the following activities: (i) establishing educational and professional conduct requirements for members; (ii) administering a “Professional Accountant” examination designed for individuals seeking advanced level qualifications; and (iii) establishing and operating QA and I&D systems for members. In addition to being an IFAC member, LAAA is a member of Accountancy Europe.

The Lithuania Chamber of Auditors (LCA)

The LCA is a public legal entity unifying all certified auditors of Lithuania. In accordance with the Audit Law No. XIII-96 of 2017, the LCA has the following responsibilities: (i) administering the auditor qualification examination; (ii) issuing the auditor’s certificate; (iii) administering and monitoring of the CPD program; (iv) maintaining the registry of certified auditors; and (v) establishing QA and I&D systems for auditors to ensure compliance with standards in cooperation with the Authority of Audit, Accounting, Property Valuation and Insolvency Management.

In addition to being an IFAC member, LCA is also a member of Accountancy Europe and a member of the International Valuation Standards Council.

In Lithuania, a mandatory quality assurance (QA) review system has existed since 1999 as stipulated by the Audit Law No. VIII-1227 of 1999. The law and subsequent updates directly adopt ISQC 1 and ISA 220.

In 2008, amendments to the Audit Law resulted in the sharing of QA responsibility between the Authority of Audit, Accounting, Property Valuation and Insolvency Management (AAAPVIM) and the Lithuania Chamber of Auditors (LCA), with the former having oversight over the entire QA process. AAAPVIM is responsible for conducting QA reviews for all public interest entities (PIEs), while LCA performs the QA reviews for non-PIEs. Reviews must be conducted every six years for non-public interest entities and every three years for PIEs.

Relevant standards (ISQM 1, 2, and ISA 220 (revised)) have been adopted for application and the AAAPVIM and LCA have updated QA documentation accordingly.

LCA reports that the QA review system in the jurisdiction is aligned with SMO 1 requirements.

Current Status: Adopted

The Audit Law No. XIII-96 of 2017 establishes the initial and continuing professional development (IPD and CPD) requirements for auditors and authorizes the Lithuania Chamber of Auditors (LCA) to implement the requirements under the oversight of Authority of Audit, Accounting, Property Valuation and Insolvency Management.

To be eligible for the designation of certified auditor, individuals must have: an academic university master’s degree; an irreproachable reputation; three years practical training; and pass examinations (5 exams on common issues, law, taxes, accounting, audit). Individuals must then join the LCA and must fulfill the CPD requirements. The CPD requirements are 120 hours over a 3-year period, which aligns with the input-based approach of IES 7.

Professional accountants are not regulated at the state level and the law does not specify professional qualifications, education, and licensing requirements. Nevertheless, the Lithuanian Association of Accountants and Auditors (LAAA)—which unites professional accountants on a voluntary basis—establishes IPD and CPD requirements for members that wish to use the Professional Accountant designation. LAAA’s IPD requirements include having a bachelor’s degree (if no higher education than ten years’ work experience and at least seven years’ experience in accounting is required); have experience of at least 3 years within the last ten years in areas of accounting, finance, economics or control; pass LAAA’s examinations (3 exam topics); and possess an impeccable reputation. LAAA members must fulfill 120 hours of CPD over a 3-year period as well.

Further clarification on how the educational requirements for both auditors and other professionals (e.g., university curricula and content, examinations, and practical experience) address the most recent version of the IES (the 2019 Handbook accompanied by revisions to IES 2, 3, 4, and 8 effective in 2021) is necessary.

Current Status: Partially Adopted

The auditing requirements are set in the Audit Law No. XIII-96 of 2017. The Audit Law adopts ISA as issued by the IAASB and requires statutory audits to be performed according to the standards.

The Audit Law also states that the Authority of Audit, Accounting, Property Valuation and Insolvency Management (AAAPVIM), as the public oversight body, is to translate the ISA and publish them on its website. The AAAPVIM has translated and published ISA effective as of December 15, 2022 (i.e., the 2021 IAASB Handbook).

Current Status: Adopted

In Lithuania, only certified auditors are mandated by the law to adhere to ethical requirements. The Audit Law No. XIII-96 of 2017 requires all certified auditors to follow the IESBA Code of Ethics for Professional Accountants.

The Audit Law also states that the Authority of Audit, Accounting, Property Valuation and Insolvency Management (AAAPVIM), as the public oversight body, is to translate the IESBA Code and publish it on its website. As of the date of the assessment, the AAAPVIM has translated and published the 2022 International Code of Ethics.

