LAW OF THE REPUBLIC OF LITHUANIA
AMENDING THE LAW OF THE REPUBLIC OF LITHUANIA ON AUDIT
15 June 1999 Mo VIII-1227
Vilnius
(A new version of 3 July 2008 No X-1676)
Article 1. New version of the Law of the Republic of Lithuania on Audit
The Law of the the Republic of Lithuania on Audit shall be amended and set it forth to read as follows:
Article1. Purpose of the Law
1. This Law shall establish the procedure for carrying out the audit of a set of financial statements and consolidated financial statements (hereafter – financial statements), the procedure of granting the name of a certified auditor and of his entry in the list of certified auditors, the procedure of entering the audit firms in the list of audit firms and issuing the certificates of audit firms, professional activities of audit firms and certified auditors, assurance of the quality of audit carried out by certified auditors and firms of auditors, the investigation of the carried out audit and public oversight of certified firms of auditors, requirements of audit of financial statements of public interest entities, provision of assurance and other related services, the rights and duties of the Authority of Audit and Accounting, the activities of the Lithuanian Chamber of Auditors, (hereafter referred to as Chamber of Auditors). When the regulations of this Law are applied both to a set of financial statements and a set of consolidated financial statements, the term “financial statements” shall apply.
2. Additional requirements applied to public interest entity audit may be established by other laws regulating the activities of these entities.
Article2. Definitions
1. Certified auditor (hereinafter referred to as the auditor) denotes a natural person who holds the title of the certified auditor granted according to the procedure set in this Law.
3. Audit network means a group of certain entities to which the audit firm and the related entities of any legal form belongs, which is clearly aimed at profit- or cost-sharing or shares common ownership, control or management, common quality-control policies and procedures, a common business strategy, the use of a common brand-name and/or a significant part of professional resources;
4. Auditor’s report means a document in which the auditor, the auditor of another Member State or the auditor of a non-member country, in addition to other obligatory required items, communicates his opinion about the audited financial statements.
5. Auditor’s assistant means a natural person seeking the auditor’s title and entered in the list of auditor’s assistants.
6. Public oversight of auditors and audit firms (hereinafter referred to as public oversight) means the totality of measures whereby the Authority of Audit and Accounting seeks to assure the quality and security of financial statements.
7. The auditor controller (hereinafter referred to as the controller) means the auditor or the auditor of another Member State, approved by the Authority of Audit and Accounting to carry out the revision of quality of audit of financial statements carried out by the auditors and audit firms.
8. Audited entity means a legal person or a group of entities the financial statements whereof are being audited.
9. Code of Ethics for Professional Accountants means the principles of professional ethics prepared and approved by the International Ethics Standards Board for Accountants of International Federation of Accountants.
10. Audit of financial statements (hereinafter referred to as audit) means independent inspection of financial statements of the audited entity and provision of the auditor's report according to the requirements set by legal acts regulating the carrying out of audit of financial statements.
11. Report on audit of financial statements (hereinafter referred to as report on audit) means the document provided in the cases and according to the procedure established by law together with the auditor’s report in which the auditor, the auditor of another member state or the auditor of a non-member country indicates additional information on audit of financial statements.
12. Working documents of audit of financial statements (hereinafter referred to as working documents) means the entire material collected and received by the auditor, the auditor of another Member State or the auditors of a non-member country and documents which he prepares for drawing up the plan of audit of financial statements, for carrying out the audit of financial statements and for substantiating the auditor’s report.
13. The contractor of audit of financial statements (hereinafter referred to as the contractor) the audited entity or the legal or natural person, which chooses or selects the audit firm for carrying out the audit of financial statements and/or which concludes an agreement for the audit of financial statements..
14. Another Member State (hereinafter referred to as the Member State) means a Member State of the European Union, except for the Republic of Lithuania, as well as a Member State of the European Economic Area.
15. The auditor of another Member State (hereinafter referred to as the auditor of a Member State) means a natural person particularly granted by the competent authority of a Member State the right to carry out an audit in that Member State.
16. Audit firm of another Member State (hereinafter referred to as the audit firm of a member state) means a firm set up in the Member State, whatever its precise legal form, having the right to carry out an audit in the Member State.
17. The competent authority means the Authority of Audit and Accounting, the Chamber of Auditors, the authority of another Member State and/or professional organisation of another Member State, which will be specified to the European Commission as the competent authority, or the authority of the another non-member country and/or professional organisation which shall be given responsibility for carrying out public oversight of auditors and audit firms or carrying out the functions related to auditors and audit firms.
18. A non-practitioner shall be a natural person who is deemed to be knowledgeable in the areas relevant to the statutory audit either because of his past professional skill or, alternatively, is sufficiently knowledgeable in audit and who has at least 3 years before taking up employment in the Audit and Accounting Service fulfilled all the following requirements:
2) was not an owner/one of owners of the audit firm and/or did not have any influence on the management of the audit firm;
19. International Auditing Standards means the International standards on auditing, Audit Practice Statements and other related to audit standards prepared and approved by the International Auditing and Assurance Standards Board of the International Federation of Accountants.
20. International Quality Control Standard means the standard prepared and approved by the International Auditing and Assurance Board of the International Federation of Accountants whereby the internal quality control of the audited entity is regulated.
21. Assurance and other related services means the services other than auditing provided by the audit firm to which the International Standards on Assurance Engagements, Standards on Review Engagements, International Standards on Related Services and Related Practice Statements prepared and approved by the International Auditing and Assurance Board of the International Federation of Accountants are applied.. The Chamber of Auditors shall establish the methodology in applying the International Standard on Assurance Engagements, Standards on Review Engagements, the International Standards on Related Services and Related Practice Statements and shall control the quality of assurance and related services.
22. Audit firm of a non-member country – means a firm of any precise legal form set up in any non-member country entitled to carry out audit in that non-member country.
23. Auditor of a non-member country means a natural person entitled by the competent authority of that non-member country to carry out audit in that non-member country.
24. Public-interest entity means an entity that is of significant public relevance because of the nature of its business, its size or the number of clients. A public-interest entity shall be:
1) public company whose securities are traded in the regulated market of the Republic of Lithuania and/or any other member state;
4) investment company with variable capital and closed-end investment fund whose property management has not been transferred to management firm;
25. Other terms used in this Law are understood within the meaning they are used in the Law of the Republic of Lithuania on Accounting, the Law of the Republic of Lithuania on Financial Statements of Entities and the Law of the Republic of Lithuania on Consolidated Financial Statements of Groups of Entities.
Article 3. Purposes of Audit
The purposes of audit shall be to establish whether:
1) the financial statements in all material aspects present fairly the entity’s financial position of the audited entity, its performance and cash flows under the legislation regulating the accounting and drawing up of financial statements;
Article 4. Principles of Professional Ethics
1. Audit firms and auditors when carrying out the audit must abide by the principles set in the Code of Ethics for Professional Accountants.
2. Regardless of the principles specified in the Code which is set in paragraph 1 of this Article, audit firms and auditors shall abide by these main principles of professional ethics:
1) independence and objectivity – the auditor and audit firm may carry out audit only being independent from the audited entity and not taking part in the decision making in that entity;
2) confidentiality and professional secrecy – the auditor and audit firm must conceal the information entrusted by the contractor and/or the audited entity and not to divulge it to third persons except in cases established by this law and other legal acts, not to use the contractor’s and/or audited entity’s information received during the auditing for meeting the interests of the audit firm and/or third persons;
3) integrity – the opinion of the auditor and the audited entity shall not be subject to the opinion of others;
4) professional competence and due diligence – the auditor must have the required knowledge and skills, devote sufficient time for the audit to be carried out professionally;
Article 5. Application of the Principles of Independence and Objectivity
1. The auditor and/or the audit firm may not carry out the audit, if the auditor, the audit firm or the audit network to which the audit firm or the audited firm belongs is directly or indirectly related and this could impair the independence of the auditor and/or the audit firm.
2. The auditor shall be considered independent from the audited entity if:
1) he is not linked by family, close relations or related by marriage with the participants in the audited entity, its head, chief accountant (accountant) or with any other employees of the audited entity, who may have a direct and material influence on the drawing up of financial statements, on the members of the entity’s board and/or supervisory board, if it is formed;
2) he is not an employee of the entity subject to audit and, if he were an employee of the audited entity who may have a direct and material influence on the preparation of the financial statements, at least 3 years have lapsed from the end of employment relations;
3) he is not a participant of the audited entity and, if he was a participant of the audited entity, at least 3 years have lapsed from the day of transferring shares or parts of shares;
4) he has not provided to the audited entity the services of asset and business valuation, book keeping and drawing up of financial statements, the services of valuation of reorganisation of public and private companies, did not perform internal audit services and if provided/performed, not less than one year has lapsed from the moment of their provision or performance;
3. The audit firm shall be deemed independent from the audited entity if:
2) the audit firm, participants in the audit firm, its head, members of the firm’s board and/or supervisory board, if it is formed, shall not be participants in the audited entity;
3) participants in the audit firm, its head, members of the head, the firm’s board and/or supervisory board, if they are formed, are not linked by family, close relations or related by marriage with the participants in the audited entity;
4) it did not provide to the audited entity the services of asset and business valuation, book keeping and drawing up of financial statements, the services of valuation of reorganisation of public and private companies, did not perform internal audit services, and if provided/performed , not less than one year has lapsed from the moment of their provision or performance;
5) the audit firm does not receive for its audit services the amount of income from the audited entity that it could affect its independence;
4. The auditor may not carry out the audit of one and the same entity for longer than 7 consecutive financial years and, in case of auditing a public interest entity, for longer than 5 consecutive years, unless other laws establish otherwise. After the expiration of the said period the auditor may not carry out the audit of the entity for 2 years and, if the audited entity is a public interest entity, for 2 years he may not become its head or board member. The provisions of this paragraph shall also apply to the auditor/auditors who undersigned the auditor’s report.
5. When the audit of consolidated financial statements of a group of entities is carried out, the provisions of paragraph 4 of this Article shall be applied to the auditor who carried out the audit of consolidated financial statements of a group of entities and to the auditor/auditors, who carried out the audit of financial statements of material subsidiaries.
6. The head of the audit firm and/or audit network to which it belongs, members of the board and/or supervisory board shall not affect performance of the audit in such a way that would affect the auditor’s independence and objectivity.
7. In the working documents the auditor and/or the audit firm shall specify significant risk to auditor’s and/or audit firm’s independence and the measures the auditor and/or the audit firm has to take in order to avoid the risks. If the applied measures do not help to avoid the risk to independence, the auditor and/or the audit firm may not carry out the audit.
8. The Authority of Audit and Accounting shall establish the procedure for committing to independence, applied to inspectors, Authority of Audit and Accounting staff and members of the Audit Supervision Committee. The Chamber of Auditors, having agreed in writing with the Authority of Audit and Accounting , shall establish the procedure of committing to the independence, applied to members of the Chamber of Auditors and personnel, appointed responsible for the implementation of audit quality assurance and for other persons invoked by the Chamber of Auditors to carry out that function..
