Text consolidated by Valsts valodas centrs (State
Language Centre) with amending laws of:
22 January 2004 [shall come
into force on 19 February 2004];
29 March 2007 [shall come into force on 1 May
2007];
12 June 2008 [shall come into force on 29 June
2008];
29 January 2009 [shall come into force on 4 March
2009];
11 February 2010 [shall come into force on 31 March
2010];
3 June 2010 [shall come into force on 6 July 2010];
3 March 2011 [shall come into force on 6 April
2011];
22 March 2012 [shall come into force on 25 April
2012];
12 September 2013 [shall come into force on 1 January
2013];
18 April 2013 [shall come into force on 22 May
2013];
9 July 2013 [shall come into force on 7 August
2013];
12 September 2013 [shall come into force on 1 January
2014];
29 October 2015 [shall come into force on 1 January
2016];
15 December 2016 [shall come into force on 1 January
2017];
19 April 2018 [shall come into force on 23 May
2018];
21 June 2018 [shall come into force on 18 July
2018];
20 June 2019 [shall come into force on 16 July
2019];
14 September 2023 [shall come into force on 11 October
2023].
If a whole or part of a section has been amended, the
date of the amending law appears in square brackets at
the end of the section. If a whole section, paragraph or
clause has been deleted, the date of the deletion appears
in square brackets beside the deleted section, paragraph
or clause.
|
The Saeima 1 has adopted
and the President has proclaimed the following law:
Law on Audit Services
[15 December 2016]
Chapter I
General Provisions
Section 1. Terms Used in this
Law
(1) The following terms are used in this Law:
1) opinion - an integral part of an auditor's report
which states a clearly expressed view on whether the financial
statements included in the annual statement, also in the
consolidated annual statement, present a truthful and clear view
of the financial situation, profit or losses, and cash flow of
the relevant client in accordance with the relevant financial
statement preparation principles (standards) and comply with laws
and regulations. There may be an opinion without reservations, an
opinion with reservations and a negative opinion;
2) audit working papers - materials which are prepared
for a sworn auditor or commercial company of sworn auditors or
which are prepared, obtained and stored by a sworn auditor or
commercial company of sworn auditors and which are related to
provision of audit services. The audit working papers may be
prepared in a printed form, electronic data carriers or in other
form [for example, records the information included therein is
formed by an image or sound and which are perceived and used via
relevant equipment (audiovisual and cinematographic records,
photographs and sound records)];
3) financial institution - a credit institution, an
investment management company, a manager of alternative
investment funds, an insurance company, a branch of a non-member
country's insurer, a reinsurance company, a branch of a
non-member country's reinsurer or a private pension fund
providing financial, insurance or reinsurance services;
4) client - a merchant, a State or local government
authority, an association or foundation or any other person who
receives audit services in accordance with this Law;
5) [19 April 2018];
6) self-employed person - a natural person who earns
employment income independently, without entering into
contractual employment relations with an employer as a paid
employee, and does not occupy a position that gives the right to
remuneration. A natural person who is a member (participant) of a
partnership and earns employment income in accordance with a
contract entered into by such partnership and the assignor of an
audit task shall also be considered a self-employed person;
7) auditor's report - a written document prepared by a
sworn auditor or a responsible auditor of the commercial company
of sworn auditors regarding the audit (review) of the annual
statement and consolidated annual statement;
8) audit service shall be:
a) the review (audit) of a client's annual statement, also
consolidated annual statement, laid down in laws and regulations
and the provision of an auditor's report;
b) the performance of an audit task at the request specified
by law of the Commercial Register institution, an investigative
institution, a prosecutor, a judge or a court in cases prescribed
by law;
c) the financial audit of State and local government
authorities and the preparation of audit reports, as well as
provision of an opinion regarding the report on the financial
year;
d) the performance of an audit task provided for by other laws
and regulations or an audit service contract;
e) the limited review of a client's annual statement laid down
in laws and regulations and the provision of a review report;
9) audit report - a document prepared by a sworn
auditor regarding the results of a financial audit of a State or
local government authority;
10) audit task - review of annual statements, also
consolidated annual statements, of a client as well as the review
of economic activity of a client in accordance with the law or a
contract entered into;
11) [19 April 2018];
12) International Standards on Auditing recognised in
Latvia - International Standards on Auditing, International
Standards on Review Engagements, International Standards on
Quality Control and notifications and standards related thereto,
in so far as they are related to audit services, issued by the
International Auditing and Assurance Standards Board of the
International Federation of Accountants and determined by the
Latvian Association of Sworn Auditors;
121) International Standards on Auditing for
public sector recognised in Latvia - the international
standards determined by the Auditor General for the Supreme Audit
Institutions;
13) network of commercial companies of auditors -
cooperation among sworn auditors, commercial companies of sworn
auditors, Member State or third country auditors or commercial
companies of auditors with the aim of income or cost allocation,
joint administration or ownership, joint quality assurance policy
and procedures or joint strategy of commercial activity and which
provides for the partners of this cooperation to use one and the
same commercial company or a significant portion of professional
resources at the disposal of the partners of this
cooperation;
14) third country - a country which is not a Member
State of the European Union or the European Economic Area;
141) Member State - a European Union Member
State or a state of the European Economic Area;
15) third country auditor - a natural person who, in
accordance with the laws of a third country, is entitled to carry
out an audit (review) of the annual statement and the
consolidated annual statement of the commercial company
registered in this country and who is not an auditor of the
Member State;
16) third country commercial company of auditors - a
commercial company of any type registered in a third country
which, in accordance with the laws of a third country, is
entitled to carry out an audit (review) of the annual statement
and the consolidated annual statement of the commercial company
registered in this country and which is not a commercial company
of auditors of the Member State;
17) public-interest entities - financial institutions
and commercial companies the transferable securities of which are
admitted to trading on the regulated market of Member States;
18) competent authority of the Member State - an
authority to which the responsibility for supervision of the
auditor and commercial company of sworn auditors and also the
audit services provided thereby is laid down by the laws and
regulations of the relevant Member State, and regarding which the
relevant Member State has notified the European Commission;
19) auditor of the Member State - a natural person
which is approved by a competent authority of the Member State
other than the Republic of Latvia (hereinafter - other Member
State) to be entitled to carry out an audit (review) of the
annual statement and consolidated annual statement of the
commercial company registered in such other Member State;
20) commercial company of auditors of the Member State
- a commercial company of any type registered in other Member
State which is approved by a competent authority of this other
Member State to be entitled to carry out an audit (review) of the
annual statement and the consolidated annual statement of the
commercial company registered in this other Member State;
21) competent authority of the third country - an
authority to which the competence to carry out supervision of
auditors of this third country and commercial companies of
auditors of the third country, and also audit services provided
by them, has been granted by the laws and regulations of the
third country;
22) State or local government authority - a State or
local government institution, a derived public person fully or
partly financed from the State or local government budget, and
also a State or local government agency.
(2) The term "international accounting standards" used in this
Law complies with the definition thereof contained in Regulation
(EC) No 1606/2002 of the European Parliament and of the Council
of 19 July 2002 on the application of international accounting
standards.
(3) The term "related parties" used in this Law conforms to
the term used in IAS 24 "Related party disclosures" referred to
in Annex to Regulation (EC) No 1126/2008 of 3 November 2008
adopting certain international accounting standards in accordance
with Regulation (EC) No 1606/2002 of the European Parliament and
of the Council.
(4) The term "a sworn auditor and a commercial company of
sworn auditors providing audit services to public-interest
entities" used in this Law shall be used in the meaning of the
sworn auditor and commercial company of sworn auditors which have
provided audit services to a public-interest entity at least once
in three years after the audit services quality control referred
to in Section 35.1, Paragraph one of this Law. This
term conforms to the term "a statutory auditor or an audit firm
carrying out statutory audits of public-interest entities" used
in Regulation (EU) No 537/2014 of the European Parliament and of
the Council of 16 April 2014 on specific requirements regarding
statutory audit of public-interest entities and repealing
Commission Decision 2005/909/EC (hereinafter - Regulation No
537/2014).
(5) The terms "investment brokerage company", "regulated
market operator" and "data reporting services provider" used in
this Law conform to the terms used in the Financial Instrument
Market Law.
[22 January 2004; 12 June 2008; 9 July 2013; 29 October
2015; 15 December 2016; 19 April 2018; 21 June 2018; 20 June
2019; 14 September 2023]
Section 2. Purpose and Scope of
Application of the Law
(1) The purpose of this Law is to govern the legal basis of
the professional activities of persons which are manifested as
audit services and to ensure supervision of the professional
activities of such persons in order to promote a stable, safe,
and credible market of audit services and protect common
interests of the public (as the user of annual statements and
consolidated annual statements).
(2) This Law shall apply to sworn auditors, commercial
companies of sworn auditors, recipients of audit services,
public-interest entities, and also competent institutions in the
field of supervision of professional activities of sworn auditors
and commercial companies of sworn auditors, and of
public-interest entities.
(3) The Law prescribes:
1) the procedures for obtaining and registration of a sworn
auditor certificate and licence for a commercial company of sworn
auditors;
2) the requirements for independence, objectivity and ethics
of sworn auditors and commercial companies of sworn auditors, the
regulations of professional activities and responsibility for
failing to comply with the requirements laid down in this Law and
Regulation No 537/2014;
3) the rights and obligations of recipients of audit
services;
4) competent institutions in the field of supervision of the
professional activities of sworn auditors and commercial
companies of sworn auditors, the obligations and rights of such
institutions and authorities;
5) the legal basis of establishment, operating and supervision
of the audit committee of a public-interest entity;
6) the regulations for ensuring application of Regulation No
537/2014.
