Mongolia

Accounting, auditing, and financial reporting requirements in Mongolia are stipulated in the Company Law of 2011 and the Partnership Law of 1995 as well as the Law of Mongolia on Accounting of 1993 and the Law of Mongolia on Auditing 1997, which were both amended in 2015.

The Company Law obligates companies to keep books of accounts and provides the basic legal framework for accounting. The Law on Accounting establishes accounting standards for all companies and empowers the Accounting and Auditing Standard Committee (AASC), under the oversight of the Ministry of Finance (MoF), to review and confirm the official translations and provide applicable interpretations and recommendations, which are submitted to the MoF for its review and approval. The Law on Accounting requires the application of IFRS, IFRS for Small- and Medium-sized Entities (SMEs), and IPSAS.

Under the Law on Accounting, listed companies, banks and non-banking financial institutions, insurance companies, other companies specified in the Law on Licensing of Business Activities, state or local government-owned enterprises and enterprises with state ownership participation, public service entities engaged to supply electricity, water and heating, and political parties and non-governmental organizations performing governmental functions are required to apply IFRS. In Mongolia, SMEs are defined within the Law on Small and Medium Enterprises of 2007 as legally registered business entities with employees of 199 or less and with an annual turnover of up to 1.5 billion Tugrik. These entities are required to apply IFRS for SMEs.

The Law on Auditing establishes ISA as the auditing standards for all companies. The AASC and MoF follow same translation and implementation guidance process as mentioned above for the accounting standards.

In accordance with the Law on Auditing, the financial statements of the following companies are required to be audited: companies applying IFRS as stipulated in the Law on Accounting, companies preparing consolidated financial statements, companies being restructured, liquidated, or proposing to sell all its assets through an auction, foreign invested companies, funds stated in the Civil Code, and companies required by laws and international treaties of Mongolia.

While the MoF is responsible for the overall development of accounting and auditing standards in the country, the Central Bank of Mongolia and Financial Regulatory Commission also issue additional regulations consistent with the MoF directives for banks, listed companies, insurance companies, and non-banking financial institutions.

The accountancy profession in Mongolia is regulated by the Ministry of Finance (MoF) and the Mongolian Institute of Certified Public Accountants (MonICPA) as established in both the Law of Mongolia on Accounting of 1993 and the Law of Mongolia on Auditing of 1997, both amended in 2015.

The Law on Accounting provides the definition for Professional Accountants and Certified Public Accountant (CPA). Professional Accountants are individuals who have attained a degree in accounting, while a CPA is defined as a professional accountant, financier, and economist who has obtained the CPA designation by MonICPA.

The Law on Accounting establishes the requirements for individuals who wish to take the CPA examination. Candidates who take the CPA examination are required to possess a university degree in accounting, achieve requirements related to practical experience, and complete a final examination. Professional Accountants (PA) are authorized to prepare financial statements for tax and financial reporting purposes; however, they do not appear to be subject to regulation. PA’s may choose to voluntarily join one of the other professional accountancy organizations (PAOs) in Mongolia—the Mongolian Institute of Internal Auditors; the Mongolian Institute of Management Accountants; and the Association of Mongolian Auditors—and be self-regulated through the membership requirements of the respective PAOs.

The Law on Auditing establishes requirements for auditors. Membership with MonICPA is mandatory in order to offer auditing services. Only audit firms that obtain an audit license from the MoF and are registered with both the Financial Regulatory Commission and MonICPA are authorized to act as statutory auditors of listed and insurance companies.

Under both the Law on Accounting and the Law on Auditing, the MoF is responsible for reviewing and approving auditing and accounting standards presented by the Accounting and Auditing Standard Committee; maintaining a register of CPAs and audit firms; and carrying out quality assurance reviews.

