Luxembourg

As a member of the European Union (EU), Luxembourg 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 Luxembourg accounting framework is mainly derived from EU accounting directives and regulations.

Companies whose securities trade on a regulated market (“listed entities”) are within the scope of the EU Regulation 1606/2002 of 19 July 2002 (“IAS Regulation”) and are therefore required to prepare and publish their consolidated financial statements in accordance with IFRS’s as adopted by the European Union (“IFRS–EU”). Listed entities are also allowed - but not required - to prepare and publish their statutory annual financial statements under IFRS-EU. If such option is not exercised, statutory annual financial statements of listed entities are prepared in accordance with domestic provisions as described below.

Upon authorization from the Luxembourg accounting advisory board (“Commission des Normes Comptables”, “CNC”), other non-listed entities have the choice between using EU-endorsed IFRS or LuxGAAP for consolidated accounts and/or separate financial statements. LuxGAAP is outlined in the amended Law on Commercial Companies of 10 August 1915 (consolidated accounts) and the Law on the Commercial and Companies Register and on the Accounting Records and the Annual Accounts of Undertakings of 19 December 2002 (annual accounts). Although LuxGAAP is predominantly based on historic cost measurement, there are exceptions for entities such as investment companies for which fair value measurement is the default regime.

Non-listed companies, such as banks, insurers, and other undertakings, must also consider other provisions outlined in legislation. For example, non-listed banks must adhere to the provisions of the Law of 17 June 1992 relating to (1) the annual and consolidated accounts of credit institutions governed by the laws of Luxembourg and (2) the obligations regarding publication of the accounting documents of branches of credit institutions and financial institutions governed by foreign laws (“LUX bank accounting law”) derived from EU directive 86/635/EEC of 8 December 1986 while non-listed insurers must comply with provisions of the Law of 8 December 1994 on the annual and consolidated accounts of insurance and reinsurance undertakings governed by Luxembourg law (“LUX insurance accounting law”) derived from EU directive 91/674/EEC of 19 December 1991.

Not-for-profit entities are required to prepare statutory annual financial statements. In the absence of a dedicated accounting framework, these entities generally choose to apply LuxGAAP as applicable to other undertakings.

Auditing Framework

Auditing requirements are set in the Law of 23 July 2016 concerning the audit profession, as amended (“Audit Law”), which transposes the Audit Directive 2006/43/EC on statutory audits of annual accounts and consolidated accounts as amended by the Directive 2014/56/EU (“Audit Directive”). It also implements EU Regulation No 537/2014 of 16 April 2014 on specific requirements regarding statutory audit of public-interest entities (“Audit EU Regulation”).

One of the requirements of the national legislation is the mandatory audit of all public-interest entities (PIEs) as defined in the Audit Law. In Luxembourg, the definition of PIEs covers entities governed by the law of a Member State whose transferable securities are admitted to trading on a regulated market of any Member State, credit institutions, and insurance and reinsurance undertakings.

Small companies, including cooperative companies, are exempted from an audit if the criteria set by the Law of 19 December 2002 have been met. However, companies subject to the supervision of the Commission de Surveillance du Secteur Financier, the public audit oversight body and financial services regulator (“CSSF”), or the Commissariat aux Assurances, the insurance regulator (“CAA”), must have their annual accounts audited regardless of size and type of the company.

According to the Audit Law, only approved statutory auditors (“réviseurs d’entreprises agréés”) are allowed to perform statutory audits. Statutory auditors (“réviseurs d’entreprises”) are authorized to perform audits commonly called “contractual audits”.

The Audit Law stipulates statutory audits be carried out in compliance with International Standards on Auditing (“ISA”) as adopted by the CSSF. The latter is also empowered to adopt standards on professional ethics, internal quality control, and auditing in the field of statutory audit for matters that may not be covered by the ISA. These standards, including ISA, are adopted by way of a CSSF regulation. This regulation comprises add-ons/carve-outs to ISA, however there is an ongoing process within the CSSF to incorporate new and revised ISA as issued by IAASB.

The professional auditing organization, the Institut des Réviseurs d’Entreprises (“IRE”), is responsible for issuing standards on various activities except for those applicable to statutory audits. IRE has adopted applicable IAASB pronouncements for assurance engagements, review engagements, and related services (ISAE, ISRE, and ISRS). IRE has also adopted national standards on engagements entrusted exclusively to the audit profession by law.