[15 December 2016; 19 April 2018]
Section 3. Sworn Auditors and
Commercial Companies of Sworn Auditors
(1) Only sworn auditors and commercial companies of sworn
auditors which comply with the requirements specified in this Law
are entitled to provide audit services.
(2) A sworn auditor may provide audit services as:
1) an individual merchant;
2) an employee of a commercial company of sworn auditors;
3) a self-employed person.
(3) A commercial company of sworn auditors may be a commercial
company of any type.
[19 April 2018]
Section 4. Status of a Sworn
Auditor
(1) A natural person shall acquire the status of a sworn
auditor after such person has passed a sworn auditor
qualification examination in accordance with the procedures
prescribed by this Law, has obtained a sworn auditor certificate
issued by the Latvian Association of Sworn Auditors and has been
registered in the Sworn Auditor Register.
(2) The status of a sworn auditor is valid only during the
period of validity of a sworn auditor certificate.
Section 5. Status of a Commercial
Company of Sworn Auditors
(1) A commercial company shall acquire the status of a
commercial company of sworn auditors after it has obtained, in
accordance with the procedures prescribed by this Law, a licence
issued by the Latvian Association of Sworn Auditors and has been
registered in the Register of Commercial Companies of Sworn
Auditors.
(2) The status of a commercial company of sworn auditors is
valid only during the period of validity of the licence.
Chapter II
Latvian Association of Sworn Auditors
Section 6. Status, Purpose of
Activities and Tasks of the Latvian Association of Sworn
Auditors
(1) The Latvian Association of Sworn Auditors is an
independent professional corporation of Latvian sworn
auditors.
(2) All the sworn auditors of Latvia and commercial companies
of sworn auditors are, on the principle of professional activity,
united in the Latvian Association of Sworn Auditors.
(3) The Latvian Association of Sworn Auditors shall supervise
that the professional activity of sworn auditors in the field of
the provision of audit services would conform to the requirements
of this Law, other laws and regulations governing the provision
of audit services, and also professional standards and rules of
ethics.
(4) The Latvian Association of Sworn Auditors:
1) shall represent and defend the interests of its
members;
2) shall organise qualification examinations for sworn
auditors;
3) shall decide on the issuance of a certificate to a sworn
auditor and on the issuance of a licence to a commercial company
of sworn auditors;
4) shall organise the Sworn Auditor Register and the Register
of Commercial Companies of Sworn Auditors;
5) shall review disputes between sworn auditors and clients at
the request of one of the parties to the dispute;
6) shall organise and supervise continuation of education and
improvement of professional qualification of sworn auditors as
part of the continuing education process recognised by the
Latvian Association of Sworn Auditors;
7) shall perform other tasks prescribed by laws and its
articles of association.
(5) To finance the operation of the Latvian Association of
Sworn Auditors, its members shall pay an annual fee in the amount
specified by the general meeting of the Association.
(6) Once every year, the Latvian Association of Sworn Auditors
shall inform the public about its activities, including the
disciplinary sanctions imposed on sworn auditors, to the extent
permitted by law. The Latvian Association of Sworn Auditors shall
make the abovementioned information available on its website each
year until 31 March, as well as forward it to the Ministry of
Finance.
[12 June 2008; 22 March 2012; 18 April 2013; 19 April
2018]
Section 7. Administrative
Institutions and Permanent Committees of the Latvian Association
of Sworn Auditors
(1) The supreme administrative institution of the Latvian
Association of Sworn Auditors shall be the general meeting. It
shall elect the chairperson of the board of the Latvian
Association of Sworn Auditors, members of the board, and
establish the permanent committees.
(2) The permanent committees shall operate in accordance with
the articles of association of the Latvian Association of Sworn
Auditors and shall implement the decisions of the general meeting
and the board.
[19 April 2018]
Chapter III
Qualification Examinations for Sworn Auditors
Section 8. Specific Requirements for
Applicants
A sworn auditor qualification examination may be taken by a
natural person with the capacity to act who complies with all the
requirements referred to in this Section:
1) has reached 25 years of age;
2) has obtained higher education in the Republic of Latvia or
in a foreign state in the field of economics, management or
finances, or also has obtained the qualification of an auditor of
the relevant state abroad. A decision to recognise documents
certifying the relevant education issued by foreign states, in
compliance with the procedures prescribed by the Education Law,
shall be taken by the Latvian Association of Sworn Auditors;
3) is fluent in the Latvian language;
4) has acquired at least three years' experience which is
approved by the Latvian Association of Sworn Auditors in the
auditing of annual statements of clients and also in financial
auditing;
5) has an unimpeachable reputation (none of the conditions
referred to in Section 9 of this Law being applicable).
[22 January 2004; 15 December 2016]
Section 9. Persons who May not be
Sworn Auditors
A sworn auditor may not be a person to whom at least one of
the following conditions referred to in this Section apply, that
is, a person:
1) in relation to whom insolvency proceedings of a natural
person have been declared;
2) who is a defendant or an accused in a criminal matter
regarding the commission of an intentional criminal offence;
3) who has been convicted for the commission of an intentional
criminal offence (irrespective of whether the person has been
released from serving the sentence because of a statute of
limitation period, clemency or amnesty);
4) against whom a criminal matter for the commission of an
intentional criminal offence has been terminated because of the
expiry of a limitation period, settlement, clemency or amnesty,
or for whom the conviction for such criminal offence has been
extinguished or set aside;
5) who has been dismissed from office by a court judgment in a
criminal matter;
6) whose occupation because of ethical considerations is not
compatible with the professional activities of a sworn
auditor.
[22 March 2012]
Section 10. Procedures for
Submission and Examination of Candidate Applications
(1) A candidate shall submit to the Latvian Association of
Sworn Auditors an application regarding the taking of a sworn
auditor qualification examination and other documents in
accordance with the procedures stipulated by the Cabinet.
(2) A candidate shall state his or her compliance with the
requirements of Section 8 of this Law in the application, and
append to it the documents stipulated by the Cabinet.
(3) After receipt of the application and the documents
appended to it, the Latvian Association of Sworn Auditors shall
examine the application and the documents appended to it within
the period of one month, and take a decision on the right of the
candidate to take a sworn auditor qualification examinations or
on a refusal.
(4) The decision of the Latvian Association of Sworn Auditors
of Latvia shall be notified to the candidate in writing.
(5) If a candidate has received a refusal because the
application and the documents appended to it are not complete or
do not prove conformity to the requirements of Section 8 of this
Law, he or she may resubmit the application to the Latvian
Association of Sworn Auditors only after rectification of the
relevant shortcomings, but not sooner than six months after the
date of receipt of a refusal. A repeated application may not be
submitted by a person who may not be a sworn auditor in
accordance with Section 9, except in cases where the
circumstances, which do not permit such person to be a sworn
auditor, have changed.
(6) Examination of applications of candidates shall be
performed for a charge the amount and payment procedures of which
shall be specified by the board of the Latvian Association of
Sworn Auditors after co-ordination with the Ministry of
Finance.
[22 January 2004]
Section 11. General Provisions for
Sworn Auditor Qualification Examinations
(1) In the sworn auditor qualification examinations it shall
be examined whether the candidates have an adequate level of
theoretical knowledge, as well as the ability to apply such
theoretical knowledge in practical work, so that they might
perform the professional activities referred to in Section 2 of
this Law appropriately, in accordance with laws and with the
international audit standards recognised in Latvia.
(2) Sworn auditor qualification examinations shall be taken in
writing, in the Latvian language.
(3) Sworn auditor qualification examinations shall be charged
for. The candidate shall pay a participation fee specified by the
Latvian Association of Sworn Auditors up to the commencement of
the examination period. A decision on the amount of the
participation fee and the payment procedures shall be taken by
the board of the Latvian Association of Sworn Auditors after
co-ordination with the Ministry of Finance.
[22 January 2004]
Section 12. Organisation of Sworn
Auditor Qualification Examinations
(1) Sworn auditor qualification examinations shall be
organised and held by the Latvian Association of Sworn
Auditors.
(2) By-laws for sworn auditor qualification examinations,
indicating the number and names of the examination subjects,
their programmes, the rules regarding the establishment of the
examination commission, the procedures for the acceptance and
examination of applications of candidates, and also for the
preparation, process and evaluation of examinations, shall be
approved by the Latvian Association of Sworn Auditors after
co-ordination with the Ministry of Finance.
(3) The sworn auditor qualification examinations commission
shall be established by the Latvian Association of Sworn
Auditors, which shall invite as members of such commission sworn
auditors, teaching staff of State-accredited tertiary education
institutions and other experts in the fields of the examination
subjects.
[22 January 2004]
Section 13. Recognition of
Professional Qualifications Attained Abroad
The Latvian Association of Sworn Auditors shall recognise the
qualifications of an auditor who has attained his or her
professional qualification in a foreign country (an EU Member
State, European Economic Area state or a third country) as equal
to the qualifications of a sworn auditor, and shall issue a
certificate of a sworn auditor to him or her if such foreign
auditor complies with all the conditions referred to in this
Section:
1) has in accordance with the procedures prescribed by the
Education Law submitted a document certifying a professional
qualification recognised by the Latvian Association of Sworn
Auditors which confirms that its holder is entitled, in
accordance with the laws of the relevant foreign state, to
perform professional activities in that state which in compliance
with the laws of Latvia are performed by a sworn auditor;
2) has passed such part of the subjects of the sworn auditor
qualification examinations, arranged by the Latvian Association
of Sworn Auditors, which include a test of the knowledge of the
candidates regarding public law, the Civil Law, labour law and
laws governing social guarantees, commercial activity and
insolvency laws and tax laws;
3) [3 June 2010];
4) has been recorded in the relevant register of auditors of a
foreign state (European Union Member State, European Economic
Area state or third country).