The Law on Accounting establishes the responsibilities of MonICPA, which include implementing IPD and CPD requirements for CPAs; establishing ethical requirements for its members; translating and contributing to the adoption and implementation of international accounting and auditing standards; providing guidelines and materials to support the audit firms; and revoking the CPA credentials of auditors who breach the MonICPA Code of Ethics and applicable auditing standards. MonICPA also operates an investigative and disciplinary system for its members and its procedures is outlined within the institute’s Code of Ethics.

There are no independent audit oversight arrangements in Mongolia.

The auditing profession in Mongolia is regulated by the Ministry of Finance (MoF) and the Mongolian Institute of Certified Public Accountants (MonICPA) as established in both the Law of Mongolia on Accounting of 1993 and the Law of Mongolia on Auditing of 1997, both amended in 2015.

Under both Law’s, the MoF is responsible for reviewing and approving auditing and accounting standards presented by the Accounting and Auditing Standard Committee; maintaining a register of Certified Public Accountants (CPA) and audit firms; and carrying out quality assurance reviews. Only audit firms that obtain an audit license from the MoF and are registered with both the Financial Regulatory Commission and MonICPA are authorized to act as statutory auditors of listed and insurance companies.

MonICPA has regulatory responsibilities related to CPAs under the oversight of the MoF. Membership in MonICPA is mandatory in order to offer auditing services and CPAs are the only individuals in Mongolia who may conduct statutory audits. The Law on Accounting establishes the responsibilities of MonICPA, which include implementing initial and continuing professional development requirements for CPAs; establishing ethical requirements for its members; translating and contributing to the adoption and implementation of international accounting and auditing standards; providing guidelines and materials to support the audit firms; and revoking the CPA credentials of auditors who breach the MonICPA Code of Ethics and applicable auditing standards. MonICPA also operates an investigative and disciplinary system for its members and its procedures is outlined within the institute’s Code of Ethics.

The Mongolian Institute of Certified Public Accountants (MonICPA) was established in 1996 to represent Certified Public Accountants (CPA). The Law on Accounting establishes the responsibilities of MonICPA, which include implementing initial and continuing professional development requirements for CPAs; establishing ethical requirements for its members; translating and contributing to the adoption and implementation of international accounting and auditing standards; providing guidelines and materials to support the audit firms; and revoking the CPA credentials of auditors who breach the MonICPA Code of Ethics and applicable auditing standards. MonICPA also operates an investigative and disciplinary system for its members and its procedures is outlined within the institute’s Code of Ethics. In addition to being a member of IFAC, the MonICPA is a member of the Confederation of Asian and Pacific Accountants.

In accordance with the Law of Mongolia on Auditing of 1997, as amended in 2015, the Ministry of Finance (MoF) is responsible for establishing and implementing a mandatory quality assurance (QA) review system for all audits.

Accordingly, the MoF has established a QA review system that, according to the Mongolian Institute of Certified Public Accountants, is developed in line with the requirements of SMO 1. The International Standard on Quality Control (ISQC) 1 and ISA 220 have also been adopted for application.

Current Status: Adopted

The Law of Mongolia on Accounting of 1993, as amended in 2015, establishes initial professional development (IPD) requirements for Certified Public Accountants (CPA) in Mongolia. The Ministry of Finance (MoF), the Ministry of Education, the Mongolian Institute of Certified Public Accountants (MonICPA), and universities are involved in the implementation of IPD and continuing professional development (CPD) requirements for CPAs. No further information is available on IPD or CPD requirements for Professional Accountants who do not undertake the CPA program.

MonICPA, under the oversight of the MoF, is responsible for establishing mandatory CPD requirements for CPAs. Overall, the extent of alignment of educational requirements in Mongolia with those of the IES has not been reported.

Current Status: Partially Adopted

The Law of Mongolia on Auditing of 1997, as amended in 2015, establishes mandatory audit requirements and prescribes auditing standards to be applied. The Law establishes ISA as the applicable auditing standards and empowers the Accounting and Auditing Standard Committee (AASC) to review and confirm the official translations and provide applicable interpretations and recommendations. These standards are then submitted to the Ministry of Finance for its review and approval.