Article 6. Application of the Principle of Confidentiality and Professional Secrecy
1. The Authority of Audit and Accounting shall establish the procedure for observing the obligation of confidentiality and professional secrecy applied to controllers, personnel of the Authority of Audit and Accounting, members of the Audit Supervision Committee and experts referred to in subparagraph 5 of paragraph 5 of Article 35 and paragraph 7 of Article 36 of this Law. The Chamber of Auditors, having adjusted in writing with the Authority of Audit and Accounting, shall establish the procedure for adhering to confidentiality and professional secrecy, applied to the members and staff of the Chamber of Auditors who are appointed responsible for ensuring the quality of audit and other person invoked for carrying out the function by the Chamber of Auditors.
2. When, upon termination of the contract for carrying out the audit with one audit firm a contract is concluded for the caring out of the audit with the other audit firm, and for that reason the auditor/audit firm is replaced by another auditor/audit firm, the auditor/audit firm which carried the audit must submit to the auditor/audit firm which takes over the carrying out of audit all the information required for carrying out the audit on audited entity.
Article 7. Audit Fee for Carrying out the Audit
1. The scope of the audit fee must ensure that the audit would be carried out according to principles of professional ethics and requirements of international auditing standards.
2. The audit fee must be set in the audit contract and no contingent conditions which may affect the amount of the fee for the carrying out of the audit may be set in the contract.
Article 8. Requirements for Granting the Title of the Auditor
The person shall be granted the title of the auditor if he:
4) has worked in the audit firm and/or in the audit firm of a member state for at least 3 years as an auditor’s assistant and if, at the time of submitting the application to be granted the title of the auditor, the person was no longer working in the audit firm, the work in the audit firm as auditor’s assistant was completed at least 3 years before submission of the application;
Article 9. Good Repute
The person shall be deemed to be of good repute:
1) if the person concerned has not been convicted of an offence or if the conviction has been expunged or vacated according to the procedure established by law, also if he has not been convicted of a criminal offence;
3) he has been dismissed by his undertaking, entity or organisation from the position of internal auditor, inspector, accountant, auditor’s assistant for professional misconduct or career development violation, from civil service position upon appointing official penalty and, if he was dismissed, not less than 3 years have lapsed from his dismissal;
4) he was not a head of the audit firm which was deprived of the audit firm certificate and was withdrawn of the list of audit firms at the time when the circumstances arose for which the audit firm was deprived of the audit certificate and was withdrawn of the list of the audit firms, and if he was head of the firm – not less than 3 years have lapsed from the deprivation of certificate of the audit firm and its withdrawal from the list of audit firms. The subparagraph shall not be applied if the audit firm was withdrawn of the list of audit firms on the grounds set in subparagraphs 1, 2 and 3 of paragraph 1 of Article 22 of this Law;
Article 10. Practice of the Auditor’s Assistant in the Audit Firm
1. The auditor’s assistant shall work (i.e. shall undergo practical training) in the audit firm and/or in the audit firm of the member state under the guidance of the auditor and/or of the auditor of the member state, having an at least 3 years’ period of service as an auditor, has given his consent subject to written confirmation on management the work of the auditor’s assistant and there are no disciplinary measures that may apply before his appointment to manage the work of the auditor’s assistant. If, following his appointment to manage the work of the auditor’s assistant, the auditor is imposed a disciplinary penalty, the Chamber of Auditors shall immediately appoint another auditor who meets the requirements for managing the work of auditor’s assistant.
3. The procedure for entering in the list of auditor’s assistants and withdrawal from it, the management of the list of auditor’s assistants, the procedure of training for auditor’s assistants, the procedure of appointment/dismissal of the auditor as the auditor’s assistant’s practice guide, calculation of the time of practice of the auditor’s assistants, the procedure of the auditor’s assistants’ practice evaluation, the training of the auditor’s assistants and other requirements for carrying out the practice of the auditor’s assistants shall be set by the Chamber of Auditors, upon the adjustment thereof in writing with the Authority of Audit and Accounting.
Article 11. The Auditor’s Qualification Examinations
1. The auditor’s qualification examinations shall be held by the Chamber of Auditors at least once per calendar year.
2. The Chamber of Auditors, upon adjustment thereof with the Authority of Audit and Accounting, shall:
3. The Chamber of Auditors shall appraise the application submitted by the person seeking to be granted the title of the auditor and shall decide on whether or not to allow the person to take the auditors’ qualification examinations.
4. The Committee of the Auditors’ Qualification Examinations (hereinafter – the Examining Committee) shall be comprised of 7 members, one of them shall be the Chairman of the Board. Law, taxation, accounting and/or finance experts and auditors shall be appointed as members of the Examining Committee). 4 members, from among them also the Chairman, shall be appointed by the Ministry of Finance of the Republic of Lithuania (hereinafter referred to as the Ministry of Finance), 3 members - auditors – by the Chamber of Auditors. A member of the Examining Committee shall be appointed for 3 years. The same persons may be appointed as members of the Examining Committee) for no more than 2 consecutive terms of office. The composition of the Examining Committee) and the rules of procedure shall be approved by the Authority of Audit and Accounting. The authority which appointed the member of the Examining Committee shall be entitled to recall him before the expiry of his term of office. A member of the Examining Committee) may resign before the expiry of his term of office.
5. The Examining Committee shall approve:
6. The list of the auditor’s qualification examinations, where the areas listed in paragraph 8 of this Article are to be included, shall be approved by the Authority of Audit and Accounting on the recommendation of the Chamber of Auditors. The tasks of the auditor’s qualification examinations according to the programmes approved by the Examining Committee shall be prepared by the Chamber of Auditors.
7. The auditor’s qualification examinations must be organised in such a way, that the persons who pass the examinations should have theoretical knowledge necessary for carrying out the audit and would be able to apply the knowledge when carrying out the audit.
8. The text of theoretical knowledge included in the examination must cover the following subjects in particular:
9. In addition to theoretical knowledge in the areas listed in paragraph 8 of this Article, during the auditors’ qualification examinations in so far as they are relevant to auditing the knowledge in these areas shall be checked:
10. The examination of the knowledge of the person seeking to be granted the title of the auditor in the areas listed in subparagraphs 5 to 8 of paragraph 9 of this Article (all or any one of them) may be not examined if the person has passed the examinations in theoretical knowledge in these areas (the examination has been evaluated “excellent”, “very good”, “good” or “mediocre”) according to the areas of university study programme. In such case the person seeking to be granted the title of the auditor shall submit to the Chamber of Auditors the application to abstain from checking of the knowledge in the areas listed in subparagraphs 5 to 8 of paragraph 9 of this Article and evidence that programmes of theoretical knowledge of these areas in schools of high education meet the criteria of relevant programmes approved by the Examining Committee as well as evidence of the passed examinations. The decision to abstain from checking of the knowledge in the areas listed in subparagraphs 5 to 8 of paragraph 9 of this Article shall be taken by the Chamber of Auditors.
11. A person who fails to pass the auditor’s qualification examinations may repeatedly attempt to pass such examinations only after 6 months. The number of repeated attempts is not limited.
12. The appeals of the persons who fail to pass the auditor’s qualification examinations and disagree with the evaluation of the auditor’s qualification examinations approved by the Examining Committee as well as the complaints about the refusal of the Chamber of Auditors to abstain from the checking of the knowledge in the areas listed in subparagraphs 5 to 8 of paragraph 9 of this Article shall be considered by the Authority of Audit and Accounting.
Article12. The Procedure for Granting the Title of the Auditor
1. The person seeking to be granted the title of the auditor shall submit to the Chamber of Auditors an application to be granted the title of the auditor. The application shall contain the personal data (name, surname, identification number, place of residence), also the response to the question whether or not there are the reasons specified in this Law precluding the granting of the title of the auditor.
2. The Chamber of Auditors, having received the application and all documents demonstrating compliance of the person seeking to be granted the title of the auditor with the requirements specified in Article 8 of this Law, shall no later than within 20 working days from the filing of all documents take a decision to grant the title of the auditor and shall notify in writing of the decision the person seeking to be granted the title of the auditor and of the possibility to take the oath.
3. Before becoming the auditor, the person shall take the following oath to the person authorised by the Chamber of Auditors: “ I, the auditor (name, surname), swear to comply with the Constitution of the Republic of Lithuania, its laws and other legal acts, honestly and in full independence fulfil the duties of the auditor, be bound by the obligation of professional secrecy, continue further training, comply with the Code of Ethics of Professional Accountants and the Statute of the Chamber of Auditors.“.
4. The person who swore the oath of the auditor and put his signature under the text of the oath shall be granted the title of the auditor, provided with the auditor’s certificate and included in the List of Auditors indicated in Article 23 of this Law. The procedure for issuing the auditor’s certificate, the suspension of its validity, renewal of its validity and its cancellation shall be set by the Chamber of Auditors upon coordination thereof in writing with the Authority of Audit and Accounting. The Chamber of Auditors shall notify the Authority of Audit and Accounting of the issued auditor’s certificate according to the procedure coordinated in writing with it.
Article13. Suspension and Renewal of Validity of the Auditor’s Certificate
1. The Chamber of Auditors shall by its decision suspend the validity of the auditor’s certificate :
1) in the case prescribed by subparagraph 2 of paragraph 1 of Article39 of this Law – until the repeated passing of the specified examination/examinations;
2) on the written application of the auditor in the case specified in paragraph 6 of Article 43 of this Law;
3) if the auditor fails to submit within the term indicated in the notice of the intended suspension of validity of the auditor’s certificate the data required for the management of the list of auditors established in Article 23 of this Law and/or it proves that the provided data are not correct;
4) the auditor did not provide within the term set in the notice of the intended suspension of validity of the auditor’s certificate conditions for review of quality of the carried out audit established in Article 34 of this Law and/or the investigation of the carried out audit prescribed by Article 36 of this Law.
2. The suspension of validity of the auditor’s certificate shall preclude the auditor from carrying out audit during the suspension of validity of the certificate, but the duty set in paragraph 1 of Article 28 of this Law to develop professional qualification shall apply.
3. Having suspended the validity of the auditor’s certificate on any ground specified in subparagraphs 3 and 4 of paragraph 1 of this Article the Chamber of Auditors shall set the term, on the ground indicated in subparagraph 4- coordinated with the of the Authority of Audit and Accounting, for submitting the required and/or correct data or for creating the conditions.
4. The validity of the auditor’s certificate shall be renewed on the decision of the Chamber of Auditors after the elimination of the reasons for the suspension of validity of the auditor’s certificate and after the filing of the application to renew the validity of the suspended auditor’s certificate.
5. The auditor shall be notified in writing of the decisions of the Chamber of Auditors to suspend, renew the validity of the auditor’s certificate no later than within 5 working days from the day of adoption of the decision. The Chamber of Auditors shall notify the Authority of Audit and Accounting according to the procedure coordinated with it in writing of the suspended, renewed validity of the auditor’s certificate.