[12 June 2008; 3 June 2010; 15 December 2016]
Section 14. Content of Sworn Auditor
Qualification Examinations
The programmes of subjects for sworn auditor qualification
examinations shall include questions and tasks which are directly
linked with the reviews of annual statements and consolidated
annual statements, or linked with them indirectly, as far as they
are related to such reviews, and which allow to determine the
knowledge of the candidates in the following areas:
1) theory and technique of an audit, international audit
standards;
2) preparation and analysis of annual statements and
consolidated annual statements, accounting methods and the
regulations for evaluation;
3) financial and management accounting;
4) internal audit;
5) public law, the Civil Law, labour law, and laws governing
social guarantees;
6) commercial activity and insolvency laws;
7) tax laws;
8) information and computer systems;
9) general and financial economics;
10) management and analysis of commercial activity risk;
11) basic principles for financial management;
12) mathematics and statistics;
13) international accounting standards;
14) professional ethics and independence.
[22 January 2004; 12 June 2008]
Section 15. Procedures for
Announcement of Results of Sworn Auditor Qualification
Examinations
(1) The decision regarding the results of the sworn auditor
qualification examinations shall be taken by the Latvian
Association of Sworn Auditors not later than within two months
after the date of the relevant examination, on the basis of the
minutes confirmed by the sworn auditor qualification examinations
commission, and shall be made known to the candidates within 10
days after taking of the decision.
(2) If a candidate has not passed a sworn auditor
qualification examination, such examination may be taken again
during one of the following examination periods. If the candidate
again fails to pass such examination, the decision regarding the
further possibility of the candidate to take the relevant
examination shall be taken by the Latvian Association of Sworn
Auditors.
(3) The work of a candidate at a sworn auditor qualification
examination shall be regarded as restricted access information
and shall be stored in the relevant file at the archives of the
Latvian Association of Sworn Auditors.
(4) A candidate has the right to become acquainted with the
evaluation of his or her work for the sworn auditor qualification
examination and to submit a complaint to the responsible
permanent committee of the Latvian Association of Sworn Auditors
within one month from the date the candidate has received a
notification from the sworn auditor qualification examinations
commission.
[22 January 2004]
Chapter IV
Procedures for Issuance, Suspension of Validity or Cancellation
of a Sworn Auditor Certificate, the Sworn Auditor Register
Section 16. Procedures for Issuance
of a Sworn Auditor Certificate
(1) The Latvian Association of Sworn Auditors shall take a
decision and shall issue a sworn auditor certificate to
candidates who have passed the relevant sworn auditor
qualification examinations, and afterwards have again stated in
writing that none of the conditions referred to in Section 9 of
this Law apply to them, and shall specify the date for the
signing of the oath of a sworn auditor and for the issuance of
the certificate.
(2) Before the receipt of a sworn auditor certificate
candidates who wish to become sworn auditors shall sign the
following text of the oath: "I swear to observe the laws of the
Republic of Latvia, the articles of association of the Latvian
Association of Sworn Auditors and to fulfil my duties honourably,
acknowledging that for violation of this oath I shall be liable
before the public and the law."
(3) The signed oath of a sworn auditor shall be stored in the
relevant file in the archives of the Latvian Association of Sworn
Auditors.
[12 June 2008]
Section 17. Procedures for
Suspension of Validity of a Sworn Auditor Certificate
(1) If, after the issuance of a sworn auditor certificate, it
is found that any of the conditions referred to in Section 9,
Clause 2 or 6 of this Law is applicable to the person who has
received such certificate, the Latvian Association of Sworn
Auditors shall suspend the validity of the sworn auditor
certificate for a specified period of time.
(2) The validity of the sworn auditor certificate shall be
suspended also for such persons who:
1) have submitted a submission to suspend the validity of the
sworn auditor certificate for a specified period of time in
accordance with Section 28, Paragraph two of this Law, indicating
the reason and the time period for the suspension;
2) have violated the requirements of this Law, the Law on the
Prevention of Money Laundering and Terrorism Financing, the
International Standards on Auditing recognised in Latvia, the
International Standards on Auditing for public sector recognised
in Latvia, the instructions regulating the professional activity
of sworn auditors, or have not complied with the norms of the
professional code of ethics.
(3) During the period when the validity of the certificate is
suspended, a sworn auditor is not entitled to enter into new
contracts for the provision of audit services but is entitled to
continue to provide audit services in accordance with the
contracts entered into before the validity of the certificate was
suspended. If during the period when the validity of the
certificate is suspended a sworn auditor continues the provision
of audit services according to contracts which were entered into
prior to the day when the validity of the certificate was
suspended, the Latvian Association of Sworn Auditors shall ensure
the supervision of professional activities of the sworn auditor
in accordance with the procedures specified by it until
fulfilment of such contracts which were entered into prior to the
day when the validity of the certificate was suspended.
(4) Disputing or appealing a decision of the Latvian
Association of Sworn Auditors to suspend operation of a sworn
auditor certificate shall not suspend the operation of such
decision.
[22 January 2004; 22 March 2012; 15 December 2016; 19 April
2018]
Section 18. Cancellation of a Sworn
Auditor Certificate
(1) The Latvian Association of Sworn Auditors shall cancel a
sworn auditor certificate if after its issuance it is found that
any condition referred to in Section 9, Clauses 1, 3, 4 and 5 of
this Law is applicable to the person who has received such
certificate, or that such person has submitted false information
regarding the circumstances referred to in Sections 8 and 9 of
this Law.
(2) The validity of a sworn auditor certificate shall be
cancelled also for such persons who:
1) have been recognised in accordance with a court ruling as
not having the capacity to act, or have died;
2) have repeatedly violated the requirements of this Law or
other laws and regulations and instructions governing sworn
auditor professional activity, and also the requirements of the
International Standards on Auditing recognised in Latvia, the
International Standards on Auditing for public sector recognised
in Latvia or have not complied with the norms of the professional
code of ethics, or whose committed violations or non-fulfilment
of the duties imposed thereon are not compatible with the work of
sworn auditors;
3) have committed a substantial violation of the requirements
of the Law on the Prevention of Money Laundering and Terrorism
Financing;
4) have lodged a submission regarding cancellation of a sworn
auditor certificate.
[22 January 2004; 22 March 2012; 15 December 2016; 19 April
2018]
Section 18.1 Informing
Regarding Suspension or Cancellation of Validity of a Sworn
Auditor Certificate
(1) If the validity of a sworn auditor certificate is
suspended or a sworn auditor certificate has been cancelled for a
person who at the same time is an auditor registered into the
register of another Member State and who is entitled to perform
the audit (review) of annual statements and consolidated annual
statements of commercial companies registered in that Member
State, the Latvian Association of Sworn Auditors shall, within
five working days, notify in writing the Ministry of Finance of
the relevant fact, indicating the term and reason for suspension
of the validity of certificate or the reason for cancellation of
certificate.
(2) The Ministry of Finance shall, not later than within five
working days, send the information referred to in Paragraph one
of this Section to the competent authority of the relevant Member
State in the field of audit.
[29 January 2009]
Section 19. Sworn Auditor
Register
(1) Sworn auditors shall be registered in the Sworn Auditor
Register which shall be maintained and regularly updated by the
Latvian Association of Sworn Auditors.
(2) The Register shall contain the following information
regarding a sworn auditor:
1) the given name and surname;
2) the address of the place of practice, the telephone number,
electronic mail address and the reference to the website address,
if it exists;
3) the number of the certificate;
4) the date and basis of the issuance, suspension of validity
or cancellation of the certificate;
5) the firm name (with indication of the type of a merchant),
legal address and registration number in the Commercial Register
of the commercial company of sworn auditors, if the sworn auditor
is in employment relationship with this commercial company or is
a member, shareholder or participant thereof;
6) if a sworn auditor is at the same time a foreign auditor,
the foreign register shall also be included in which the auditor
has been entered along with the registration number, if the law
of the relevant foreign state provides for the entering of an
auditor into the register.
(3) If any information referred to in Paragraph two, Clauses
1, 2, 5 and 6 of this Section is subject to change, the sworn
auditor shall submit a relevant notification to the Latvian
Association of Sworn Auditors within two weeks. A notification
shall be attested with a signature by a sworn auditor.
(31) It shall be referred to in the Sworn Auditor
Register that the Latvian Association of Sworn Auditors shall be
responsible for the certification of sworn auditors, supervision
of activities, audit services quality control, initiation,
adjudication and enquiry of disciplinary proceedings and
imposition of disciplinary sanctions and the legal address
thereof shall be given. Additionally, it shall be set out that
the public supervision of the Latvian Association of Sworn
Auditors shall be administered by the Ministry of Finance and its
address shall be given.
(32) The Sworn Auditor Register shall be maintained
in Latvian. Additionally, the Latvian Association of Sworn
Auditors may maintain the register in any other of the official
languages of a Member State of the European Union. In this case,
it shall be set out in the register whether the translation is
certified.
(4) The Sworn Auditor Register shall be accessible to the
public, and any person has the right to become acquainted with
it. The information contained in the Sworn Auditor Register shall
be maintained and stored electronically and it shall be available
on the website of the Latvian Association of Sworn Auditors. The
Ministry of Finance shall include an indication on its website to
the website of the Latvian Association of Sworn Auditors where
such register is available.
(5) [3 June 2010]
(6) [3 June 2010]
[12 June 2008; 29 January 2009; 3 June 2010; 15 December
2016]
Chapter V
Regulations for Licensing of Commercial Companies of Sworn
Auditors, Register of Commercial Companies of Sworn Auditors
Section 20. Licensing of Commercial
Companies of Sworn Auditors
(1) A commercial company of sworn auditors has the right to
commence the provision of audit services only after the obtaining
of a licence issued by the Latvian Association of Sworn
Auditors.