Auditors

In Luxembourg, statutory auditors are regulated by Audit Law alongside a number of grand-ducal regulations and Commission de Surveillance du Secteur Financier (CSSF) regulations. The Audit Law and regulations, including the EU Audit Regulation, outline the regulatory mechanisms and organization of the audit profession including Institut des Réviseurs d’Entreprises (IRE).

CSSF is the oversight authority for the audit profession and is also the financial services regulator. The CSSF has the ultimate responsibility for the regulation of the audit profession and the public oversight of approved statutory auditors and approved audit firms (“cabinets de révision agréés”). Its scope of activities includes: (i) the approval and registration of approved statutory auditors and approved audit firms; (ii) the adoption of standards on professional ethics, internal quality control of approved audit firms and auditing; (iii) continuing education; (iv) quality assurance systems; and (v) investigative and administrative disciplinary systems.

CSSF is also responsible for the approval and licensing of statutory auditors and audit firms (“cabinets de révision”).

Candidates seeking to become statutory auditors must hold one or more master’s degrees or have undergone equivalent training. The content of those qualifications is governed by the grand-ducal regulation determining the requirements for the professional qualification.

Candidates must then serve a period of at least three years’ training with an approved statutory auditor or an approved audit firm. In parallel with the traineeship, the candidate follows complementary training courses on Luxembourg laws and specificities at the University of Luxembourg. Each course, 12 in total, culminates in an examination.

Once the three-year training period and the complementary training examinations are completed, the candidate is authorized by the CSSF to sit for the professional aptitude examination leading to the award of the statutory auditor title. Should the statutory auditor wish to perform statutory audit, the individual must register with the CSSF to that effect. The practitioner will then be granted the status “approved statutory auditor” ("réviseur d’entreprises agréé"). It is compulsory for the statutory auditors, the approved statutory auditors, the audit firms and the approved audit firms to be members of the IRE.

Chartered Accountants

Chartered accountants in Luxembourg are also regulated by Law of 10 June 1999 on the profession of accountant and the certification is issued by the Ministry of Economy. Qualified chartered accountants who are authorized to practice in Luxembourg, whether they are individuals or legal entities, are required to belong to the Ordre des experts-comptables (“OEC”), the professional accountancy organization for certified chartered accountants in the country. While the education requirements (minimum bachelor’s degree, three years’ practical experience, and complementary education and exam) are set by law, the education program and the professional examinations are organized by the University of Luxembourg in accordance with the legal requirements. OEC is part of the University of Luxembourg committee which is responsible for the professional education program and the organization of the examinations (“test d’aptitude”).

In addition, OEC’s responsibilities include the following: (i) ensure that its members comply with all applicable laws and regulations; (ii) establish ethical requirements for its members; (iii) protect the rights and interest of the profession; (iv) advocate for the profession in legal and technical matters; (v) set and enforce continuing professional development requirements for its members; and (vi) to implement and oversee disciplinary measures of its members.

The Audit Law grants authority to the Commission de Surveillance du Sector Financier (CSSF)to oversee the audit profession. The CSSF is a member of the International Forum of Independent Audit Regulators (“IFIAR”) and its scope of activities are as follows: (i) the approval and registration of statutory auditors, approved statutory auditors, audit firms and approved audit firms; (ii) the adoption of standards on professional ethics, internal quality control of approved audit firms and auditing; (iii) continuing education; (iv) quality assurance systems; and (v) investigative and administrative disciplinary systems.

The Audit Law provides provisions for the establishment and implementation of a mandatory quality assurance (QA) review system for all statutory audits of financial statements in Luxembourg. The QA review system is administered by the Commission de Surveillance du Secteur Financier (CSSF).

As mentioned in the Audit Law, CSSF is responsible for the QA reviews of statutory audits of public interest entities (PIEs) every three years and statutory audits of non-PIEs every six years. The QA system complies with the requirements of the Audit Directive, the EU Audit Regulation, and SMO 1 requirements. ISQM 1 and ISQM 2 are adopted as the applicable quality management standards.

In addition to the CSSF’s QA system and in accordance with the Audit Law, Institut des Réviseurs d’Entreprises (IRE) maintains a system of peer review to ensure that members respect their legal obligations and professional rules, other than those related to statutory audits, as well as their professional obligations arising from legislation relating to anti-money laundering and terrorism financing.

Regarding certified chartered accountants, Ordre des Experts-Comptables (OEC) also maintains a peer review which ensure that OEC members respect their legal obligations and professional rules as well as a professional review with regards to their professional obligations arising from legislation relating to anti-money laundering and terrorism financing.