Article 14. Deprivation of the Title of the Auditor and Invalidation of the Auditor’s Certificate
The auditor shall be deprived of the title of the auditor on the decision of the Chamber of Auditors:
2) in case the auditor repeatedly fails to pass the examination/examinations specified in subparagraph 2 of paragraph 1 of Article 34 of this Law for longer than 3 years of the day of giving such instruction;
3) if the auditor failed to submit to the Chamber of Auditors within the term set in paragraph 3 of Article 13 correct data and/or the data required for the management of the list of auditors established in Article 23 of this Law;
4) if the auditor did not provide within the term set in paragraph 3 of Article 13 of this Law the conditions for review of quality of the carried out audit established in Article34 of this Law and/or the investigation of the carried out audit prescribed by Article 36 of this Law;
6) if, after granting the title of the auditor, circumstances come to light which would be detrimental to the granting of the title of the auditor;
2. After the auditor is deprived of title of the auditor, the validity of the auditor’s certificate shall be cancelled and the auditor shall be withdrawn from the list of auditors. The auditor shall be notified in writing of the decision of the Chamber of Auditors to cancel the validity of the auditor’s certificate no later than within 5 working days from the date of adoption of this decision. The Chamber of Auditors shall notify the Authority of Audit and Accounting of the validity of the cancelled auditor’s certificate following a procedure harmonized with it.
3. After the auditor is deprived of the title of the auditor in the cases established in paragraph 1 of this Article, except subparagraph 5, the person may repeatedly attempt to pass the qualification examinations referred to in Article 11 of this Law or have their knowledge tested according to the examinations specified in Article15 of this Law no earlier than after 3 years.
4. If, in the cases specified in paragraph 1 of this Article, the persons entitled by the competent authority/authorities of other member states to carry out the audit are deprived of the title of the auditor, the Authority of Audit and Accounting shall notify thereof the competent authority/authorities which entitled the person to carry out the audit and shall indicate the reason for which the person was deprived of the auditor’s title.
Article 15. Granting of the Title of the Auditor to Member State Auditors, Suspension of Validity of the Auditor’s Certificate, Deprivation of the Title of the Auditor and Cancelling the Validity of the Auditor’s Certificate
1. The Authority of Audit and Accounting shall establish the procedure for granting the title of the auditor to the auditors of member states which are entitled to carry out audit by the competent authority/authorities of the member state/member states.
2. The title of the auditor shall be granted to member state auditors who have been granted the right to carry out audit by competent authorities of the member states on the decision of the Authority of Audit and Accounting upon submission of the documents issued by the competent authority of the member state which was the first to grant the right to carry out audit, whereby the right to carry out audit in a member state is demonstrated and whereby it is demonstrated that the right has not been suspended or cancelled, and after they pass the knowledge tests.
3. The aptitude tests shall be taken according to the established procedure in State language in the areas specified in subparagraphs 2 and 8 of paragraph 8 and subparagraphs 1 to 4 of paragraph 9 of Article11 of this Law.
4. The validity of the auditor’s certificate shall be suspended for a member-state auditor or he shall be deprived of the title of the auditor and the validity of the auditor’s certificate shall be cancelled on the same grounds and according to the same procedure which is provided for auditors in Articles 13 and 14 of this Law, also in case the member state/states’ competent authority/authority whereof have granted the right to carry out the audit, suspends or cancels the right. The decisions on suspending or deprivation of the title of the auditor shall be taken by the Authority of Audit and Accounting.
Article16. Granting the Title of the Auditor to Auditors of Non-Member Countries, Suspension of Validity of the Auditor’s Certificate, Deprivation of the Title of the Auditor and Cancelling the Auditor’s Certificate
1. All the requirements set in Article15 of this Law shall be applied to the auditor of a non-member country, including the requirement to demonstrate that he satisfies the requirements set in subparagraphs 1 to 4 of Article 8 of this Law, has passed qualification examinations in the areas specified in paragraph 8 of Article11 of this Law and has appropriate theoretical knowledge in the areas provided in paragraph 9 of Article 11 of this Law.
2. The validity of the auditor’s certificate for the auditors of non-member countries shall be suspended or he shall be deprived of the auditor’s title and the validity of the auditor’s certificate shall be cancelled on the same grounds and according to the same procedure provided for the auditors in Articles 13 and 14 of this Law, also in case the competent authority of a non-member country which granted the right to carry out the audit suspends or cancels that right. The decisions on the suspension or deprivation of the auditor’s title shall be taken by the Authority of Audit and Accounting.
CHAPTER FOUR
ENTERING THE AUDIT FIRM IN THE LIST OF AUDIT FIRMS
Article17. Procedure for Entering the Audit Firm in the List of Audit Firms
1. The firm may start its auditing activities only after having been entered in the list of audit firms on the decision of the Chamber of Auditors. Entered in the list of audit firms may be the entity registered in the Republic of Lithuania and audit firms of the member states which have established branches in the Republic of Lithuania and other audit firms of member states which wish to carry out audits according to the procedure established by legal acts of the Republic of Lithuania.
2. In order to be entered in the list of audit firms, the firm shall submit the following documents:
1) an application containing the following particulars: name, registered number, names and surnames of the registered office, telephone, full names and addresses of partners, the voting rights of each partner, the numbers of certificates which show the granting of the auditor’s name and other particulars established in paragraph 2 of Article 24 of this Law which are necessary for entering in the list of audit firms. When registering the audit firm of a member state which has a branch in the Republic of Lithuania, the data concerning the member state auditors and the branch shall be additionally submitted;
2) a copy of the statutes or other document of incorporation specifying the firm’s objectives. When registering an audit firm of a member state, which has a branch in the Republic of Lithuania, a copy of the statutes of the branch and the data of the registration of the audit firm in the member state shall be additionally submitted;
3. Upon receipt of all the documents referred to in paragraph 2 of this Article and having ascertained that the firm corresponds to the requirements set in Articles 18, 19 and 20 of this Law, the Chamber of Auditors shall adopt a decision to enter the audit firm in the list of audit firms within 20 working days from the day of submission of documents referred to in paragraph 2 of this Article. The Chamber of Auditors shall dispatch to the firm seeking to be entered in the list of audit firms a copy of the adopted decision not later than within 5 working days from the day of adoption of the decision. The Chamber of Auditors shall notify the Authority of Audit and Accounting of the adopted decision according to the procedure coordinated with it in writing .
4. Having adopted the decision to enter the firm in the list of audit firms, the Chamber of Auditors shall within 2 working days enter the firm in the list of audit firms. Having entered the firm in the list of audit firms the Chamber of Auditors shall provide the firm with a certificate confirming it.
Article 18. Audit Firms
1.Audit Firms may operate in one of the two legal forms:
3. At least 3/4 of the general partners of the general partnership and limited partnership must be auditors, auditors of member states, audit firms and/or audit firms of a member state.
4. Shareholders of an audit firm which operates as a private company may include:
5. Shareholders of the private company specified in subparagraphs 1 and 2 of Paragraph 4 hereof must hold at least 3/4 of all voting shares.
7. Where the Management Board is established in the private company, over 1/2 of the members of the Board must be auditors and/or auditors of member states. If the Board is formed of two members, one of them must be an auditor or an auditor of member states.
Article 19. Good Repute of Audit Firms
Article 20. Civil Liability Insurance of Firms of Auditors
1. The audit firm must insure its civil liability by a general and/or compulsory civil liability insurance.
2. The minimum annual sum of general civil liability insurance must amount to at least LTL 100,000. General civil liability insurance object shall be civil liability of the audit firm for the damage caused to the contractor and/or third persons when carrying out audit in other authority, organizations or firms, which are not specified in paragraphs 3 and 4 of this Article. The contract of insurance shall be concluded according to the procedure laid down in the Law of the Republic of Lithuania on Insurance.
3. The minimum annual sum of compulsory civil liability insurance must amount to at least LTL 100,000 per one insured event. The object of compulsory civil liability insurance shall be the firm’s civil liability insurance for the damage which would have been caused to the contractor and/or third persons when carrying audit in the firms in which audit must be carried out according to the procedure laid down by legal acts, except for the audit of public interest entities. The contract of insurance shall be concluded according to the procedure established by the rules of compulsory civil liability insurance of audit firms. The rules shall be drawn up and, after their coordination with the Authority of Audit and Accounting, shall be approved by the Insurance Supervisory Commission of the Republic of Lithuania.
4. When the object of compulsory civil liability insurance is civil liability of the audit firm for damage which would have been caused to the contractor and/or third persons when carrying out audits in public interest entities, the minimum annual sum of civil liability insurance must amount to at least LTL 200,000 per one insured event. The contract of insurance shall be concluded according to the procedure laid down in the rules for compulsory civil liability insurance of audit firms. The Rules shall be drawn up and, after their coordination with the Authority of Audit and Accounting, shall be approved by the Insurance Supervisory Commission of the Republic of Lithuania.
Article 21. Suspension and Renewal of Validity of the Certificate of the Audit Firm
The Chamber of Auditors may suspend the validity of the certificate of the audit firm:
1) if the audit firm did not present to the Chamber of Auditors within the period indicated in the notice of intention to suspend the validity of the audit firm’s certificate data indicated in Article 24 of this Law and/or the information indicated in subparagraph 6 of Article 30 of this Law and/or it appeared that incorrect data has been submitted;
2) if the audit firm did not pay in a timely manner within the period indicated in the notice of intention to suspend the validity of the audit firm’s certificate the deductions of the audit firm set in paragraphs 2 and/or 3 of Article 60 of this Law;
3) if the audit firm did not allow, within the period indicated in the notice of intention to suspend the validity of the audit firm’s certificate to carry out review of audit quality established in Article34 of this Law and/or the investigation of the carried out audit prescribed by Article36 of this Law;
4) by a written application of the member/members and/or the head of the audit firm, if the shareholders of more than a half of the audit firm’s voting shares or more than a half of the audit firm’s general members agree with the suspension for the period requested by them of the validity of the certificate of the audit firm.
2. The Chamber of Auditors, having suspended the validity of the audit firm’s certificate on any ground specified in subparagraphs 1, 2 and 3 of paragraph 1 of this Article shall set the term within which the audit firm must submit the necessary and/or correct data, pay the deductions or allow to carry out quality assurance reviews or the investigations of the carried out audit. In the case specified in subparagraph 3 of paragraph 1 of this Article the set term shall be coordinated with the Authority of Audit and Accounting.
3. The audit firm, for which the validity of the audit firm’s certificate was suspended on the decision of the Chamber of Auditors as set in subparagraphs 1, 2 and 3 of paragraph 1 of this Article, upon removing the reasons for which the validity of the audit firm’s certificate was suspended, shall have the validity of the audit firm’s certificate renewed after it submits a written application to the Chamber of Auditors to renew the validity of the audit firm’s certificate. The audit firm the validity of whose audit certificate has been suspended on the decision of the Chamber of Auditors as set in subparagraph 4 of paragraph 1 of this Article, upon the submission of a written application to the Chamber of Auditors, if the shareholders of more than a half of the firm’s voting shares or more than a half of the general members consent to the renewal of validity of the audit firm’s certificate, the validity of the audit firm’s certificate shall be renewed.
4. The suspension of validity of the audit firm’s certificate shall repeal the audit firm’s right to carry out audits during the suspension of validity of the certificate. If the validity of the audit firm’s certificate is suspended when the audit firm is carrying out audit, the audit firm must immediately notify the audited entity and the contractor.