(2) The Latvian Association of Sworn Auditors shall issue a
licence for a commercial company of sworn auditors for an
indefinite period.
Section 21. Criteria for the
Issuance of a Licence
(1) A licence for a commercial company of sworn auditors shall
be issued to a commercial company which is entered into the
Commercial Register maintained by the Enterprise Register of the
Republic of Latvia.
(2) A member of the general partnership of sworn auditors and
a complimentary of the limited partnership may be only sworn
auditors or commercial companies of sworn auditors, or auditors
of the Member States, or commercial companies of sworn auditors
of the Member States.
(3) In a capital company of sworn auditors more than 50 per
cent of the voting capital shares or voting shares shall be owned
by sworn auditors or commercial companies of sworn auditors, or
auditors of the Member States or commercial companies of auditors
of the Member States.
(4) In a capital company of sworn auditors, at least 75 per
cent of the members of the executive board shall be sworn
auditors or auditors of the Member States.
(5) If a commercial company of sworn auditors is a stock
company, it may issue only registered stock.
(6) The procedures for work organisation, resource planning,
document management, establishment of registers and files for
sworn auditors and commercial companies of sworn auditors shall
comply with the requirements referred to in Cabinet Regulation
issued on the basis of Section 31.1 of this Law.
(7) Persons who, on behalf of a commercial company of sworn
auditors, provide an auditor's report on the review of the
client's annual statements which is determined by laws and also
provide an audit report on the financial audit of State or local
government authorities shall be sworn auditors.
[22 January 2004; 12 June 2008; 15 December 2016 /
See Paragraph 15 of Transitional Provisions]
Section 21.1 Recognition
of a Licence for a Commercial Company of Auditors Entered in the
Register of other Member State
(1) By derogation from Section 3, Paragraph one of this Law, a
commercial company of auditors entered in the register of other
Member State is entitled to provide audit services in the
Republic of Latvia if the Ministry of Finance has recognised it
as equal to a commercial company of sworn auditors, it has been
issued a licence for a commercial company of sworn auditors and
such commercial company is entered in the Register of Commercial
Companies of Sworn Auditors.
(2) The Ministry of Finance shall prepare an opinion if the
following is received:
1) a submission for obtaining (registering) a licence for a
commercial company of auditors entered in the register of another
Member State which contains also a certification that an
auditor's certificate of another Member State has been issued to
persons who, on behalf of the abovementioned commercial company,
will provide auditor's report on the audit (review) of the annual
statements and consolidated annual statements of a client, and
that the professional qualification of such persons has been
recognised in accordance with the procedures laid down in Section
13 of this Law;
2) a document issued by a competent authority of the relevant
Member State on the fact that this commercial company of auditors
has been entered in the relevant register of commercial companies
of auditors of this Member State.
(3) Within five working days after receipt of the documents
referred to in Paragraph two of this Section, the Ministry of
Finance shall examine them and electronically inform a commercial
company of auditors entered in the register of other Member State
accordingly that:
1) a licence for a commercial company of sworn auditors or a
substantiated refusal will be issued (sent) within 30 days;
2) the document referred to in Paragraph two, Clause 2 of this
Section has not been submitted and that a licence for a
commercial company of sworn auditors or a substantiated refusal
will be issued (sent) within the time period referred to in
Clause 1 of this Paragraph only after receipt of all information
referred to in Paragraph two of this Section.
(4) If the information referred to in Paragraph two of this
Section is received, the Ministry of Finance shall, within 30
days, examine the abovementioned documents and prepare an opinion
regarding recognition of the commercial company of auditors
entered in the register of other Member State as equal to a
commercial company of sworn auditors.
(5) The Ministry of Finance, where necessary, shall cooperate
with a competent authority of the relevant Member State in order
to find out the conditions related to the information referred to
in Paragraph two of this Section.
(6) If it is recognised that a commercial company of auditors
entered in the register of other Member State is equal to a
commercial company of sworn auditors, the Ministry of Finance
shall prepare and, within five working days, send an opinion:
1) to this commercial company;
2) the Latvian Association of Sworn Auditors.
(7) The Latvian Association of Sworn Auditors shall issue a
licence for a commercial company of sworn auditors to a
commercial company of auditors entered in the register of another
Member State and enter it in the Register of Commercial Companies
of Sworn Auditors on the basis of the opinion of the Ministry of
Finance and concurrently inform the Ministry of Finance
thereof.
(8) The Ministry of Finance shall, within five working days
after receipt of the information referred to in Paragraph seven
of this Section, inform a competent authority of the relevant
Member State regarding entering of the commercial company of
auditors entered in the register of this other Member State in
the Register of Commercial Companies of Sworn Auditors.
[15 December 2016]
Section 22. Procedures for the
Issuance of a Licence
(1) In order to obtain a licence, an applicant - commercial
company of sworn auditors - shall submit to the Latvian
Association of Sworn Auditors an application for a licence and
other documents stipulated by the Cabinet. The procedures for
submission of documents shall be determined by the Cabinet.
(11) Within five working days after receipt of the
application and documents referred to in Paragraph one of this
Section the Latvian Association of Sworn Auditors shall inform an
applicant - commercial company of sworn auditors:
1) that a licence of the commercial company of sworn auditors
or a substantiated written refusal will be issued to the
applicant - commercial company of sworn auditors - within the
time period referred to in Paragraph two of this Section
(indicating a specific date);
2) on the procedures for contesting a substantiated written
refusal to issue a licence for a commercial company of sworn
auditors.
(12) If within the time period laid down in
accordance with Paragraph 1.1, Clause 1 of this
Section the Latvian Association of Sworn Auditors does not notify
an applicant for a licence - commercial company of sworn auditors
- regarding its decision to issue a licence for a commercial
company of sworn auditors or not to issue a licence for a
commercial company of sworn auditors or a substantiated refusal
to issue it, it shall be regarded that the Latvian Association of
Sworn Auditors has issued a licence for a commercial company of
sworn auditors to the commercial company of sworn auditors,
applying the default referred to in the Freedom to Provide
Services Law.
(13) Within five working days after receipt of the
application and documents referred to in Paragraph one of this
Section the Latvian Association of Sworn Auditors shall inform an
applicant - commercial company of sworn auditors:
1) regarding an application filled in incompletely and
non-submitted documents stipulated by the Cabinet;
2) that a licence for a commercial company of sworn auditors
or a substantiated written refusal will be issued within the time
period referred to in Paragraph two of this Section only after
receipt of all the information laid down in laws and
regulations.
(14) If the Latvian Association of Sworn Auditors
does not notify an applicant for a licence - commercial company
of sworn auditors - the information referred to in Paragraph
1.3, Clauses 1 and 2 of this Section, it shall be
regarded that the Latvian Association of Sworn Auditors has
issued a licence for a commercial company of sworn auditors
within the time period referred to in Paragraph two of this
Section, applying the default referred to in the Freedom to
Provide Services Law.
(2) The Latvian Association of Sworn Auditors shall examine
the application submitted for a licence, and the documents
appended thereto, and issue to an applicant - commercial company
of sworn auditors -, not later than within 30 days from the date
of receipt of the application, a licence or a substantiated
written refusal. If the Latvian Association of Sworn Auditors has
issued a substantiated written refusal to an applicant -
commercial company of sworn auditors - for a licence for a
commercial company of sworn auditors, the applicant - commercial
company of sworn auditors - for a licence for a commercial
company of sworn auditors is entitled to submit anew the
application referred to in Paragraph one of this Section to the
Latvian Association of Sworn Auditors after elimination of the
reasons referred to in the refusal.
(3) [22 January 2004]
(4) Before the receipt of a licence, a commercial company of
sworn auditors shall pay the State fee laid down by the board of
the Latvian Association of Sworn Auditors. The Latvian
Association of Sworn Auditors shall coordinate the amount of
payment with the Ministry of Finance.
[22 January 2004; 18 April 2013]
Section 23. Suspension and
Cancellation of Validity of a License
(1) If the composition of the members of the executive board
or the composition of the members, shareholders or participants
of a commercial company of sworn auditors has changed, such
commercial company shall notify the Latvian Association of Sworn
Auditors thereof in writing within 30 days from the day of
occurrence of the changes.
(2) The Latvian Association of Sworn Auditors is entitled to
cancel a licence issued to a commercial company of sworn auditors
in the following cases:
1) the information provided for the obtaining of the licence
is false;
2) the conditions referred to in Section 21 of this Law have
been violated;
3) the commercial company has not commenced the provision of
audit services within 12 months from the date of receipt of the
licence;
4) the commercial company has suspended the provision of audit
services for a period exceeding 12 months;
5) the commercial company substantially violates other
provisions of this Law or Regulation No 537/2014;
6) the commercial company substantially violates the
requirements of the Law on the Prevention of Money Laundering and
Terrorism Financing, other laws or laws and regulations;
7) the commercial company has lodged a submission regarding
cancellation of the licence.
(3) If the Latvian Association of Sworn Auditors has
determined circumstances that allow deciding on the cancellation
of a licence issued, having assessed the nature of violation, it
may take a decision on suspension of validity of the licence, the
time period of which may not exceed six months.
(4) During the period when the validity of the licence is
suspended a commercial company of sworn auditors is not entitled
to enter into new contracts for the provision of audit services
but is entitled to continue to provide audit services in
accordance with contracts entered into before the date when the
validity of the licence was suspended. If during the period when
the validity of the licence is suspended the commercial company
of sworn auditors continues the provision of audit services
according to contracts which were entered into prior to the day
when the validity of the licence was suspended, the Latvian
Association of Sworn Auditors shall ensure the supervision of
professional activities of the commercial company of sworn
auditors in accordance with the procedures specified thereby
until fulfilment of such contracts, which were entered into prior
to the day when the validity of the licence was suspended.