Current Status: Adopted

The following laws and regulations organize the initial professional development (IPD) and continuing professional development (CPD) requirements for statutory auditors in Luxembourg: (i) the Audit Law, (ii) the grand-ducal regulation determining the requirements for the professional qualification of statutory auditors and approved statutory auditors and (iii) the Commission de Surveillance du Secteur Financier (CSSF) regulation on continuing education.

The requirements stipulated in the Audit Law and regulations concerning IPD (higher education, practical experience, local law/tax education, and examinations) and CPD are compliant with the Audit Directive and with 2019 revised IES.

CSSF is responsible for establishing CPD requirements. Institut des Réviseurs d’Entreprises (IRE) supports CSSF in the implementation of the CPD requirements, participates in the monitoring process and is involved in the CSSF working group on education topics for auditors and audit firms.

For certified chartered accountants, the Law of 10 June 1999 regulates the accounting profession in Luxembourg. The University of Luxembourg organizes and delivers the IPD program, including professional examinations, based on the requirements outlined in the law (minimum bachelor’s degree, three years’ practical experience, and complementary education and exam). Ordre des Experts-Comptables (OEC), the PAO for certified chartered accountants, is responsible for establishing CPD obligations are in line with 2019 revised IES.

Current Status: Adopted

The Audit Law stipulates statutory audits be carried out in compliance with ISA as adopted by the Commission de Surveillance du Secteur Financier (CSSF). It also states that the CSSF may issue standards in the field of statutory audit. ISA and other standards are adopted by way of a CSSF regulation. This regulation comprises add-ons/carve-outs to ISA, however there is an ongoing process within the CSSF to incorporate new and revised ISA as issued by IAASB.

The Audit Law also empowers Institut des Réviseurs d’Entreprises (IRE) to issue standards except for those applicable to statutory audit. IRE has adopted applicable IAASB pronouncements for assurance engagements, review engagements, and related services (ISAE, ISRE, and ISRS). IRE has also adopted national standards on engagements entrusted exclusively to the audit profession by law.

There is an ongoing process within IRE to adopt new and revised IAASB pronouncements.

As of 2024, the 2022 Handbook of International Quality Control, Auditing, Review, Other Assurance, and Related Services Pronouncements is in effect.

Current Status: Adopted

In accordance with the Audit Law, Commission de Surveillance du Secteur Financier (CSSF) has responsibility for the adoption of standards on professional ethics for statutory auditors. The CSSF has adopted the International Code of Ethics as issued by IESBA by way of CSSF Regulation. This regulation comprises add-ons/carve-outs to the IESBA Code, however there is an ongoing process within the CSSF to incorporate new and revised ethical requirements as issued by IESBA.

Institut des Réviseurs d’Entreprises (IRE), which is the professional accountancy organization (PAO) for auditors and audit firms, requires its members to adhere to the ethical requirements as stipulated by CSSF Regulation.

Under the Law of 10 June 1999, Ordre des Experts-Comptables (OEC), the PAO for certified chartered accountants, is responsible for establishing ethical requirements applicable to its members. The OEC’s “Code de déontologie” has been approved by the General Assembly of its members. In 2024, the OEC “Code de déontologie” was updated to align with the 2023 International Code of Ethics.

Current Status: Adopted

Public sector accounting standards are set by the Ministry of Finance through laws, regulations, and circulars. The Luxembourg government is currently using national standards on a modified cash accounting basis (IFAC, CIPFA 2021). According to the 2017 OECD Publication entitled “Accrual Practices and Reform Experiences in OECD Countries”, Luxembourg has an ongoing reform process to move to accrual accounting in the long term. Luxembourg is undertaking preparatory work to prepare for a possible adoption of European Public Sector Accounting Standards (EPSAS) (no timeframe available).

Current Status: Not Adopted

The Audit Law establishes a mandatory investigative and disciplinary (I&D) system for statutory auditors. The responsibility for the I&D system is shared between the Commission de Surveillance du Secteur Financier (CSSF) and Institut des Réviseurs d’Entreprises (IRE).

The CSSF has responsibility to investigate, impose preventive measures, and issue sanctions and other administrative measures for approved statutory auditors and approved audit firms. IRE has the power to carry out controls and operate a system which includes investigative, disciplinary, and appeals processes over statutory auditors and audit firms. Both systems are stated to align with SMO 6 requirements.