5. The audit firm shall be informed in writing of the decision of the Chamber of Auditors to suspend, renew the validity of the audit firm’s certificate not later than within 5 working days from the day of adoption of the decision. The Chamber of Auditors shall inform the Authority of Audit and Accounting of the validity of the suspended, renewed certificate of the audit firm according to the procedure coordinated with it in writing.
Article 22. Withdrawal of Audit Firms from the List of Audit Firms
1. An audit firm shall be deprived of the audit firm’s certificate and shall be withdrawn from the list of audit firms on the decision of the Chamber of Auditors:
1) if a member/members and /or head of the audit firm submits a written application to withdraw it from the list of audit firms and the holders of more than a half of the audit firm’s voting shares or more than a half of the audit firm’s general members agree with it, also if the branch of the audit firm of a member state in the Republic of Lithuania is liquidated;
5) if it failed to submit to the Chamber of Auditors within the time period set in paragraph 2 of Article 21 of this Law the required and/or correct data, as established in Article 24 of this Law, and information as prescribed in paragraph 6 of Article 30 of this Law or failed to pay the deductions as established in subparagraphs 2 and 3 of Article 60 of this Law;
2. The audit firm shall be withdrawn from the list of audit firms on the day following the day of adoption of the decision established in paragraph 1 of this Law. After the audit firm is withdrawn from the list of audit firms it shall be deprived of its certificate of audit firm. The audit firm shall be informed in writing of the decision of the Chamber of Auditors to cancel the validity of the audit firm’s certificate and to withdraw from the list of audit firms not later than within 5 working days of the adoption of the decision. The Chamber of Auditors shall notify the Authority of Audit and Accounting of the cancelled validity of the audit firm’s certificate and withdrawal from the list of audit firms according the procedure coordinated with it.
3. In the case established in subparagraph 3 of paragraph 1 of this Article the audit firm must within 3 months of the adoption of the court order to open insolvency proceedings complete, amend or terminate contracts on the carrying out of audit concluded before the day of adoption of the court order to open insolvency proceedings. In this case the audit firm shall be considered withdrawn from the list of audit firms on the next day following 3 months from the end of the period of adoption of the court order to open insolvency proceedings.
4. In the case specified in subparagraph 4, 5 and 6 of paragraph 1 of this Article the audit firm withdrawn from the list of audit firms may apply to the Chamber of Auditors for re-entry of the audit firm into the list if audit firms according to the procedure established in Article17 of this Law not earlier than after 3 years from the days of withdrawal of the audit firm from the list of audit firms. The audit firm withdrawn from the list of audit firms on other grounds may be re-entered in the list of audit firms according to the procedure established in Article17 of this Law upon withdrawal of the reasons for which it was withdrawn from the list of audit firms.
5. When in the cases established in paragraph 1 of this Article an audit firm of a member state is withdrawn from the list, the Authority of Audit and Accounting shall notify thereof the competent authority/authorities of the member state/states, which entitled the firm to carry out audits and indicate the reasons why it was withdrawn from the list of audit firms.
Article 23. List of Auditors
1. The Chamber of Auditors shall enter the persons granted the title of the auditor and the auditors of a non-member country specified in paragraph 5 of this Article in the list of auditors.
2. Data about the auditor must be gathered in the list of auditors:
2) name/names of the audit firm/firms and other firm/firms in which the auditor is employed, number/numbers of the audit firm’s certificate, address of the registered office, telephone, fax (if available) number and address of the internet website (if available);
3) if the auditor is a participant in an audit firm/firms – the name/names of the audit firm/firms, the number of the certificate of the audit firm/firms, the address of the registered office, telephone, fax (if available) number and address of the internet website (if available);
4) if the validity of the auditor’s certificate is suspended in the cases established in paragraph 1 of Article13 of this Law – the beginning of suspension of validity of the certificate and the number and date of the document whereby the decision of the Chamber of Auditors to suspend the validity of the auditor’s certificate is formulated;
5) if the competent authorities of the member state or a country which is not a member country registered the person as a member state’s auditor or as an auditor of a non-member country – the name/names of the registering authority/authorities, the registration number/numbers and any other information about the registration;
3. The auditor must inform the Chamber of Auditors of the changes of the data submitted in paragraph 2 of this Article, except for the information indicated in subparagraphs 4 and 6 of paragraph 2 of this Article immediately, but not later than within 10 working days of the day of change. The information submitted by the auditor must be signed by him personally or according to the procedure established by the Law of the Republic of Lithuania on Electronic Signature.
4. Upon any change in the data the Chamber of Auditors shall immediately change the data of the list of auditors.
5. The non-member country auditors having carried out an audit of the financial statements of an undertaking registered in a non-member country, which securities are offered publicly or admitted to trading on a regulated market in the Republic of Lithuania, are provided according to the procedure established by the legal acts shall, before submitting the financial statements and the auditor’s report, apply to the Authority of Audit and Accounting for their entry in the list of auditors. The auditors of a non-member country shall be entered in the list of auditors as non-member country auditors according to the procedure established by the Government of the Republic of Lithuania or the authority authorised by it.
Article 24. List of Audit Firms
1. The Chamber of Auditors shall enter into the list of audit firms the firms which have been provided with the certificate of the audit firm and the audit firms of non-member country which are indicated in paragraph 5 of this Article.
2. Data about the audit firm must be gathered in the list of audit firms:
1) name of the firm, address of the registered office, registration number, number of certificate of the audit firm;
3) telephone, fax (if available) number and address of the internet website (if available) and other contact information;
4) names, surnames and numbers of auditor’s certificates of auditors employed in the audit firm, separately identifying the auditors and other employees of the audit firm, who are participants in the audit firm (hereinafter referred to as partners), when the employees of the audit firm are auditors;
5) the names, surnames and addresses of the participants, and where the owners or participants are legal persons – their names, code numbers and addresses of the registered office;
6) names, surnames and addresses of management and supervisory bodies (if they are formed) and if members of the supervisory body are legal persons – their names, codes and addresses of the registered offices;
7) if the audit firm belongs to an audit network – the names of other firms belonging to the audit network, their addresses or references where such information may be received;
9) if the validity of the audit firm representation is suspended in the cases established in subparagraph 1 of Article 21 of this Law – the beginning of suspension of validity of the certificate and the number and date of the document whereby the decision of the Chamber of Auditors to suspend the validity of the certificate of audit firm is formulated;
10) if the competent authority of another member state or another non-member country registered as the audit firm of another member state or as the audit firm of another non-member country - all information related thereto, including the name of the registering authority;
3. The audit firm must notify the Chamber of Auditors of the changes in the data presented in paragraph 2 of this Article immediately, except the information specified in subparagraph 9 and 11 of paragraph 2 of this Article, but not later than within 10 working days after the day of their change. The information submitted by the audit firm must be signed personally by the owner or participants and/or the head of the audit firm according to the procedure laid down by the Law of the Republic of Lithuania on Electronic Signature.
4. Upon any change in the data the Chamber of Auditors shall immediately change the data of the list of audit firms.
5. The non-member country audit firms having carried out an audit of the financial statements of an undertaking registered in a non-member country, which securities are offered publicly or admitted to trading on a regulated market in the Republic of Lithuania, are provided according to the procedure established by the legal acts shall, before submitting the financial statements and the auditor’s report, apply to the Authority of Audit and Accounting for their entry in the list of audit firms. The audit firms of a non-member country shall be entered in the list of audit firms of a non-member country according to the procedure established by the Government of the Republic of Lithuania or the authority authorised by it.
Article 25. Publishing the Lists of Auditors and Audit Firms
1. The lists of auditors and audit firms shall be continuously modified and published in the website of the Chamber of Auditors according to the procedure established by legal acts..
Article 26. Keeping the Data of the Lists of Auditors and Audit Firms
The data presented in the lists of auditors and audit firms shall be kept electronically according to the procedure established by the Law of the Republic of Lithuania on Documents and Archives.
CHAPTER SIX
ACTIVITIES OF AUDITORS AND AUDIT FIRMS, THEIR RIGHTS, DUTIES AND LIABILITY. AUDITOR’S REPORT
Article 27. Rights, Duties and Liability of Auditors when Carrying the Audit
1. Only the auditor may carry out the audit and only if he is the owner of the individual audit firm, general partner of the general partnership or limited partnership or is employed in the audit firm.
2. The auditor shall have the following rights when carrying out the audit:
1) making use of his professional knowledge, skills and taking into account the methodology of carrying out the audit, choose the procedures of carrying out the audit;
2) obtain from the audited entity the necessary documents and/or their copies for carrying out the audit and make use of all collected information ;
3) demand from the entity being audited to provide an explanations, to perform other required acts necessary for carrying out the audit;
3. The auditor must:
1) when carrying out an audit comply with laws and other legal acts, the International Auditing Standards;
2) abide by principles of professional ethics laid down in the Code of Ethics of Professional Accountants;
Article 28. Other Duties of the Auditor
1. The auditor must continually develop his professional qualification in the auditors professional courses (each three consecutive years hear not less than 120 hours of courses or attend equivalent courses of development the professional qualifications).
2. The requirements of qualification’s development courses of auditors (thematic division of mandatory hours, etc.) shall be established by the Chamber of Auditors in coordination thereof with the Authority of Audit and Accounting. The qualification’s development courses of auditors must be organized so as to ensure for the auditors the strengthening of theoretical knowledge and its application in practice according to the programmes prepared and agreed in writing with the Authority of Audit and Accounting.
3. The Authority of Audit and Accounting shall monitor compliance with the requirements laid down in paragraph 1 of this Article. The auditor who developed his professional qualifications not in the courses organised by the Chamber of Auditors or attended the equivalent courses of development of professional qualifications shall apply to the Chamber of Auditors for the courses, if they correspond to the programmes specified in paragraph 2 of this Article, be taken into account of the hours of courses established in paragraph 1 of this Article. In case the Chamber of Auditors adopts a negative decision, the auditor shall have the right to submit a complaint to the Authority of Audit and Accounting, the decision adopted by whom shall be binding to the Chamber of Auditors.
Article 29. Activities, Rights and Liabilities of Audit Firms when Carrying out the Audit
1. The audit firms shall have the right to engage in the following activities:
4. The liability of audit firm when carrying out an audit shall be established in a written contract concluded with the contractor. The audit firm shall be liable for the carrying out of the audit and the auditor’s report according to the procedure established by legal acts and the signed audit contract.
5. If the audit firm audits consolidated financial statements, it shall be liable for carrying out the audit and the auditor’s report prepared upon carrying out the audit of the consolidated financial statements.
6. The audit firm must compensate according to the procedure established by legal acts and the signed audit contract for the losses incurred through the fault of the audit firm by the contractor and/or third persons.
Article 30. Duties of Audit Firms
The audit firm, when carrying out the audit, must:
1) upon concluding a contract for audit, appoint an auditor responsible for the carrying out the audit and notify on it the contractor thereof;
3) formulating audit results in state and municipal undertakings, in public and private companies in which the shares owned by the state or municipality carry at the general meeting over ½ of votes, together with the auditor’s report must prepare the audit report, the requirements for which shall be set by the Chamber of Auditors on coordination with the Authority of Audit and Accounting. Together with the auditor’s report it shall be submitted to the audited entity and the contractor.
