Basis for Establishment
The Authority of Audit and Accounting (AAA) was established in 2002 as Institute of Accounting responsible for setting the Business Accounting Standards (Lithuanian GAAP). During 2007-2008, following the update in the EU Directive on Statutory Audit, the Lithuanian Parliament decided not to establish a new separate body for public audit oversight, but delegated these functions to AAA in purpose to establish an independent system of regulation for audit profession. As a result of this reform, the responsibilities of the Institute of Accounting were expanded to include the functions of Public Audit Supervision and the name of the Institute was changed accordingly to the AAA.
According to the Government act Nr. 749 of 23-07-2008 the AAA is a public entity, accountable to the Ministry of Finance. It operates according to the Constitution of the Republic of Lithuania, the Civil Code of the Republic of Lithuania, the Law on Public Institution, the Law on Audit, the Accounting Law, the other laws and the AAA Charter, which is approved by the Order of Minister of Finance of 26-08-2008.
Mission and Responsibility / Authority
The AAA is the Lithuania's independent regulator of audit profession with the primary responsibility in the Lithuania in relation to standards of financial reporting and audit.
In April 2009, the Ministry of Finance of the Republic of Lithuania approved the Strategic Operational Plan of the AAA for 2009-2011, which sets the goals for next 3 years in the fields of accounting and audit regulation. The AAA plans to develop further the framework of Business Accounting Standards by issuing new Standards for UCITS financial reporting, entities under liquidation etc. and to engage in day-to-day audit supervision activity. As part of public audit oversight activity, the AAA together with the Chamber of Auditors started the work on translation the International Standards on Audit in Lithuanian.
In 2009 the AAA became a member of International Forum of Independent Audit regulators (IFIAR) and EGAOB (European group of audit oversight bodies). The membership in the IFIAR and participation in the EGAOB work will allow exchange of information on audit oversight with relevant audit oversight institutions of other countries and to enhance cooperation in the field of audit oversight.
Auditor Oversight and Accounting Standards System
The AAA has responsibility, which is delegated to it from the Lithuanian Parliament:
- to provide independent supervision of the Lithuanian audit profession;
- to issue Business Accounting Standards;
- to improve accounting system of Lithuania in reference to European Union directives and international (IFRS based) financial reporting requirements;
- to oversight the process of issuing / revoking the certificates for audit companies and auditors;
- to oversight auditors qualification improvement and examinations process, to deal with the auditors' appeals related to their examination;
- to assure the quality of auditors' professional courses;
- to oversight the translating the Codex of Ethics for Professional Accountants, International Standards on Audit (ISA) and International Standard on Quality Control into Lithuanian;
- in cooperation with the Lithuanian Chamber of Auditors (LCA) to ensure the quality of audits performed by auditors and audit companies by the help of recurring quality reviews (inspections performed by the external auditors-controllers assigned by LCA and approved by the AAA) and investigations (performed by the inspectors of the AAA);
- to approve the auditors-controllers, annual plan and results of recurring quality reviews;
- to assure the quality of the self-regulatory activities on audit profession performed by the LCA;
- to perform other functions provided for in the Law on Audit of the Republic of Lithuania.
At the moment, the Law on Accounting does not empower the AAA to oversight the quality of entities financial statements. But there are theoretical discussions in this regard and there is possibility that this could change in the near future. At the moment in Lithuania only small part of entities financial statements are under quality oversight by the Lithuanian institutions. In particular, commercial banks financial reporting is supervised by the Central Bank of Lithuania, insurance companies financial reporting by the Insurance Supervisory Commission and listed companies financial reporting by the Securities Commission.
The financial statements of all entities should have been registered in the Centre of Registers which is a public entity of limited civil liability incorporated on the basis of the State-owned property. Recently, the Tax Authority of Lithuania made the agreement with the Centre of Registers to access all financial statements registered in there directly. The financial statements presented to the Centre of Registers are usually sent by the entities using the standard financial reporting form prepared with the help of the AAA.
Activities related to Accounting Standards setting
With the help of Accounting Standards Committee, the AAA sets Lithuanian standards for accounting and helps implement those standards through its consultation functions. At the moment, there are issued 34 Business Accounting Standards, which are based on IFRS accounting principles, and each of them has their implementation guidelines giving the practical examples for its appliance.
Through the audit investigations, the AAA has the right to inspect directly all auditors and audit firms registered in Lithuania and with the help of the Audit Oversight Committee to issue compulsory regulations in this field.
Quality assurance of the audit carried out by auditors and audit firms is implemented by the AAA together with the Chamber of Auditors. The Chamber of Auditors has established the implementation in the Chamber of Auditors of the procedure for the quality assurance of the carried out audit and coordinate it with the AAA. The AAA is informed of the other than controllers members and employees of the Chamber of Auditors who are appointed responsible for the performed audit quality assurance, and other persons invoked to carry out this function.
In order to assure quality of audit carried out by auditors and audit firms, the Chamber of Auditors organise quality reviews of the carried out audit so that all auditors and audit firms be checked at least once per 6 years. In case of audit firms of member states entered in the list of audit firms, the quality of audit carried out is reviewed to the extent it concerns the audit carried out according to the legal acts of the Republic of Lithuania. The Chamber of Auditors is responsible for the actual operations of yearly quality review plans of audit carried out by auditors and audit firms.
Quality reviews of audit carried out by auditors and audit firms which carry out the audit of public interest entities are performed at least every 3 years. If the audit performance deficiencies were established during the quality review and/or the investigation of audit carried out by auditors and audit firms, the next audit quality review is performed not later than after 3 years. Quality reviews of audit carried out by non-member country auditors and by audit-firms are performed according to the procedure established by the Government of the Republic of Lithuania or the authority authorised by it.
There are approximately 400 auditors and 200 audit firms registered in Lithuania. During the 2008 audit inspections there were reviewed 71 auditors and audit firms (more detailed information is given below).
AAA decisions due to the audit inspections reports made in 2008
Reports of audit | No contravention | Insignificant | Significant | No decisions made | |||||
| Audit companies | Audi-tors | Audit companies | Audi-tors | Audit companies | Audi-tors | Audit companies | Audi-tors | Audit companies | Audi-tors |
| 30 | 41 | 26 | 37 | 4 | 4 | 0 | 0 | 0 | 0 |
There are 45 audit companies and 86 auditors included in the quality review inspection plan for year 2009.