As for certified chartered accountants, the Law of 10 June 1999 on the profession of accountant grants Ordre des Experts-Comptables (OEC), the PAO for certified chartered accountants, authority to carry out enforcement procedures. OEC’s I&D system includes investigative, disciplinary, and appeals processes. OEC completed a self-assessment of its I&D system and confirms that its procedures are aligned with SMO 6 requirements.

Current Status: Adopted

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

Companies whose securities trade on a regulated market (“listed entities”) are within the scope of the EU Regulation 1606/2002 of 19 July 2002 (“IAS Regulation”) and are therefore required to prepare and publish their consolidated financial statements in accordance with IFRS’s as adopted by the European Union (“IFRS–EU”). Listed entities are also allowed - but not required - to prepare and publish their statutory annual financial statements under IFRS-EU. If such option is not exercised, statutory annual financial statements of listed entities are prepared in accordance with domestic provisions (LuxGAAP). 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.

Upon authorization from the Luxembourg accounting advisory board (“Commission des Normes Comptables”, “CNC”), other non-listed entities have the choice between using EU-endorsed IFRS or LuxGAAP for consolidated accounts and/or separate financial statements. LuxGAAP is outlined in the amended Law on Commercial Companies of 10 August 1915 (consolidated accounts) and the Law on the Commercial and Companies Register and on the Accounting Records and the Annual Accounts of Undertakings of 19 December 2002 (annual accounts). Although LuxGAAP is predominantly based on historic cost measurement, there are exceptions for entities such as investment companies for which fair value measurement is the default regime.

Non-listed companies, such as banks, insurers, and other undertakings, must also consider other provisions outlined in legislation specific to their industry.

Current Status: Partially Adopted

Relevant Organizations

Commissariat aux Assurances

Commission de Surveillance du Secteur Financier

Commission des Normes Comptables

Institut des Réviseurs d'Entreprises

Ministry of Finance

Ordre des Experts Comptables

Relevant Legislation

Law of 23 July 2016 concerning the audit profession

Grand-ducal regulation of 9 July 2013 determining the requirements for the professional qualification of réviseurs d’entreprises (statutory auditors) and réviseurs d’entreprises agréés (approved statutory auditors)

CSSF Regulation N° 18-02 relating to: 1) the adoption of audit standards in the field of statutory audit under the Law of 23 July 2016 concerning the audit profession; 2) the adoption of standards on professional ethics and internal quality control under the Law of 23 July 2016 concerning the audit profession

CSSF Regulation N° 16-10 organising continuing education of réviseurs d'entreprises (statutory auditors) and réviseurs d'entreprises agréés (approved statutory auditors)

Directive 2006/43/EC of the European Parliament and of the Council of 17 May 2006 on statutory audits of annual accounts and consolidated accounts as amended by the directive 2008/30/EC of 11 March 2008, the directive 2013/34/EU of 26 June 2013 and the directive 2014/56/EU of 16 April 2014

EU regulation No 537/2014 of the European Parliament and of the Council of 16 April 2014 on specific requirements regarding statutory audit of public-interest entities

Directive 2013/34/EU of the European Parliament and of the Council of 26 June 2013 on the annual financial statements, consolidated financial statements and related reports of certain types of undertakings

EU regulation No 1606/2002 of the European Parliament and of the Council of 19 July 2002 on the application of international accounting standards

Law of 19 December 2002, as amended, on the register of commerce and companies and the accounting and annual accounts of undertakings

Law of 10 August 1915 on Commercial Companies

Law of 17 June 1992 relating to (1) the annual and consolidated accounts of credit institutions governed by the laws of Luxembourg and (2) the obligations regarding publication of the accounting documents of branches of credit institutions and financial institutions governed by foreign laws, as amended.

Law of 8 December 1994 on the annual and consolidated accounts of insurance and reinsurance undertakings governed by Luxembourg law

Relevant Publications

Accountancy Europe, Public Oversight Survey, 2015.

Accountancy Europe, Structure and organization of the profession – key features: Luxembourg, 2020.

Accountancy Europe, Defining a Public Interest Entity, 2022.

IRE, SMO Action Plan, 2023.

IFIAR, Luxembourg—Member Profile, 2023.

IFRS Foundation, IFRS Application Around the World – Jurisdictional Profile: Luxembourg. June 2016.

--, IFRS Application around the World – Jurisdictional Profile: European Union, April 2021.

OEC, SMO Action Plan, 2023.

OECD & International Federation of Accountants, Accrual Practices and Reform Experiences in OECD Countries