4) if the audit firm audits the consolidated financial statements, it must review the work of other auditors, audit firms, member state auditors and/or member state audit firms, auditors of non-member countries and/or audit firms of non-member countries carried out when auditing financial statements of subsidiary undertakings belonging to a group of entities connected with the audit of consolidated statements and formulate the review results in documents;
5) if, in the case set in subparagraph 4 of this Article, when the financial statements of subsidiaries are audited by auditor/auditors or audit firm/firms from a non-member country and no cooperation referred to in Article 49 of this Law has been established with the competent authority of that non-member country, the group auditors shall be responsible for ensuring proper delivery when requested to the Authority of Audit and Accounting of the documentation of the audit work performed by a non-member country auditor/auditors or audit firm/firms, including the working documents relevant for the group audit. To ensure such delivery, the group auditor of consolidated financial statements shall retain a copy of such documentation, or alternatively agree with the non-member country auditor/auditors or audit firm/firms his proper and unrestricted access upon request or take any other appropriate action. If legal or other impediments prevent audit working documents from being passed from non-member country to the group auditor, the documentation retained by the group auditor which audited consolidated financial statements shall include evidence that he has undertaken the appropriate procedures in order to gain access to the audit documentation, and in the case of impediments other than legal ones arising from non-member country legislation, evidence supporting such impediment;
6) submit to the Authority of Audit and Accounting and the Chamber of Auditors the information established in this Article. Information about consolidated net sales, separately indicating the income specified in paragraph 1 of Article 29, shall be submitted to the Chamber of Auditors within 30 calendar days of the completion of the financial year of the audit firm, and the information about the of the audit contract, as prescribed by paragraph 2 of Article 6 of this Law, of the Authority of Audit and Accounting within 10 working days of the day of termination of the audit contract, at the same time indicating the reasons for the termination of the audit contract;
Article 31. Relationship between the Audit Firm and the Contractor
1. The contractor shall at his choice or by tendering procedure choose the audit firm, if other legal acts do not establish otherwise.
Article 32. Working documents
2. The audit firm may not transmit the working documents to third persons without the consent of the audited entity and the contractor except for the cases established in this Law.
3. The Authority of Audit and Accounting, exercising the functions established in subparagraphs 6, 7 and 8 of paragraph 2 of Article 44 of this Law, may temporarily withdraw from the audit firm the working documents for up to 60 calendar days, transfer them to the competent authority of the member state or non-member country for carrying out public oversight of auditors and audit firms having written the document of seizure of working documents. The Authority of Audit and Accounting may make copies of working documents. In cases the Authority of Audit and Accounting seizes the working documents temporarily or transfers copies of working documents to the competent authority of a member state and/or non-member country, it must notify the audit firm and the audited entity thereof .
Article 33. The Auditor’s Report
1. The auditor’s report shall comprise:
1) preface. Indicated in it shall be the subject of audit – financial statements or consolidated financial statements and legal acts on the basis whereof the financial statements or consolidated financial statements were prepared;
2) descriptive part of the audit. Indicated therein shall be the standards according to which the audit has been carried out;
3) the auditor’s opinion. It is indicated therein whether or not the financial statements or consolidated financial statements in all material cases presents fairly the financial position, performance and cash flows of each undertaking or group of undertakings according to the requirements of legal acts on book keeping and financial reporting.. The auditor’s opinion may be positive, qualified or negative or, if the auditor may not state his opinion, disclaimer of opinion;
4) reference to issues. Issues to which the auditor pay attention, but which shall not change his opinion;
5) view whether the financial data submitted in the annual report of the undertaking (consolidated annual report of the undertaking) corresponds to the data of annual financial statements (annual consolidated financial statements) if the audited entity is a public company, private company, general partnership or limited partnership, in which all general members are public companies or private companies or the view whether or not the data submitted in the entity’s annual report corresponds to the data of annual financial statements, if the audited entity must submit annual report according to the procedure established by the legal acts regulating its activities or prepares the annual report at its discretion.
CHAPTER SEVEN
QUALITY ASSURANCE AND INVESTIGATION OF THE AUDIT CARRIED OUT BY AUDITORS AND AUDIT FIRMS
Article 34.Quality Assurance of the Audit Carried out by Auditors and Audit Firms
1. Quality assurance of the audit carried out by auditors and audit firms shall be implemented by the Authority of Audit and Accounting together with the Chamber of Auditors. The Chamber of Auditors, complying with the requirements of this Chapter, shall establish the implementation in the Chamber of Auditors of the procedure for the quality assurance of the carried out audit and coordinate it with the Authority of Audit and Accounting. The Authority of Audit and Accounting must be 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..
2. In order to assure quality of audit carried out by auditors and audit firms, the Chamber of Auditors shall 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 shall be reviewed to the extent it concerns the audit carried out according to the legal acts of the Republic of Lithuania. The Chamber of Auditors shall be responsible for the actual operations of yearly quality review plans of audit carried out by auditors and audit firms, indicated in subparagraph 1 of paragraph 8 of this Article.
3. Quality reviews of audit carried out by auditors and audit firms which carry out the audit of public interest entities must be 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 shall be performed not later than after 3 years. Quality reviews of audit carried out by non-member country auditors specified in paragraph 5 of Article 23 of this Law and by audit-firms specified in paragraph 5 of Article 24 of this Law shall be performed according to the procedure established by the Government of the Republic of Lithuania or the authority authorised by it.
4. Quality reviews of the carried out audit shall be performed by the controllers indicated in Article 35 of this Law.
5. The quality of the audit shall be assured by organizing that it should be independent of the auditor and the audit firm, the quality of audit whereof is reviewed.
6. The Authority of Audit and Accounting shall:
2) on the recommendation of the Chamber of Auditors approve the methodology of carried out audit quality review, identifying the cases when quality reviews of the audit’s of consolidated financial statements are carried out by the auditor and/or audit firm;
3) on the recommendation of the Chamber of Auditors approve and revoke the controllers, approve the annual plans of audit carried out by the auditor and/or audit firm quality reviews, check the actual operations of quality review plans;
4) establish the procedure for controller selection, preparation and qualification development procedure;
7. The Chamber of Auditors, when implementing the audit quality assurance:
1) shall draw up and submit to the Authority of Audit and Accounting for approval plans of carried out audit quality reviews (indicating the auditors and audit firms, the audit quality reviews whereof are intended to be carried out, the controllers who shall perform the audit quality reviews of audit carried out by certain auditors and audit firms), submit to the Authority of Audit and Accounting the review plans for the checking of the actual operations thereof ;
2) choose the candidatures of controllers and submit to the Authority of Audit and Accounting for approval,
5) where during the review weaknesses were identified in the quality of carrying out the audit, it shall submit to the Authority of Audit and Accounting for approval the proposed decision and having received the evaluation of the Authority of Audit and Accounting of the proposed decision in the manner laid down in paragraph 3 of Article 37 of this Law shall have the right to impose disciplinary penalties specified in paragraph 1 of Article 39 of this Law and give compulsory instructions which are specified in Article 38 of this Law;
8. During the review of quality of audit carried out by the auditors/audit entities, i.e. checking the audit-related documents:
1) it shall be established how the provisions of the Standards of International Quality Control are observed;
3) it shall be established how the principles of independence and other principles of professional ethics established in Article 4 of this Law are observed;
9. The controller, having performed the review of the quality of audit carried out by the auditor or audit firm must prepare the report on the review of the audit carried out by the auditor or audit firm and submit it for the Chamber of Auditors and the Authority of Audit and Accounting.
10. The Authority of Audit and Accounting having received the proposed decision specified in subparagraph 5 of paragraph 7 of this Article shall not later than within 20 working days submit its evaluation specified in paragraph 3 of Article 37 of this Law.
11. When the Chamber of Auditors approves the quality review of the audit carried out by the auditor and/or audit firm, the Chamber of Auditors shall notify thereof the auditor, the audit firm and the Authority of Audit and Accounting and at the same time submit to the auditor and the audit firm not later than within 10 working days the approved report on audit quality review.
Article 35. Requirements to Candidates to the Office of Controllers, the Rights and Duties of Controllers
1. The review of the quality of the carried out audit shall be carried out by the controllers who must have an experience of at least 5 years in the position of auditor and/or member state auditor and have no disciplinary penalties in force.
3. Other requirements to candidates to the office of controllers shall be established by the Authority of Audit and Accounting. When the Authority of Audit and Accounting, as established in subparagraph 3 of paragraph 6 of Article 34 of this Law, approves candidatures of the controllers, the Chamber of Auditors shall conclude contracts for the provision of services according to the procedure established by the Chamber of Auditors. It shall be established in the contracts in addition to other things, that the performance of quality review of the carried out audit shall be materially and technically serviced by the Chamber of Auditors.
4. When carrying out the reviews of the quality of the carried out audit the provisions of paragraph 8 of Article 5 of this Law shall be applied.
5. The controller when carrying out the quality review of the carried out audit assigned to him shall have the right to:
1) use the information collected by the audit firm and the auditor which is required for carrying out the work of the controller, for submitting the report and taking the decisions, check the working documents and the methodology of carrying out audit; when carrying out the quality of the review of the audit carried out by the auditor and/or audit firm auditing the consolidated financial statements - check the working documents of audit of the financial statements of subsidiaries;
2) receive explanations from the auditor and audit firm how the auditor and the audit firm carried out the audit;
4) receive from other natural and legal persons information required for carrying out audit quality review;
6. The controller must:
1) when carrying out audit quality review of audit carried out by the auditor and audit firm abide by this law, the methodology of audit quality review of the carried out audit approved by the Authority of Audit and Accounting, the Code of Ethics of Professional Accountants and comply with the procedure of observing the principles of confidentiality and professional secrecy specified in paragraph 1 of Article6 of this Law;
2) having performed the audit quality review, prepare a report on quality review of audit where, among other things, recommendations would be given on the elimination of the identified weaknesses of the carried out audit and submit it within the given time to the Chamber of Auditors and the Authority of Audit and Accounting;
Article 36. Investigation of Audit Carried out by Auditors and Audit Firms
1. The investigation of the audit carried out by auditors and audit firms shall be performed by the Authority of Audit and Accounting. In the case of audit firms of member states entered in the list of audit firms the investigations of these audits may be performed only according to the procedure established by legal acts of the Republic of Lithuania.
2. The Chamber of Auditors, taking into account the performed audit quality review, where the material deficiencies are identified in the quality of audit performance, shall apply to the Authority of Audit and Accounting for initiating the investigation of the audit carried out by the auditor and/or audit firm. When the Authority of Audit and Accounting initiates the investigation of the audit carried out by the auditor or the audit firm, the auditor and the audit firm shall be notified thereof not later than one working day before the beginning of the investigation. The investigation of the audit carried out by the auditors of non-member countries set in paragraph 5 of Article 23 of this Law and of non-member country’s audit firms set in paragraph 5 of Article 24 of this Law may be initiated according to the procedure set by the Government of the Republic of Lithuania or the authority authorised by it.