The Mongolian Institute of Certified Public Accountants (MonICPA) supports the standard-setting process by providing translations of the standards, and according to the institute, the 2013 version of ISA has been translated and is being applied. The MonICPA reports that it has translated the latest ISA that are effective 2016 and submitted the translation to the AASC for review. The institute anticipates that the process will be completed by September 2017.

Current Status: Partially Adopted

Under the Law of Mongolia on Accounting of 1993, as amended in 2015, the Mongolian Institute of Certified Public Accountants (MonICPA) is responsible for setting ethical requirements for Certified Public Accountants, subject to the oversight of the Ministry of Finance. The MonICPA reports that in 2012, its general assembly approved a Code of Ethics that is consistent with the IESBA Code of Ethics; however, it is unclear as to which version of the IESBA has been adopted.

No information on the legislation and/or ethical requirements that may be applicable to Professional Accountants in the jurisdiction is available.

Current Status: Partially Adopted

The Law of Mongolia on Accounting of 1993, as amended in 2015, establishes IPSAS as public sector accounting standards in Mongolia for all budget entities, which are defined by the Law on State Registration of Legal Bodies as state or locally owned, not-for-profit legal bodies who provides work and services to execute the functions of the state in accordance with the approved budget and are registered by the State Central Administrative Body Responsible for Finance and Budget Matters. The Ministry of Finance is authorized by the law to implement the standards.

The Mongolian Institute of Certified Public Accountants supports the standard-setting process by providing translations of the standards and reports that the 2003 version of IPSAS has been translated and is being applied. No further information is available on plans to review and adopt the latest IPSAS.

Current Status: Partially Adopted

The Law of Mongolia on Accounting of 1993, as amended in 2015, outlines the penalties that can be imposed on Certified Public Accountants that breach the Code of Ethics adopted by the Mongolian Institute of Certified Public Accountants (MonICPA). The MonICPA’s investigative and disciplinary (I&D) system and procedure is outlined within the institute’s Code of Ethics and is performed under the oversight of the Ministry of Finance. The institute reports that it reviewed the requirements of SMO 6, when it was revised in 2012, and had identified gaps in its appeals process; however, no information has been provided on the identified gaps. The MonICPA reports that in 2017, its Ethics Committee will review SMO 6 to incorporate the revised requirements and address the gaps that were previously identified.

No information on the legislation and/or I&D systems that may be applicable to Professional Accountants in the jurisdiction is available.

Current Status: Partially Adopted

The Law of Mongolia on Accounting of 1993, as amended in 2015, sets accounting standards for all companies and empowers the Accounting and Auditing Standard Committee to review and confirm the official translations and provide applicable interpretations and recommendations which are then submitted to the Ministry of Finance for review and approval. The Law establishes IFRS and IFRS for Small- and Medium-sized Entities as the applicable accounting standards in the jurisdiction.

The Mongolian Institute of Certified Public Accountants supports the standard-setting process by providing translations of the standards and reports that the most updated version of IFRS is the 2011 version, with the latest version of IFRS under review as of June 2017.

Current Status: Partially Adopted

Relevant Organizations

• Central Bank of Mongolia
• Financial Regulatory Commission (FRC)
• Ministry of Finance of Mongolia
• Mongolian Institute of Certified Public Accountants (MonICPA)

Relevant Legislation

• Law on Accounting of Mongolia
• Law on Auditing of Mongolia
• Law on Budgets Mongolia
• Law on Licensing of Business Activities

Relevant Publications

• Ernst & Young, Mongolia’s new Accounting and Auditing Laws, 2016.
• IFRS Foundation, “IFRS Application around the World, Jurisdictional Profile: Mongolia,” June 2016.
• MonICPA, SMO Action Plan, June 2017.
• PwC, Doing Business Guide in Mongolia, 2015.
• World Bank, Report on the Observance of Standards and Codes (ROSC), Accounting and Auditing: Mongolia, March 2008.