(5) The Latvian Association of Sworn Auditors shall notify, in
writing, the Commercial Register institution of the suspension of
the validity of a licence or the cancellation of a licence.
(51) If the validity of the licence has been
suspended or a licence has been cancelled for a commercial
company of sworn auditors which at the same time is a commercial
company of sworn auditors registered into the register of another
Member State and which is entitled to perform the audit (review)
of annual statements and consolidated annual statements of
commercial companies registered in that Member State, the Latvian
Association of Sworn Auditors shall, within five working days,
notify in writing the Ministry of Finance of the relevant fact by
indicating the term and reason for suspension of the validity of
a licence or the reason for cancellation of a licence.
(52) The Ministry of Finance shall, not later than
within five working days, send the information referred to in
Paragraph 5.1 of this Section to the competent
authority of the relevant Member State in the field of audit.
(6) [22 January 2004]
(7) Disputing or appealing a decision of the Latvian
Association of Sworn Auditors to suspend validity of a licence
for a commercial company of sworn auditors shall not suspend the
validity of such decision.
[22 January 2004; 29 January 2009; 22 March 2012; 15
December 2016; 19 April 2018]
Section 24. Register of Commercial
Companies of Sworn Auditors
(1) Commercial companies of sworn auditors shall be registered
in the Register of Commercial Companies of Sworn Auditors which
shall be maintained and regularly updated by the Latvian
Association of Sworn Auditors.
(2) The Register shall contain the following information
regarding a commercial company of sworn auditors:
1) the firm name (with reference to the type of merchant) and
registration number entered in the Commercial Register;
2) the legal address, contact person, the telephone number,
electronic mail address and reference to the website address, if
it exists;
3) the number of the licence;
4) the date and basis of the issuance, suspension of validity
or cancellation of the licence;
5) the given names, surnames and numbers of sworn auditor
certificates of members (participants), if the member
(participant) is a sworn auditor, but for legal persons - the
firm name, registration number entered in the Commercial Register
and legal address;
6) the given name, surname, address of the place of practice
and the number of a sworn auditor certificate of the sworn
auditor who provides audit services on behalf of the commercial
company;
7) the given name, surname, and the number of a sworn auditor
certificate of a member of the executive board and supervisory
board (provided the supervisory board has been established) of
the commercial company if the member of the executive board and
supervisory board (provided the supervisory board has been
established) is a sworn auditor;
8) if a commercial company of sworn auditors is part of a
network of commercial companies of auditors - information about
cooperation partners of this network (if available) or reference
regarding where such information is accessible to the public;
9) if a commercial company of sworn auditors concurrently is a
commercial company registered in a foreign state which, in
accordance with the laws of the foreign state, is entitled to
perform the audit (review) of annual statements and consolidated
annual statements of a commercial company registered in that
state, the register of that foreign state in which a commercial
company of auditors is registered and a registration number (if
the law of the relevant foreign state provides for the
registration of a commercial company of auditors in the register)
shall also be indicated.
(3) If any of the information referred to in Paragraph two,
Clauses 1, 2, 5, 6, 8 and 9 of this Section is subject to change,
the commercial company of auditors shall, within a two-week
period, submit a relevant notification to the Latvian Association
of Sworn Auditors. If any of the information in respect of the
given name, surname of the members (participants) and certificate
number of a sworn auditor referred to in Paragraph two, Clause 5
of this Section and also information referred to in Clause 7 are
subject to change, the commercial company of auditors shall
submit the relevant notification to the Latvian Association of
Sworn Auditors within the time period referred to in Section 23,
Paragraph one of this Law. A notification shall be submitted in
writing and it shall be signed by an official who acts on behalf
of the commercial company of sworn auditors.
(31) It shall be referred to in the Register of
Commercial Companies of Sworn Auditors that the Latvian
Association of Sworn Auditors shall be responsible for the
licensing and supervision of activities of commercial companies
of sworn auditors and the legal address thereof shall be given.
Additionally, it shall be set out that the public supervision of
the Latvian Association of Sworn Auditors shall be administered
by the Ministry of Finance and its address shall be given.
(32) The Register of Commercial Companies of Sworn
Auditors shall be maintained in Latvian. Additionally, the
Latvian Association of Sworn Auditors may maintain the register
in any other of the official languages of a Member State of the
European Union. In this case, it shall be set out in the register
whether the translation is certified.
(4) The Register of Commercial Companies of Sworn Auditors
shall be accessible to the public, and any person has the right
to become acquainted with it. The information contained in the
Register of Commercial Companies of Sworn Auditors shall be
maintained and stored electronically and it shall be available on
the website of the Latvian Association of Sworn Auditors. The
Ministry of Finance shall include an indication on its website to
the website of the Latvian Association of Sworn Auditors where
such register is available.
(5) [3 June 2010]
(6) The commercial company of sworn auditors shall be excluded
from the Register of Commercial Companies of Sworn Auditors if
its licence has been cancelled, or if such commercial company has
been excluded from the Commercial Register.
[12 June 2008; 29 January 2009; 3 June 2010; 22 March 2012;
15 December 2016; 19 April 2018]
Section 24.1 Register of
Third Country Auditors and Third Country Commercial Companies of
Auditors
(1) The Register of Third Country Auditors and Third Country
Commercial Companies of Auditors shall be maintained by the
Latvian Association of Sworn Auditors in collaboration with the
Ministry of Finance. Third country auditors and commercial
companies of third country auditors which provide an auditor's
report on the annual statement or the consolidated annual
statement of a commercial company which is registered in a third
country (hereinafter in this section - the third country
commercial company) and whose transferable securities are
admitted to trading on the regulated market of Latvia shall be
entered in the Register. The information on the third country
auditor and third country commercial company of auditors referred
to in Sections 19 and 24 of this Law shall be entered into the
Register. Annual statements and consolidated annual statements
that have been audited (reviewed) by third country auditors and
third country commercial companies of auditors not included in
the Register of Third Country Auditors and Third Country
Commercial Companies of Auditors shall have no legal effect.
(2) The third country auditor and third country commercial
company of auditors which provide an auditor's report on the
annual statement or the consolidated annual statement of the
third country commercial company which only issues debt
securities that are admitted to trading on the regulated market
of a Member State and whose face value of a single security on
the day of issuance is not less than EUR 50 000 (if they are
admitted to trading on the regulated market until 31 December
2010) or EUR 100 000 (if they are admitted to trading on the
regulated market starting from 1 January 2011) shall not be
entered into the Register of Third Country Auditors and Third
Country Commercial Companies of Auditors.
(3) The Register of Third Country Auditors and Third Country
Commercial Companies of Auditors shall be maintained in Latvian.
Additionally, the Latvian Association of Sworn Auditors may
maintain the register in any other of the official languages of a
Member State of the European Union. In this case, it shall be set
out in the register whether the translation is certified.
(4) The Register of Third Country Auditors and Third Country
Commercial Companies of Sworn Auditors shall be accessible to the
public, and any person has the right to become acquainted with
it. The information contained in this Register shall be
maintained and stored electronically and it shall be available on
the website of the Latvian Association of Sworn Auditors. The
Ministry of Finance shall include an indication on its website to
the website of the Latvian Association of Sworn Auditors where
such register is available.
(5) The Latvian Association of Sworn Auditors shall renew
(update) the information included in the Register of Third
Country Auditors and Third Country Commercial Companies of
Auditors within five working days from the date it has received a
written notification from a third country auditor or third
country commercial company of auditors entered in the Register
regarding changes in information included in the Register.
[12 June 2008; 12 September 2013; 15 December 2016]
Section 24.2 Conditions
for Registration of Third Country Auditors and Third Country
Commercial Companies of Auditors
(1) Third country auditor or third country commercial company
of auditors shall be entered in the Register of Third Country
Auditors and Third Country Commercial Companies of Auditors in
accordance with the procedures specified in Section
24.1 of this Law only upon receipt of an opinion of
the Ministry of Finance, that all the conditions referred
hereinafter in this Paragraph of the Section have been
fulfilled:
1) a third country auditor is a person who has a perfect
reputation and the professional qualification of whom is equal to
professional qualification of a sworn auditor;
2) the majority of the members of the executive board of a
third country commercial company of auditors are persons the
professional qualification of whom is equal to the professional
qualification of a sworn auditor and who have a perfect
reputation;
3) persons who, on behalf of a third country commercial
company of auditors, provide an auditor's report on the annual
statement and the consolidated annual statement of a commercial
company which is registered in this country have perfect
reputation and the professional qualification of these persons is
equal to the professional qualification of a sworn auditor;
4) the audit (review) of the annual statement or consolidated
annual statement of commercial companies registered in the third
country is performed in accordance with the international audit
standards recognised in Latvia or with equal international audit
standards and the requirements of independence, objectivity, and
confidentiality specified in this Law or the requirements of
third countries equal thereto are observed. The remuneration of a
third country auditor or a third country commercial company of
auditors which has been received for audit services, shall not be
affected by the additional services provided or other
conditions;
5) a third country auditor or a third country commercial
company of auditors shall publish on its website a transparency
report in which the information referred to in Article 13 of
Regulation No 537/2014 or equal information thereto is
included.
(2) The Ministry of Finance in cooperation with the Financial
and Capital Market Commission shall prepare an opinion if a
registration application filled in by a third country auditor or
a third country commercial company of auditors has been received.