3. In addition to the case set in paragraph 2 of this Article the investigation of the audit carried out by the auditor or audit firm may be commenced on the decision of the Authority of Audit and Accounting when:
1) state authorities, Chamber of Auditors, other legal and natural persons apply to the Authority of Audit and Accounting Service with a proposal to investigate the audit carried out by the auditor and/or audit firm;
4. The Authority of Audit and Accounting shall start investigation if a state authority specified in subparagraph 1 of paragraph 3 of this Article which applies to the Authority of Audit and Accounting is a law enforcement authority.
5. When carrying out the investigation of the audit carried out by the auditor and audit firm:
3) it is established how the principles of independence and other principles of professional ethics are complied with;
6. The investigation of the carried out audit shall be performed by the employees of the Authority of Audit and Accounting having an experience of at least 5 years in the position of auditor and/or member state auditor and having no disciplinary penalties in force as established by this Law.
7. The investigation of the audit carried out by the Authority of Audit and Accounting employees shall be performed according to confidentiality and professional secrecy requirements procedure established in paragraph 1 of Article 6 of this Law. The investigation may be performed having invoked the experts (specialists) having the appropriate knowledge for settling the issues arising during audit quality review.
8. The Authority of Audit and Accounting shall establish the methodology of investigation of carried out audit and of the employee choice, preparation and qualification development procedure .
9. Having performed the investigation of the audit carried out by the auditor and/or audit firm, the Authority of Audit and Accounting shall within 20 working days inform about the investigation results the auditor and/or the audit firm, the audit carried out by which has been investigated, and the Chamber of Auditors.
Article 37. The Rights of the Authority of Audit and Accounting and the Chamber of Auditors when Implementing the Quality Assurance and the Investigation of the Carried out Audit
1. The Authority of Audit and Accounting, when implementing quality assurance, as established in paragraph 1 of Article 34 of this Law and the investigation of the carried out audit, shall have the right to:
2) require from the auditors or audit firms to explain how the auditors and audit firms carried out the audit;
4) obtain the explanations from each employee of the audit firm who participated when carrying out the audit;
5) obtain from the Chamber of Auditors and other persons the necessary information required for audit quality and performance of the investigation;
6) require withdrawal of the controller from the performance of the audit quality review if a threat to independence or/and quality of review arises;
7) obtain from the Chamber of Auditors the proposed decisions on the performed audit quality review and submit their evaluation;
8) after carrying out the investigation give the instructions specified in Article 38 of this Law and impose disciplinary penalties specified in Article 39 of this Law;
2. The Chamber of Auditors when implementing the quality assurance of the carried out audit shall have the right:
2) to require from the auditors or audit firms to explain how the auditors and audit firms carried out the audit;
3) to review the documents of the audit quality review performed by the controller and, as necessary, to participate in audit quality reviews performed by the controller;
4) to receive explanations from every employee of the audit firm who participated in carrying out the audit.
6) having received the evaluation of the Authority of Audit and Accounting on the proposed decision, to approve the reports on the audit quality reviews of the carried out audit, including the decision to give the instructions established in Article 38 of this Law and to impose disciplinary penalties specified in paragraph 1 of Article 39 of this Law or apply to the Authority of Audit and Accounting for performing the investigation.
3. The Authority of Audit and Accounting must submit its assessment regarding the proposed decision specified in subparagraph 5 of paragraph 7 of Article 34 of this Law and:
2) not to approve of the decision proposed by the Chamber of Auditors and to propose another decision;
3) not to approve of the decision proposed by the Chamber of Auditors and to assign the repeated performance of quality review of the carried out audit to another inspector or the repeated performance of quality review of the carried out audit;
Article 38. Instructions to Auditors and Audit Firms
1. The Chamber of Auditors having considered and approving the report on the carried out audit quality review or the Authority of Audit and Accounting Service having performed the investigation may:
1) instruct the auditor or the audit firm to rectify the established weaknesses within the specified time period;
2. The Chamber of Auditors shall check how the auditor and/or the audit firm performs the instructions laid down in paragraph 1 of this Article. The Chamber of Auditors shall inform the Authority of Audit and Accounting on the performance of the instructions according to the procedure harmonised with it.
Article 39. Disciplinary Penalties
1. If the auditor and/or the audit firm fails to perform the instructions laid down in Article38 of this Law or after performing the quality review of the audit carried out by auditor or audit firm and re-establishing the quality weaknesses established in former reviews or, upon carrying out the investigation and after that having disclosed the weaknesses of the carrying out of audit the Chamber of Auditors or the Authority of Audit and Accounting may impose one of the following penalties:
2. Having performed the investigation of the carried out audit and having established the material deficiencies of the carried out audit, the Authority of Audit and Accounting may impose on the auditor and/or audit firm one of the following penalties:
3. The Chamber of Auditors or the Authority of Audit and Accounting, having adopted the decision, must within 10 working days from the day of adoption of the appropriate decision notify in writing the auditor and/or the audit firm of the adopted decision and if penalties have been imposed on the auditors and/or audit firms which audited public interest entities – also the Bank of Lithuania, the Securities Commission of the Republic of Lithuania and the Insurance Supervisory Commission of the Republic of Lithuania (hereafter referred to as supervisory authorities). Information about the imposed penalties shall be published in the lists of auditors and audit firms upon the expiration of the term set in Article 40 of this Law.
Article 40. Procedure for Appealing against the Decisions of the Chamber of Auditors and the Authority of Audit and Accounting
Implementing the audit quality assurance the decisions taken by the Chamber of Auditors and the decisions of the Authority of Audit and Accounting may be appealed against according to the procedure established by the laws of the Republic of Lithuania within 30 calendar days of the day the service of notice of delivery of the appropriate decision.
Article 41. Publication of Results of Quality Assurance and Investigation of Audit Carried out by the Auditors and Audit Firms
1. The Authority of Audit and Accounting shall publish every year by 1 March in its internet website the aggregated results of audit quality assurance of auditors and audit firms – specify the number of performed audit quality reviews and investigations, their results, the disciplinary penalties imposed and instructions given.
CHAPTER EIGHT
PUBLIC OVERSIGHT OF AUDIT CARRIED OUT BY AUDITORS AND AUDIT FIRMS
Article 42. Public Oversight of Audit Carried out by Auditors and Audit Firms
1. Public oversight of audit carried out by auditors and audit firms (hereafter referred to as public oversight of audit) shall be performed by the Authority of Audit and Accounting.
2. The Authority of Audit and Accounting shall be a public authority established according to the procedure set by laws, operating according to the Law on Public Establishments of the Republic of Lithuania regulating its legal form, unless the Law establishes otherwise, and its statute. The owner of the Authority of Audit and Accounting shall be the state. The right and duties of the owner shall be implemented by the Government of the Republic of Lithuania or the institution authorised by it.
Article 43. The Authority of Audit and Accounting
1. The Authority of Audit and Accounting shall abide in its activities by the Constitution of the Republic of Lithuania, this Law, the Law of the Republic of Lithuania on Public Establishments, to the extent this Law does not establish otherwise, other legal acts and their statute. The public oversight of audit – the function delegated to the Audit and Accounting Service shall be performed by one of its structural divisions indicted in its statute.
2. The statute of the Authority of Audit and Accounting shall be approved by the Government of the Republic of Lithuania which implements proprietary rights and duties or the authority authorised by it.
3. The Authority of Audit and Accounting shall be headed by the director. The director of the Authority of Audit and Accounting and the head of the structural division carrying out public oversight of audit (hereafter referred to as division) must be non-practitioner having the experience of at least 3 years working in the sphere of auditing, accounting, law and/or finances.
4. The tender for the position of the director of the Authority of Audit and Accounting (hereafter referred to as the director) shall be organised by the Government of the Republic of Lithuania implementing the proprietary rights and duties or the authority authorised by it according to the procedure established by it. The head of the division shall be appointed by the director, having agreed beforehand the candidature with the Government of the Republic of Lithuania or its authorised authority, implementing proprietary rights and duties.
5. More than half of the employees of the division must be non-practitioners. The qualification of employees of the Authority of Audit and Accounting must be continuously raised according to the procedure established by the Authority of Audit and Accounting having agreed it with the Government of the Republic of Lithuania or its authorised authority, implementing proprietary rights and duties.
6. The auditor, before starting to work in the division or starting to perform the functions of the director, must suspend the validity of his auditor’s certificate and his membership in the Chamber of Auditors.
7. A collegiate body operating in an advisory mode shall be formed in the Authority of Audit and Accounting – the Audit Supervisory Committee. The Committee shall advise the director and the division on the issues of public oversight of the audit.
8. The Audit Supervisory Committee shall be comprised of at least 7 members. More than a half of the Committee members must be non-practitioners. Members of the Audit Supervisory Committee must have the experience of at least 3 years working in the sphere of audit, accounting, law and/or finances. The Bank of Lithuania, the Securities Commission of the Republic of Lithuania and the Insurance Supervisory Commission of the Republic of Lithuania, the Ministry of Finance, the Chamber of Auditors and other professional organisations uniting the auditors shall each appoint one member to the Audit Supervisory Committee. The member/members appointed by other organisations shall be selected on the decision of the Ministry of Finance and must be practicing auditor/auditors.