In addition, while requirements for professionals other than auditors are not specified in the law, the Lithuanian Association of Accountants and Auditors (LAAA)—which unites accountants on a voluntary basis—reports that it has established and implemented a Code of Ethics for its members since 2006. Known as the Decalogue of LAAA Ethics Standards, the association reports that their Code was established in accordance with the IESBA Code of Ethics and has been updated over the years to continue following the IESBA Code of Ethics. LAAA members also adhere to the translated Code of Ethics published by the AAAPVIM.

Current Status: Adopted

The Ministry of Finance (MoF) is responsible for establishing public sector accounting and reporting standards in Lithuania.

Since 2010, all public sector entities on both state and municipal levels have the obligation to implement the National Public Sector Accounting and Reporting Standards (NPSAS). According to the IFAC / CIPFA Public Sector Accountability Index, the NPSAS are accrual-basis IPSAS modified for the national context.

Current Status: Adopted

In Lithuania, a mandatory I&D system for certified auditors has existed since 1999 based on the Audit Law No. VIII-1227 of 1999. In 2008, amendments to the Audit Law resulted in the sharing of responsibility for the implementation of the investigative and disciplinary (I&D) system between the Authority of Audit, Accounting, Property Valuation and Insolvency Management (AAAPVIM) and the Lithuania Chamber of Auditors (LCA).

Under the law, both AAAPVIM and LCA are empowered to initiate sanctions; however, in cases regarding audit quality, AAAPVIM has the authority to investigate all certified auditors (regardless of if the audit was for a PIE or non-PIE) and enforce disciplinary actions. In matters related to ethics and misconduct, LCA has established the Auditors’ Court of Honor which has the authority to issue sanctions. LCA reports that the enforcement system for auditors is aligned with the SMO 6 requirements.

In addition, while not required by law, the Lithuanian Association of Accountants and Auditors (LAAA)—which unites professional accountants on a voluntary basis—has also established an I&D system for its members. LAAA reports that the system corresponds with the requirements of SMO 6.

Current Status: Adopted

The Accounting Law No. IX-574 of 2001 sets the requirements for the preparation of corporate financial statements in Lithuania. The law outlines which accounting standards entities should apply based on their firm size and type: EU-endorsed IFRS or Lithuanian Business Accounting Standards (LBAS), which constitute the Lithuanian Generally Accepted Accounting Principle. The Ministry of Finance is responsible for developing accounting legislation and for establishing the LBAS.

EU-endorsed IFRS have slight modifications from IFRS (e.g., temporary 'carve-out' from IAS 39 Financial Instrument: Recognition and Measurement and a temporary extension of the scope of applying IFRS 9 Financial Instruments with IFRS 4 Insurance Contracts) but according to the IFRS Foundation, the majority of companies can state full compliance with the IFRS.

The law requires all public interest entities (PIEs), defined by the EU as listed entities, credit institutions, insurance companies, and other national designated entities, to apply EU-endorsed IFRS in both the consolidated and separate company financial statements. The MoF has expanded the definition of PIEs to include banks, pension funds, brokerage houses, and state and government enterprises, among several other types of entities. All other companies including small and medium enterprises (SMEs) have the option to apply EU-endorsed IFRS or LBAS in both the consolidated and separate financial statements. IFRS for SMEs has not been adopted in Lithuania.

Current Status: Adopted

Relevant Organizations

• Authority of Audit, Accounting, Property Valuation, and Insolvency Management (AAPVIM)
• HYPERLINK "http://www.lbaa.lt/en/about-us/lithuanian-association-of-accountants-and-auditors/" Lithuania Association of Accountants and Auditors (LAAA)
• Lithuanian Chamber of Auditors (LCA)

Relevant Legislation

• HYPERLINK "https://e-seimas.lrs.lt/portal/legalAct/lt/TAD/TAIS.251038?jfwid=-fxdp7ih1" Accounting Law No. IX-574 of 06-11-2001
• Audit Law No. VIII-1227 of 1999
• Audit Law No. XIII-96 of 2017
• EU, Audit Directive and Regulation No 537/2014
• Financial Statements of Entities Law No. X-575 of 06-11-2001
• Consolidated Accounts of Groups of Undertakings Law No. 576 of 06-11-2001

Relevant Publications

• AAAPVIM, International Standards and Regulations (Audit & Ethics translations)
• Accountancy Europe, Structure and organisation of the profession - key features – Lithuania, 2020
• --, Organisation of the Public Oversight of the Audit Profession in 30 European countries, Nov 2021
• --, Definition of Public Interest Entities in Europe, March 2019
• IFAC & CIPFA Public Sector Financial Accountability Index, 2020
• IFIAR, Member Profile: AAAPVIM
• LAAA, SMO Action Plan, 20222.
• LCA, SMO Action Plan, 2022.
• IFRS Foundation, IFRS Application Around the World?Jurisdictional Profile: Lithuania, July 2016.
• Moore, Doing Business in Lithuania, 2019.