The sample form of the registration application shall be approved
by the Cabinet. After preparation of an opinion the Ministry of
Finance shall inform the European Commission regarding such
opinion without delay, also indicating whether all the conditions
referred to in Paragraph one of this Section have been complied
with.
(3) The Cabinet shall determine the sample form of the opinion
of the Ministry of Finance referred to in this Section, the
procedures for drawing up and sending thereof.
(4) If the European Commission has recognised third country
supervision, quality control, investigation and penalty systems
as equivalent to the supervision, quality control, investigation
and penalty systems of Member States, then after receipt of a
registration application filled in by such third country auditor
or a third country commercial company of auditors the Ministry of
Finance shall prepare the opinion referred to in this Section,
without assessing whether the conditions referred to in Paragraph
one of this Section have been complied with.
(5) The Ministry of Finance is entitled to enter into a mutual
agreement with the third country competent authority in the field
of audit, if it is necessary to obtain additional information
regarding the quality control results of the audit services
provided by a third country auditor or a third country commercial
company of auditors. The Ministry of Finance shall inform the
European Commission regarding entering into a mutual agreement
without delay.
[29 January 2009; 3 June 2010; 22 March 2012; 15 December
2016]
Section 24.3 Audit
Services Quality Control of Third Country Auditors and Third
Country Commercial Companies of Auditors Entered in the
Register
Third country auditors and third country commercial companies
of auditors which have been entered in the Register of Third
Country Auditors and Third Country Commercial Companies of
Auditors shall be subject to the audit services quality control
laid down in Section 35.1 of this Law and the system
for initiation, examination of disciplinary matters and
application of penalties, sanctions and supervisory measures laid
down in this Law shall be applied to these auditors and
commercial companies of auditors.
[29 January 2009; 15 December 2016]
Chapter VI
Independence, Objectivity of a Sworn Auditor and Requirements of
Professional Ethics
[15 December 2016]
Section 25. Independence and
Objectivity of a Sworn Auditor
(1) A sworn auditor (also a responsible sworn auditor
appointed by a commercial company of sworn auditors) shall be
independent and objective in his or her professional
activity.
(2) State and local government authorities, courts,
prosecutors, and pre-trial investigation institutions shall
guarantee the independence of the professional activity of sworn
auditors. In order to guarantee the independence of the
professional activity of sworn auditors, it is prohibited:
1) to interfere with the professional activities of sworn
auditors, to exert influence or pressure upon them;
2) to require information and explanations from sworn
auditors, except for the cases referred to in Section 27,
Paragraph one and Section 33 of this Law, and also to question
them as witnesses regarding facts that have become known to them
while providing professional services;
3) to control the mail, telegraph and other means of
correspondence, as well as the documents which sworn auditors
have received while providing professional services, to perform
inspection and withdrawal of correspondence and documents, or to
perform searches in order to find and withdraw correspondence and
documents;
4) to control, also by the procedural measures referred to in
Clause 3 of this Section, the information systems and means of
communication necessary for the provision of professional
services of sworn auditors, including electronic means of
communication, to obtain information from them and to interfere
with their functioning;
5) to require information from clients regarding the content
of the professional services provided by sworn auditors;
6) to subject sworn auditors to any sanctions or threats in
respect of the professional services they provide, in compliance
with law, to clients;
7) to bring sworn auditors to any type of liability for
announcements made in writing or orally, which they have made,
pursuant to law and in good faith, while fulfilling their
professional duties.
(3) Members, shareholders or participants, manager, members of
the executive board and supervisory board (if the supervisory
board is established) of the commercial company of sworn auditors
and other persons are prohibited to interfere in the professional
activity of the sworn auditor (also a responsible sworn auditor
appointed by the commercial company of sworn auditors) or affect
him or her with a view to influence independence and objectivity
of this auditor, his or her view or opinion as an independent
expert.
(4) Illegal activity of the sworn auditor in the client's
interests, and also his or her activity in promoting illegal
commitment of the client shall not be regarded to be a
professional activity which expresses as an audit service.
[29 March 2007; 15 December 2016; 19 April 2018]
Section 26. Circumstances which
Jeopardise the Independence and Objectivity of a Sworn Auditor or
a Commercial Company of Sworn Auditors
(1) A sworn auditor and commercial company of sworn auditors
are entitled to undertake the audit of an annual statement and
consolidated annual statement only if the independence and
objectivity of the sworn auditor, responsible sworn auditor
appointed by the commercial company of sworn auditors, and
commercial company of sworn auditors involved in this audit and
also experts or specialists and assistants invited thereby are
not jeopardised.
(2) The independence and objectivity of the sworn auditor,
responsible sworn auditor appointed by the commercial company of
sworn auditors and commercial company of sworn auditors, and also
experts or specialists and assistants invited thereby are
jeopardised if any of the abovementioned persons is, directly or
indirectly, interested in the outcome of the audit. The
independence and objectivity of the abovementioned persons are
jeopardised by the following circumstances:
1) financial obligations and participation in the transactions
of the client;
2) employment relations with the client which are existing now
or which have existed within the last three years;
3) the performance of management functions of the client;
4) kinship or affinity up to the second degree with the member
of the executive board or supervisory board of the client of a
sworn auditor or his or her spouse, or dependent child, or other
relative who has a shared household with the sworn auditor for at
least one year;
5) substantial dependence for income on the services provided
to one or more mutually connected clients;
6) dependence of the remuneration received for audit services
on the results of the audit or additional services provided;
7) acceptance of gifts or services, discounts or other
favourable conditions of a transaction from the client, except
for the case when an objective and informed third person could
consider their value as insignificant or as such which does not
cause any consequences;
8) participation in the equity capital of the client (or of a
commercial company related thereto) or involvement in the
transactions with a view to obtain financial instruments issued,
guaranteed or otherwise ensured by the client (or by a commercial
company related thereto). That referred to in this Paragraph
shall not apply to the participation which is owned only
indirectly in different collective investment schemes (for
example, investment funds, alternative investment funds, life
insurance, funded pension schemes in fund investment plans or
private pension plans).
(3) The independence and objectivity of a sworn auditor, a
responsible sworn auditor appointed by a commercial company of
sworn auditors and a commercial company of sworn auditors is also
jeopardised if at least one of the conditions referred to in
Paragraph two of this Section applies to:
1) a cooperation partner of the network of commercial
companies of auditors to which a sworn auditor or a commercial
company of sworn auditors belongs;
2) a member, shareholder or participant, manager, member of
the executive body, employee of the commercial company of sworn
auditors or any other person the services provided by whom are
used by or directly or indirectly controlled by a sworn auditor,
responsible sworn auditor appointed by a commercial company of
sworn auditors or commercial company of sworn auditors.
(4) A sworn auditor and a commercial company of sworn auditors
may not carry out the audit of an annual statement and
consolidated annual statement if there is a risk that the client
could be a person related to a sworn auditor or commercial
company of sworn auditors, or a risk that this audit could be
related with self-interests of a sworn auditor, responsible sworn
auditor appointed by a commercial company of sworn auditors or
commercial company of sworn auditors (defence or intimidation of
the client in relation to participation in the client's
transactions, financial, civil legal, employment or other
relations between a sworn auditor, commercial company of sworn
auditors, network of commercial companies of auditors or such
natural person referred to in Paragraph three of this Section who
could directly or indirectly influence the audit result, and the
client) from which an objective and duly informed third person
could conclude that the independence of the sworn auditor,
responsible sworn auditor appointed by a commercial company of
sworn auditors or commercial company of sworn auditors is
jeopardised.
(5) The duty of a sworn auditor, a responsible sworn auditor
appointed by a commercial company of sworn auditors and a
commercial company of sworn auditors is to indicate the
conditions referred to in Paragraphs two and three of this
Section in the audit working papers, if such conditions have been
established, and also to indicate measures that have been taken
to rectify these conditions.
(6) The requirements of independence of the sworn auditor and
commercial company of sworn auditors referred to in Section 25 of
this Law and this Section shall apply at least to the time period
to which the client's annual statement or consolidated annual
statement to be audited (or reviewed) applies and the time period
in which the sworn auditor or commercial company of sworn
auditors provides an audit (or review) service.
(7) If during a time period to which the client's annual
statement applies the client is being reorganised by merging,
division or restructuring, a sworn auditor or commercial company
of sworn auditors shall assess whether the conditions referred to
in Paragraphs two and three of this Section have not been caused
by the restructuring of the client which may jeopardise the
independence of the sworn auditor or commercial company of sworn
auditors. Any non-audit services shall also be assessed which
have been provided to the abovementioned client before its
reorganisation and which could influence the independence of the
sworn auditor or commercial company of sworn auditors and
capacity to continue audit of such client's annual statement or
consolidated annual statement after the date when the client's
reorganisation came into effect.
(8) If a sworn auditor or commercial company of sworn auditors
detects risk to independence due to the reasons referred to in
Paragraph seven of this Section, a sworn auditor and commercial
company of sworn auditors has a duty, as soon as possible but not
later than within three months from the day of the detection, to
carry out all necessary measures in order to prevent conditions
that cause risk to independence and may influence objectivity of
a sworn auditor.