9. The approval of the Audit Supervisory Committee shall be required when approving the decisions of the Authority of Audit and Accounting:
1) on the procedures set in paragraph 8 of Article 5 of this Law and paragraph 1 of Article 6 of this Law, on the procedure set in subparagraph 1, the methodology established in subparagraph 2, the procedure set in subparagraph 4 and the requirements set in subparagraph 5 of paragraph 6 of Article 34 of this Law,
2) on the results of the investigation set in Article 36 of this Law, on the results of reviews as specified in paragraph 3 of Article 37 of this Law, including related instructions and/or disciplinary penalties;
Article 44. Tasks, Functions and Rights of the Authority of Audit and Accounting
1.The tasks of the Authority of Audit and Accounting shall be:
2. Implementing the tasks set in paragraph 1 of this Article, the Authority of Audit and Accounting Service shall perform the following functions:
1) supervise the adoption of the decisions on the granting of the title of the auditor, on the issuing of the audit firm certificate and on its entry in the list of audit firms, the procedure of issuing the auditor’s certificate and entry of the auditor in list of auditors;
2) approve the areas where the auditor’s qualification examinations shall be held, consider the applications of persons who failed to pass the examinations and disagreed with the assessment of their examination results;
3) monitor the organisation of the qualification development courses of the auditors and, as necessary, make comments on the improvement of their organisation, participate in coordinating the programmes set in Article 28 of this Law, take decisions on the complaints by the auditors who heard other courses than those prescribed by paragraph 2 of Article 28 of this Law and auditors who took part in the equivalent professional qualification development courses on refusals made by the Chamber of Auditors to include the time of the courses into the time of hours specified in paragraph 1 of Article 28 of this Law;
4) monitor the translation into the Lithuanian language of the Code of Ethics for Professional Accountants, the International Auditing Standards and the International Quality Control Standard and, as necessary, take actions to guarantee their proper translation when due;
5) together with the Chamber of Auditors implement the assurance of audit carried out by the auditors and audit firms, perform the investigations, impose the penalties established in paragraphs 1 and 2 of Article 39 of this Law and give the instructions established in Article 38 of this Law, assess the decisions proposed by the Chamber of Auditors on imposing the penalties or instructions or refusing to impose any sanctions according to the procedure established in paragraph 3 of Article 37 of this Law;
6) immediately transfer to the supervisory authorities, the Ministry of Finance, competent authorities of member states and non-member countries the information, including confidential information, required for carrying out their functions of supervision. The information received from appropriate authorities of member states and non-member countries, including the confidential information, shall be used for carrying out public oversight of audit;
7) cooperate with competent authorities of member states and non-member countries when carrying out investigation;
8) cooperate, share information with the supervisory authorities, the Ministry of Finance, competent authorities of member states and non-member countries;
9) according to its competence participate in the activities of committees and working groups formed by the European Commission;
3. Carrying out its functions the Authority of Audit and Accounting shall have the right to:
1) cooperate with competent authorities of member states, conclude contracts with competent authorities of non-member countries for cooperation and share of information;
2) participate in the audit investigation of competent authorities of member states and non-member countries investigating the audit carried out by auditors and audit firms;
3) permit participating the competent authorities of member states and non-member countries in the investigation of performed audit carried out by the Authority of Audit and Accounting;
4) obtain information, including confidential information, required for implementing the tasks established in paragraph 1 of this Article;
6) participate in the general meetings and meetings of management and collegiate bodies of the Chamber of Auditors and other professional organisations uniting auditors without the right to vote;
7) check the performance by the Chamber of Auditors of the functions assigned to it which are related to the organisation and performance of qualification examinations, the assessment of the Code of Ethics of Professional Accountants, the assessment of International Auditing Standards and of the International Quality Control Standard and give obligatory instructions to the Chamber of Auditors on the development of these functions;
8) check the performance by the Chamber of Auditors of the functions of granting, suspension and withdrawal of the title of auditors, also the function of management of the lists of auditors and audit firms and submit mandatory instructions to Chamber of Auditors on the development of performance of these functions;
9) check the performance by the Chamber of Auditors of the functions related to quality assurance of the carried out audit and submit mandatory instructions to the Chamber of Auditors on the development of performance of these functions;
10) having received the reasoned request of the supervisory authority to revoke the auditor carrying out the audit of public interest entities and/or revoke the audit firm from the audit agreement , give mandatory instruction to revoke the auditor carrying out the audit of public interest entity and/or revoke the audit firm from the audit agreement;
11) apply to the Chamber of Auditors to consider whether the auditor and/or audit firm abides by the Code of Ethics of Professional Accountants and to take appropriate decisions;
12) apply to the Chamber of Auditors to consider whether the audit firm assurance and other related services were provided according to the methodology established by the Chamber of Auditors on International Assurance Engagements, International Review Engagements, International Standards of Related Services and Application of Related Practice Statements and to take appropriate decisions;
4. The Ministry of Finance shall control the fulfilment by the Authority of Audit and Accounting of the functions assigned to it. The Authority of Audit and Accounting shall, at the end of the calendar year, within 30 calendar days submit to the Ministry of Finance a report on the fulfilment of the functions assigned to it. At the request of the Ministry of Finance the Authority of Audit and Accounting shall submit other additional information related to public oversight of audit or other functions established in other legal acts.
Article 45. The Duty of the Employees of the Authority of Audit and Accounting and its Collegiate Body Members not to Disclose Confidential Information
The employees of the Authority of Audit and Accounting and its collegiate body members must keep the data or information disclosed to them when exercising their rights, fulfilling their functions if such data or information constitutes a secret protected by law or were received from the working documents specified in Article 32 of this Law and agree to comply with the confidentiality and professional secrecy procedure established in paragraph 1 of Article 6 of this Law. The employees of the Authority of Audit and Accounting and its collegiate body members shall have no right to use confidential information for purposes other than those established in this Law.
Article 46. The Resources of the Authority of Audit and Accounting for Fulfilling the Function of Public Oversight
The resources of the Authority of Audit and Accounting for performing public oversight of audit:
Article 47. Reorganisation, Overhaul and Liquidation of the Authority of Audit and Accounting
The Authority of Audit and Accounting shall be reorganised, overhauled and liquidated according to the procedure established by legal acts.
CHAPTER NINE
COOPERATION OF THE AUTHORITY OF AUDIT AND ACCOUNTING WITH COMPETENT AUTHORITIES
Article 48. Cooperation of the Authority of Audit and Accounting with Competent Authorities of other Member States
1. The Authority of Audit and Accounting fulfilling the functions established in subparagraph 6, 7 and 8 of paragraph 2 of Article 44 of this Law shall cooperate and share information with competent authorities of member states.
2. The cooperation shall be based on trust in the public oversight of audit of the member state which granted the auditor or audit firm the right to carry out audit.
3. Cooperation shall be based on the provision to the effect that the employees of the competent authorities of the member state keep to the principle of confidentiality and professional secrecy specified in subparagraph 2 of paragraph 2 of Article 4 of this Law. Keeping to this principle may not impede competent authorities to exchange confidential information.
4. In cases when the Authority of Audit and Accounting decides that the audit activity which was performed and/or is performed in another member state is contrary to the principles of carrying out audit established in this law, it must notify the competent authorities of that member state thereof.
5. If, in the case established by paragraph 4 of this Article, the Authority of Audit and Accounting is notified of the decision by the competent authority of another member state, the Authority of Audit and Accounting must take appropriate actions and notify the competent authority of another member state which informed thereof.
6. If the audit of financial statements of subsidiaries belonging to a group of entities was carried out by auditors or audit firms of other member states and the parent undertaking has been set up in the Republic of Lithuania, the audit carried out by auditors of member states shall be recognised without additional requirements concerning the independence of those auditors or audit firms, keeping to the principles of the Code of Ethics of Professional Accountants, audit standards applied, granting of the right to carry out audit and quality assurance of the carried out audit.
7. If the audit of the company set up in a member state, whose securities are traded in the regulated market of the Republic of Lithuania, was carried out by the auditor or audit firm of the member state, the audit carried out by member state auditors and/or audit firms shall be recognised as the audit carried out by the auditors of member states and/or audit firms without putting additional requirements concerning the independence of those auditors and/or audit firms, keeping to the principles of the Code of ethics of professional accountants, audit standards applied, granting of the right to carry out audit and quality assurance of the carried out audit.
Article 49. Cooperation of the Authority of Audit and Accounting with Competent Authorities of Non-Member Countries
1. The Authority of Audit and Accounting, fulfilling the functions set in subparagraphs 6, 7 and 8 of paragraph 2 of Article 44 of this Law, shall cooperate and share information according to the procedure established by it with the competent authorities of non-member countries when the working documents and other documents of the auditors and/or audit firms are related to the undertakings trading in their securities on the regulated markets of non-member countries, their subsidiaries and/or when the working documents and other documents of auditors and/or audit firms are related to the undertakings trading in their securities on the regulated market of the Republic of Lithuania registered in non-member countries, their subsidiaries and/or when the working documents and other documents of auditors and/or audit firms are related to the undertakings registered in non-member country.
2. The Authority of Audit and Accounting, performing public oversight of audit, shall have the right to sign cooperation agreements with competent authorities of non-member countries, if the employees of the competent authorities of a non-member country observe the obligation of confidentiality and professional secrecy requirement specified in subparagraph 2 of paragraph 2 of Article 4 of this Law. When the Authority of Audit and Accounting signs the agreements for the cooperation with the competent authorities of non-member countries, the European Commission shall be notified thereof.
Article 50. Refusal to Cooperate
1.The Authority of Audit and Accounting shall have the right to refuse to cooperate or to provide information, as established in subparagraphs 6, 7 and 8 of paragraph 2 of Article 44 of this Law to the competent authorities of member states and non-member countries in case:
1) the transmission of information, cooperation or performance of the investigation established in subparagraph 2 of paragraph 3 of Article 36 of this Law may have an adverse effect on the sovereignty, security or public order of the Republic of Lithuania;
2) the trial or pre-trial procedure has been started in the Republic of Lithuania against the actions or persons;
2. If the Authority of Audit and Accounting exercised the right provided in paragraph 1 of this Article, it shall immediately notify the competent authority which submitted the application to provide information or aid of a qualitatively different nature, specifying the reasons of refusal to cooperate and share information.
Article 51. Additional Requirements to Auditors and Audit Firms Auditing Public Interest Entities
1. Public interest entities may be audited by the auditor who, in addition to other requirements set in this Law, has at least 3 years' relevant professional experience working in the sphere of audit and who when carrying the audit has no effective disciplinary penalties.
2. The audit firms which audited public interest entities shall within 3 months of the end of their financial year publish in their internet website their annual transparency report that includes at least the following:
2) if the audit firm belongs to a network – a description of the network and the legal and structural arrangements in the network;
4) ) a description of the internal quality control system of the audit firm and a statement by the administrative or management body on the effectiveness of its functioning;
5) an indication of when the last quality review of carried out audits by that audit firm took place;
6) a list of public-interest entities for which the audit firm has carried out audits during the preceding financial year;
7) a statement concerning the audit firm's independence practices which also confirms that an internal review of independence compliance has been conducted;
8) a statement on the policy followed by the audit firm concerning the development of qualification of auditors;
9) information for the previous year showing the net turnover – separately indicated revenue from each activity of the audit firm;
4. The head of the audit firm shall be liable for the preparation, publication of transparency report as established in paragraph 2 of this Article, and preservation according to the procedure established by the Law of the Republic of Lithuania on Documents and Archives.
Article 52. The Audit Committee
1. An Audit Committee shall be formed in each public interest entity established in subparagraphs 1 and 2 of paragraph 24 of Article 2 of this Law .
2. The requirements for the Audit Committee shall be established by the appropriate supervisory authorities.
3. Duties of the Audit Committee:
2) to monitor the effectiveness of the company's internal control, internal audit where applicable, and risk management systems;
4. The audit firm shall be elected by the general meeting of shareholders taking into account the proposal of the management body or the supervisory authority on the audit firm which must be based on the recommendation of the Audit Committee regarding the audit firm.
5. The audit firm shall notify the Audit Committee about the problematic issues related to audit, especially when the material deficiencies of internal control related to financial statements are established.
Article 53. Requirements for the Independence of the Audit Firm Carrying out the Audit of Public Interest Entities
1. The requirements of independence from the public interest entity which it intends to audit shall be posed to the auditors and audit firms also in the period before concluding the contract for audit.
2. In addition to the principles of independence set in Article 5 of this Law the audit firm which carries out the audit of private interest entities must:
1) every year by December 1 submit to the Authority of Audit and Accounting and the Audit Committee of the audited entity, where it is formed in the cases provided in paragraph 1 of Article 52, a letter evidencing that it is independent from the audited public interest entities;
2) every year inform the Audit Committee of the audited entity, where it is formed in the cases provided in paragraph 1 of Article 52, about the non-audit services provided to the entity;
3) discuss with the Audit Committee, where it is formed in the cases provided in paragraph 1 of Article 52, the emerging threats to compliance with the principles of independence and the measures which were taken seeking to mitigate them, as established in paragraph 7 of Article 5 of this Law.
Article 54. Preparation and Submission of the Report on Audit when Carrying out the Audit of Public Interest Entities
1. The audit firm, when processing the results of the audit in the public interest entity shall prepare the report on audit together with the auditor’s report. The report on audit of the public interest entity must be submitted to the audited entity and its supervisory authority.
2. The requirements of the report on audit of public interest entity shall be established, taking into account the provisions of laws regulating the activities of the public interest entity, by the Chamber of Auditors upon coordination thereof with the Authority of Audit and Accounting and with the appropriate supervisory authority.
Article 55. Chamber of Auditors
1. Chamber of Auditors shall be a public legal person uniting the auditors and implementing professional self-governance.
2. In its activities the Chamber of Auditors shall be guided by the Constitution of the Republic of Lithuania, this Law, the Law of the Republic of Lithuania on Associations to the extent this Law does not establish otherwise, other legal acts and the Statute of the Chamber of Auditors. The Statute of the Chamber of Auditors shall be approved by the general meeting of members of the Chamber of Auditors.
Article 56. Members of the Chamber of Auditors
1. Persons having the auditor’s certificate and entered in the list of auditors shall be members of the Chamber of Auditors. The provision shall not apply to member state auditors and auditors of non-member countries who are granted the title of auditor according to the procedure established in Articles 15 and 16 of this Law.
2. The rights of members of the Chamber of Auditors shall be established by the Statute of the Chamber of Auditors.
Article 57. Rights of the Chamber of Auditors
1. The Chamber of Auditors shall have the right to:
4) provide services in accordance with the procedures prescribed by the Statute of the Chamber of Auditors;
5) render support to its members in accordance with the procedure prescribed by the Statute of the Chamber of Auditors;
Article 58. Obligations of the Chamber of Auditors
In addition to the obligations established in this Law the Chamber of Auditors shall have the following obligations:
1) to control the observance to the Code of Ethics of Professional Accountants by auditors and audit firms and apply due to violations the penalties established in paragraph 2 of Article 59;
2) to translate into the Lithuanian language the Code of Ethics of Professional Accountants, the International Auditing Standards, the International Quality Control Standard and publish them;
3) to organise the auditor’s qualification examinations as established in Article 11 of this Law, provide conditions for the Examining Board to duly perform the assigned functions;
6) to settle the issues of audit performance and enhancement of the auditors’ professional activities;
7) to prepare the draft on the carried out audit quality review and submit it to the Authority of Audit and Accounting for approval;
8) to set the methodology in relation to application of international assurance engagement standards, international review engagement standards, international standards of related services and of related practice statements when providing assurance and other related services, and to control the quality of the performed assurance and other related services and, where there are irregularities, impose the penalties set in paragraph 2 of Article 59 of this Law;
9) according to the procedure established by the Statute of the Chamber of Auditors, to establish the procedure of control of assurance and other related services for the performance of control specified in subparagraph 8 of this Article to establish the assurance procedure and the procedure of control of related services, the procedure of considering complaints about improper provision of assurance and related services;
10) immediately provide information to the Authority of Audit and Accounting about the restrictive measures applied according to the procedure established in Article 59;
11) having received information about the improperly carried out audit commence the review of quality of the audit carried out by the auditor or audit firm or apply to the Authority of Audit and Accounting with a request to start investigation of the audit;
12) to provide the conditions for the Auditors’ Court of Honour to properly perform the function assigned to it, representing the institutions in hearing the disputes;
13) provide information to the Authority of Audit and Accounting, state institutions according to the procedure established by this Law and other legal acts;
Article 59. The Auditors’ Court of Honour
1. The Auditors’ Court of Honour shall be formed in the Chamber of Auditors. The Auditors’ Court of Honour shall be composed of 7 members:
1. The Auditors’ Court of Honour shall consist of 7 embers:
1) 2 members having an at least 5 years experience of work as auditor shall be appointed by the general meeting of the Chamber of Auditors;
2) 1 member each shall be appointed by the Ministry of Justice, the Ministry of Economy and the Ministry of Finance of the Republic of Lithuania;
3) 1 member shall be appointed by the organizations of businessmen upon the appeal of the Chamber of Auditors and by common consent;
2. The Auditors’ Court of Honour shall be entitled to bring disciplinary action against the auditor on the proposal of the Chamber of Auditors and, upon hearing it, impose penalties for non-compliance with the Code of Ethics of Professional Accountants and the duty laid down in paragraph 1 of Article 28 of this Law and the methodology set in subparagraph 8 of Article 58 of this Law. The Auditors’ Court of Honour shall have the right to impose the following penalties:
4. The Auditors’ Court of Honour having established violations of the Code of Ethics of Professional Accountants shall have the right to propose to the Chamber of Auditors to deprive the person of the auditor’s title on the grounds set in subparagraph 8 of paragraph 1 of Article 14 of this Law.
5. Having decided to impose penalties specified in paragraph 2 of this Article, the Chamber of Auditors shall inform the Authority of Audit and Accounting according to the procedure harmonised with it. The Chamber of Auditors taking into account the decisions of the Auditors’ Court of Honour may carry out the review of quality of the audit carried out by auditor or audit firm or appeal to the Authority of Audit and Accounting with a request to perform an investigation.
Article 60. Funds of the Chamber of Auditors
1. The funds of the Chamber of Auditors shall be:
2) deductions of the audit firms for the functions set to be performed for the Chamber of Auditors and for the reviews of audit quality;
3) income for the organization of quality development courses and auditors’ qualification examinations, the provided teaching services;
2. Audit firms shall pay every year by June 30 for the functions set in this Law the sum of deductions to the Chamber of Auditors, amounting to 0.2 percent of income received for the audit carried out, but not less than 0.5 of the minimum monthly salary (hereafter referred to as MMS) that was valid on 1 January of that year. If the audit firm did not receive any income from audit, its deductions to the Chamber of Auditors shall amount to 0.5 of MMS. The audit firms of member states entered in the list of audit firms shall pay to the Chamber of Auditors only the amount of deductions from the income received for the audit carried out according to the procedure established by legal acts of the Republic of Lithuania. The Chamber of Auditors shall receive from the audit firms the information required for calculating the amount of deductions of audit firms.
3. The audit firm, having performed the quality review of the audit carried out by the audit firm, shall within 30 calendar days from the day of receipt of the notification set in paragraph 11 of Article 34 of this Law pay the amounts of deductions to the Chamber of Auditors amounting to 3 MMS for the review of quality of audit carried out by one auditor according to the procedure established by the Chamber of Auditors.
Article 61. Appealing against the Decisions of the Chamber of Auditors
The decisions of the Chamber of Auditors may be appealed against according to the procedure established by legal acts within 30 calendar days from the service of the appropriate report.
Article 62. Reorganisation, Overhaul and Liquidation of the Chamber of Auditors
The Chamber of Auditors shall be reorganized, overhauled and liquidated according to the procedure established by legal acts.
Annex to the Law on Audit of the Republic of Lithuania
IMPLEMENTED LEGAL ACTS OF THE EU
1. 78/660/EEC: fourth Council Directive of 25 July 1978 based on article 54 (3) (g) of the treaty on the annual accounts of certain types of companies
2. 83/349/EEC: seventh Council Directive of 13 June 1983 based on the article 54 (3) (g) of the treaty on consolidated accounts
3. Commission Recommendation of 16 May 2002 - Statutory Auditors' Independence in the EU: A Set of Fundamental Principles (Text with EEA relevance) (notified under document number C(2002) 1873)
4. Directive 2003/51/EC of the European Parliament and of the Council of 18 June 2003 amending Directives 78/660/EEC, 83/349/EEC, 86/635/EEC and 91/674/EEC on the annual and consolidated accounts of certain types of companies, banks and other financial authorities and insurance undertakings (Text with EEA relevance)
Article 2. Final provisions
2. The Government of the Republic of Lithuania or the authorities authorised by it, the Chamber of Auditors, the Institute of Accounting of the Republic of Lithuania shall draft and approve by 1 October 2008 the legal acts assigned to it to approve according to their competence required for implementing this Law and shall coordinate other legal acts, except the procedure set forth in Article 1 of this Law paragraph 5 of Article 17 of the Law on Audit of the Republic of Lithuania, which shall be drafted and approved by 1 December 2009.
3. In 20008 the audit firms shall submit the information established in subparagraph 6 of Article 30 of the Law on Audit of the Republic of Lithuania set forth in Article 1 of this Law to be submitted to the Chamber of Auditors within 30 days calendar days from the day of entry into force of this Law.
4. When carrying out the audit of financial statements of the reporting period starting before 1 January 2009 the national auditing standards prepared by the Chamber of Auditors and approved by the general meeting of the members of the Chamber of Auditors or the international auditing standards shall apply, also the Code of Ethics of Professional Auditors approved by the general meeting of the members of the Chamber of Auditors shall apply and the monitoring of compliance with them according to this Law shall be carried out according to that of international auditing standards and of the Code of Ethics of Professional Accountants. When carrying out the audit of financial statements starting on 1 January 2009 and later the international auditing standards and the Code of Ethics of Professional Accountants shall apply.
5. The Chamber of Auditors shall translate into the Lithuanian language and publish by 1 January 2009 the Code of Ethics of Professional Accountants and the International Auditing Standards.
6. The Chamber of Auditors shall by 1 September 2008 translate into the Lithuanian language and publish the International Quality Control Standard.
7. Preparing the session of qualification examinations of auditors for 2008 which will end by 31 December 2008, the Examination Committee composed before the entry into force of this Law shall function, for which the Chamber of Auditors shall provide conditions to appropriately fulfil the assigned functions and the subjects set before the entry into force of this Law shall be in effect in which the auditors’ qualification examinations shall be held, the examination rules and the amount of the examination fee. The new composition of the Examining Committee shall be approved by 31 December 2008, the term of office whereof shall start on 1 January 2009. After the approval the term of office it shall be considered the first term of office of the members of the Examining Committee.
8.The procedure for implementing in the Chamber of Auditors quality assurance of the carried out audit shall be approved before the entry into force of this Law taking into account the requirements set in Article 1 of Chapter Seven of the Law on Audit of the Republic of Lithuania.
9. Until the entry into force of this Law the qualification examinations of the auditor passed by persons, except for persons deprived of the title of the auditor, shall count. The title of the auditor granted prior to the entry into force of this Law and not revoked shall be valid.
10. From the entry into force of this Law the provision of subparagraph 4 of paragraph 3 of Article 5 of the Law of the Republic of Lithuania on Audit set forth in Article 1 of this Law shall be applied to audit firms carrying out the audit of public interest entities. Carrying out the audit of financial statements for the period starting on 1 January 2009 and later the provision shall be applied to all audit firms.
11. The periods specified in Article 1 of this Law set in paragraph 4 of Article 5 of the Law of the Republic of Lithuania on Audit shall count in the financial year which commenced before the entry into force of this Law for the audit whereof the audit contract of financial statements has been concluded.