(9) A sworn auditor, responsible sworn auditor appointed by a
commercial company of sworn auditors, and commercial company of
sworn auditors shall, before entering into a contract with a
client on audit of the annual statement or consolidated annual
statement, and also during the provision of audit service
provided for in this contract, assess and immediately indicate in
the audit working papers:
1) whether the sworn auditor, responsible sworn auditor
appointed by a commercial company of sworn auditors and
commercial company of sworn auditors comply with the requirements
for independence and objectivity laid down in this Law;
2) whether any of the conditions referred to in Section 25 of
this Law and Paragraphs two and three of this Section is known
that may cast substantiated doubts about independence and
objectivity of the sworn auditor, responsible sworn auditor
appointed by a commercial company of sworn auditors and
commercial company of sworn auditors, and indicate measures taken
to prevent such conditions;
3) whether the experts, specialists or assistants invited are
sufficiently competent for the performance of the audit of the
annual statement or consolidated annual statement of the
particular client and whether the amount of employees and other
necessary resources attracted to this audit are sufficient;
4) whether the time planned for the audit is sufficient in
order to fulfil the obligations of the contract on the audit of
the client's annual statement or consolidated annual statement
not violating the requirements of this Law and other laws and
regulations;
5) in the case of a commercial company of sworn auditors -
whether the requirements of Section 31 of this Law are met.
[15 December 2016; 19 April 2018]
Section 27. Confidentiality
Requirements
(1) A sworn auditor is prohibited to disclose a commercial
secret that he or she has learned while performing professional
duties. The information containing a commercial secret may not be
used or disclosed by a sworn auditor and a commercial company of
sworn auditors without the written authorisation of the client,
except for the cases referred to in Paragraph two of this
Section, Section 33 of this Law, and the Law on the Prevention of
Money Laundering and Terrorism Financing and also the law On
Taxes and Fees and Regulation No 537/2014, or in the cases when
the sworn auditor has the right or an obligation to do so in
accordance with a court ruling.
(2) If the audit services contract concluded between a client
and a sworn auditor or a commercial company of sworn auditors is
terminated and the client has concluded an audit services
contract with another sworn auditor or commercial company of
sworn auditors, the sworn auditor or the commercial company of
sworn auditors with which the contract is terminated shall ensure
that the new sworn auditor or commercial company of sworn
auditors (with which the contract has been concluded) has access
to all relevant information on the client and the last audit of
the annual statement and consolidated annual statement
thereof.
(3) The requirements as set out in Paragraph one of this
Section shall refer to a sworn auditor and a commercial company
of sworn auditors during the period of validity of the audit
services contract with the client, as well as after the contract
is terminated.
(4) Without prejudice to the confidentiality provisions
referred to in Paragraph one of this Section, a sworn auditor or
commercial company of sworn auditors which is carrying out an
audit (review) of the annual statement or consolidated annual
statement for a client which is a part of such group of companies
the parent company of which is located in a third country is
entitled to transfer the audit working papers prepared by it to a
responsible auditor or responsible commercial company of auditors
of the abovementioned group of companies located in a third
country if such papers are necessary for the audit (review) of
the consolidated annual statement of the group of companies. In
such case the right of a data subject to request information on
data processing, including on purposes of data processing, data
recipients, source from which it has been obtained, right to
access his or her data and request their amending, destruction,
discontinuation or prohibition of the processing thereof provided
for in the Personal Data Protection Law, shall apply to the data
processing performed.
(5) Without prejudice to the confidentiality provisions
referred to in Paragraph one of this Section, a sworn auditor or
commercial company of sworn auditors which is carrying out an
audit service for a client the transferable securities of which
are admitted to trading on the regulated market of a third
country or which is a subsidiary of the group of companies of the
third country is entitled, upon request of the competent
authority of this third country, to transfer the audit working
papers or other documents prepared for it which are related to
the audit of the annual statement or consolidated annual
statement of the abovementioned client by complying with the
requirements of Section 37.4 of this Law.
[12 June 2008; 15 December 2016; 19 April 2018]
Chapter VII
Activity, Rights and Duties of Sworn Auditors and Commercial
Companies of Sworn Auditors
Section 28. Professional Activity of
a Sworn Auditor
(1) A sworn auditor shall provide audit services in compliance
with the provisions referred to in Section 3, Paragraph two of
this Law by complying with the requirements of the International
Standards on Auditing recognised in Latvia and the norms of the
professional ethics. If a client is a public-interest entity, the
sworn auditor and commercial company of sworn auditors shall also
comply with the requirements laid down in Regulation No 537/2014
for carrying out an audit of annual statements and consolidated
annual statements in such public-interest entity.
(11) If a client is a state or local government
authority, a sworn auditor and commercial company of sworn
auditors shall provide audit services in conformity with the
requirements of the laws and regulations by complying with the
instructions of the State Audit Office as a group auditor, and
also the International Standards on Auditing for public sector
recognised in Latvia. The State Audit Office as a group auditor
shall provide instructions to a sworn auditor or commercial
company of sworn auditors by 15 October of the current year.
(2) A sworn auditor who cannot for certain reasons perform his
or her professional activity for more than one year shall notify
the Latvian Association of Sworn Auditors thereof and submit an
application regarding suspension of the validity of the sworn
auditor certificate for a specified period of time.
(3) A sworn auditor and a responsible sworn auditor appointed
by a commercial company of sworn auditors has the right to
request from the client and the client has a duty to provide all
information, documents and explanations required in order that
the audit service be provided in compliance with this Law. A
sworn auditor and a responsible sworn auditor appointed by a
commercial company of sworn auditors has the right to invite
experts or knowledgeable persons and assistants, notifying the
client thereof in advance and assuming the responsibility for the
activities carried out by the persons referred to, as well as to
check the movable and immovable property (also securities and
cash), claims and liabilities of the client.
(4) A sworn auditor and commercial company of sworn auditors,
in providing audit services to a State or local government
authority, have the right to receive the information from the
State Audit Office at the disposal thereof obtained from public
registers and databases which is necessary for the achievement of
the purpose of the relevant audit.
[22 January 2004; 15 December 2016 / See Paragraph
16 of Transitional Provisions]
Section 28.1 Limited
Review of the Annual Statement
(1) A sworn auditor and a commercial company of sworn auditors
shall carry out a limited review of the annual statements laid
down in the Law on Annual Statements and Consolidated Annual
Statements in conformity with the provisions of this Law and in
compliance with the requirements of the International Standards
on Auditing recognised in Latvia - International Standards on
Review Engagements. The Latvian Association of Sworn Auditors
shall lay down the procedures in which a set of measures is
included, including the methodology for the conformity review of
amounts of the enterprise income tax, which shall be performed by
sworn auditors and commercial companies of sworn auditors, in
order to meet the requirements of this Paragraph.
(2) When the limited review of the annual statements is
completed, a sworn auditor shall draw up a review report in
accordance with the requirements of the International Standards
on Auditing recognised in Latvia - International Standards on
Review Engagements.
[29 October 2015 / See Paragraph 11 of Transitional
Provisions]
Section 29. Provision of
Professional Services of a Sworn Auditor and a Commercial Company
of Sworn Auditors
(1) A sworn auditor or a commercial company of sworn auditors
is entitled to provide audit services:
1) upon an invitation from the client, and in State or local
government authorities and the institutions which are subordinate
to them - upon an invitation from the management of a higher
authority, but in capital companies where a State or local
government authority is a holder of State or local government
capital shares - upon an invitation from the capital company
itself or the holder of capital shares;
2) upon an invitation from the State institutions and
officials set out in law.
(2) A sworn auditor and a commercial company of sworn auditors
shall provide audit services in accordance with a written
contract for the provision of such services - an audit services
contract.
(3) A client, members of a commercial company or meeting of
participants (shareholders) has the right to freely choose a
sworn auditor or commercial company of sworn auditors with which
to enter into an audit services contract, insofar as such choice
is not restricted by the requirements for independence,
objectivity of a sworn auditor or other requirements laid down in
this Law but in respect of a public-interest entity - also
restrictions laid down in Article 5(1), (4) and (5), and Article
6 of Regulation No 537/2014. A sworn auditor or commercial
company of sworn auditors has the right to freely choose a client
with which to enter into a contract on provision of audit
services, insofar as such choice is not restricted by the
requirements for independence, objectivity of a sworn auditor or
other requirements laid down in this Law but in respect of a
public-interest entity - also restrictions laid down in Article
5(1), (4) and (5), and Article 6 of Regulation No 537/2014. The
rights to meeting of members or participants (shareholders) of
the commercial company referred to in this Paragraph may not be
limited either by the planned provisions of the audit services
contract or any previous agreement, or a provision included in
the agreements entered into by the executive board of the capital
company.
(31) A client may unilaterally derogate from the
audit services contract with a sworn auditor or a commercial
company of sworn auditors only if a substantiated reason exists.
Differences in opinions about accounting techniques as expressed
by a client and a sworn auditor or a commercial company of sworn
auditors shall not constitute the basis for the termination of
the contract. The client who has unilaterally derogated from the
audit services contract has an obligation to notify the Ministry
of Finance and the Latvian Association of Sworn Auditors thereof,
but if the client is a public-interest entity - the Financial and
Capital Market Commission by indicating the reason.
(32) If a capital company is a public-interest
entity, then participants (shareholders) of such capital company
who represent not less than one twentieth of the equity capital
may bring an action to the court against such capital company
regarding revocation of the sworn auditor elected by the meeting
of participants (shareholders) if it has a justified reason.
(33) A sworn auditor and commercial company of
sworn auditors with which the audit services contract is
terminated during the term of validity thereof (regardless of
whether the reason for the termination of such contract is
unilateral derogation of the client, sworn auditor, commercial
company of sworn auditors) has an obligation to notify the
Ministry of Finance, the Latvian Association of Sworn Auditors
thereof, but if the client with which the contract terminated
before its expiry has been entered into is a public-interest
entity - the Financial and Capital Market Commission by
indicating the reason.
(34) A sworn auditor and a commercial company of
sworn auditors which has entered into or extended the audit
services contract on the audit of the annual statement or
consolidated annual statement with a client which is a
public-interest entity has an obligation, as soon as possible but
not later than within 30 days from the day when the
abovementioned contract has come into effect, to notify the name
of the client and time period (in years) for the provision of the
audit services laid down in the abovementioned contract, and also
a time period regarding which the first annual statement or
consolidated annual statement audited in accordance with this
contract has been prepared to the Ministry of Finance being the
competent authority.
(4) [15 December 2016]
(41) A sworn auditor and a commercial company of
sworn auditors have no right to provide audit services for one
and the same State or local government authority for more than
six consecutive years, and also they are prohibited from
participation in the audit of the annual statement of the
abovementioned client for at least two years after the end of
this time period.
(5) At least one year after the termination of the contract on
the audit of the annual statement or consolidated annual
statement a sworn auditor and a responsible sworn auditor
appointed by a commercial company of sworn auditors are
prohibited to hold the office in the executive board or
supervisory board of the commercial company which has been the
client referred to in the terminated contract. If the client
referred to in the terminated contract on the audit of the annual
statement or consolidated annual statement is a public-interest
entity, at least two years after the termination of the
abovementioned contract the sworn auditor and responsible sworn
auditor appointed by a commercial company of sworn auditors are
prohibited:
1) to hold the office in the executive board and supervisory
board of such public-interest entity;
2) to become a member of the audit committee of such
public-interest entity or if the relevant public-interest entity
does not establish the audit committee - a member of such
authority which carries out functions similar to the audit
committee.
(51) At least one year after provision of audit
services a sworn auditor who provides audit services as an
individual merchant or self-employed person and a responsible
sworn auditor appointed by a commercial company of sworn auditors
are prohibited to hold an office in a management body, executive
board, supervisory board, audit committee of the former client or
if the relevant client does not establish the auditor committee -
in a body which carries out functions similar to the audit
committee.
(6) Once a year, a sworn auditor, a commercial company of
sworn auditors and a responsible sworn auditor shall provide a
written attestation of independence of their professional
activity of a sworn auditor from the audited client to the audit
committee of a capital company whose transferable securities are
admitted to trading on the regulated market of Member States, as
well as inform the audit committee of any additional services
provided to this client. A sworn auditor, a commercial company of
sworn auditors and a responsible sworn auditor shall inform the
client's audit committee of conditions jeopardising his or her
independence within the meaning of Section 26, Paragraph two of
this Law and shall consult on measures implemented to rectify
these conditions.
[22 January 2004; 12 June 2008; 29 October 2015; 15
December 2016; 19 April 2018]
Section 30. Special Provisions
Regarding Audit Services Contracts
(1) Upon the receipt of an audit task, a sworn auditor shall
inform the assignor of the task and, if he or she works as a paid
employee at a commercial company of sworn auditors, also the
management of such company, as to whether the conditions referred
to in Section 26, Paragraph two of this Law apply to him or her.
A sworn auditor may undertake the provision of audit services
only if his or her independence and objectivity in the submission
of an opinion are not jeopardised.
(2) If the conditions referred to in Section 26, Paragraph two
come into effect during the period after the entering into of the
audit services contract, the sworn auditor has a duty to, without
delay, notify the assignor of the task and to decline the
performance of the task specified in the contract.
[15 December 2016]
Section 31. Responsible Sworn
Auditor
(1) On the basis of an audit services contract with the
client, the management of a commercial company of sworn auditors
shall appoint a responsible sworn auditor for the provision of
audit services (performance of audit task) and notify the client
of his or her appointment.
(2) The responsible sworn auditor shall provide the audit
services and prepare an auditor's report. Such document,
indicating the given name and surname, the certificate number and
the licence number of the commercial company of sworn auditors,
shall be signed by the responsible sworn auditor and the official
who acts on behalf of the commercial company of sworn
auditors.
[22 January 2004]
Section 31.1 Competence
of the Cabinet in the Field of Audit Services
The Cabinet shall determine the requirements for work
organisation, resource planning, document management,
establishment of registers and files for sworn auditors and
commercial companies of sworn auditors.
[15 December 2016]
Section 31.2 Auditor's
Report
The auditor's report shall include:
1) a paragraph where a client is identified (by indicating the
name and type of the client) the financial statements included in
the annual statement (consolidated annual statement) of which
have been audited by indicating the date and reporting period
regarding which the annual statement (consolidated annual
statement) has been prepared, and the laws and regulations used
in the preparation of the annual statement (consolidated annual
statement) which determine the structure, scope, content, and
procedures for preparation of the annual statement (consolidated
annual statement) of the relevant client (the laws and
regulations of the Republic of Latvia or the legal acts of the
European Union), and also the information regarding the
responsibility of the client and sworn auditor is included;
2) a description of the volume of audit work performed and a
reference to the auditing standards applied in the audit;
3) the opinion of a sworn auditor or a statement on a refusal
to provide an opinion;
4) an indication to all conditions or events to which a sworn
auditor wishes to pay attention by emphasising them but not
providing opinion with reservations, and also an indication to
any material uncertainty (if any detected) relating to the events
or conditions that may cast significant doubt on the client's
ability to continue its activity;
5) the view of the sworn auditor regarding the fact whether
the management report is consistent with the financial statement,
but in relevant cases - whether the consolidated report is
consistent with the consolidated financial statement and whether
the abovementioned report has been prepared in accordance with
the requirements of the law or regulation governing the
preparation thereof;
6) the view of the sworn auditor on whether, in the light of
the knowledge and understanding of the client and the environment
in which the client operates obtained in the course of the audit,
he or she has identified material misstatements in the management
report, and an indication of the nature of any such material
misstatements;
7) the view of the sworn auditor on whether the corporate
governance statement of a capital company (if the transferable
securities thereof are admitted to trading on the regulated
market of the Member States) contains information in accordance
with the requirements of Section 56.1, Paragraph one,
Clauses 3, 4, 6, 8, and 9, and also Section 56.2,
Paragraph two, Clause 5 and Paragraph three of the Financial
Instrument Market Law and whether the information laid down in
Paragraph two, Clauses 1, 2, 3, 4, 7, and 8 of Section
56.2 is included;
8) information on whether a client (if the client is such
capital company the transferable securities of which are admitted
to trading on the regulated market of the Member State, credit
institution, insurance company in the form of a joint-stock
company or reinsurance company in the form of a joint-stock
company) has prepared a non-financial statement, but if the
abovementioned client has an obligation to prepare a consolidated
annual statement - a consolidated non-financial statement, and on
whether the non-financial statement (consolidated non-financial
statement) is included in the management report (consolidated
management report) or prepared as a separate part of the annual
statement (consolidated annual statement) or included in the
consolidated non-financial statement prepared by the parent
company of the abovementioned capital company;
9) opinion of a sworn auditor on whether the information
referred to in Section 59.4 of the Financial
Instrument Market Law has been included in the remuneration
statement of the capital company (if its stocks are admitted to
trading on a regulated market) and whether significant
non-conformities have been established in the remuneration
statement in relation to the financial information indicated in
the annual statement;
10) information on whether the commercial company referred to
in Law on Disclosure of Information on Revenue and Income Taxes
had the obligation to submit the report on income taxes for the
reporting year which was before the relevant reporting year on
which the annual statement to be audited or the consolidated
annual statement to be audited (if there is an obligation to
prepare such) has been prepared and, if there was such an
obligation, whether this report was submitted to the State
Revenue Service in accordance with the requirements of Section 23
of the abovementioned law and published on the website in
accordance with the requirements of Section 24 of the
abovementioned law.
[14 September 2023 / See Paragraph 22 of
Transitional Provisions]
Section 32. Particulars of an
Auditor's Report
(1) In order to acquire legal validity, an auditor's report
shall contain the following particulars (identification
data):
1) the addressee;
2) the date of the document and place of its preparation;
3) the name of the document;
4) the given name and surname of the sworn auditor (in cases
provided by law - of the responsible sworn auditor);
5) the number of the certificate;
6) the signature of the sworn auditor (in cases provided by
law - of the responsible sworn auditor);
7) in cases provided by this Law - the given name, surname and
signature of the person who acts on behalf of the commercial
company of sworn auditors and the number of the licence of the
commercial company of sworn auditors;
8) if the author of the report is a commercial company of
sworn auditors - the legal address thereof but if the author of
the report is a sworn auditor as an individual merchant or
self-employed person - also the address indicated by a person or,
if such address is not indicated, the address of declared place
of residence.
(2) If several sworn auditors who provide audit services as
individual merchants or self-employed persons or responsible
sworn auditors appointed by commercial companies of sworn
auditors are involved in the audit of the annual statement or
consolidated annual statement and they have agreed on the results
of the relevant audit, they shall provide a joint auditor's
report which is signed by all the abovementioned sworn
auditors.
(3) If several sworn auditors who provide audit services as
individual merchants or self-employed persons or responsible
sworn auditors appointed by commercial companies of sworn
auditors are involved in the audit of the annual statement or
consolidated annual statement and they cannot agree on the
results of the relevant audit in general or on certain issues to
be included in the auditor's report or opinion, they shall submit
a joint auditor's report in which each of the abovementioned
sworn auditors shall include a separate opinion accordingly
regarding the results of the abovementioned audit or a certain
issue of the auditor's report or opinion by indicating a reason
due to which an agreement has not been reached.
(4) That referred to in Paragraph one of this Section shall
apply also to a review report which the sworn auditor provides in
accordance with Section 28.1 of this Law regarding a
limited review of the annual statement by accordingly applying
the requirements of Section 31.2, Clauses 1, 2, 3, and
4 of this Law thereto.
[12 June 2008; 15 December 2016; 14 September 2023]
Section 33. Provision of Information
to the Management of a Client, the Financial and Capital Market
Commission, and the Corruption Prevention and Combating
Bureau
(1) A sworn auditor or a commercial company of sworn auditors
shall notify the management (executive board or its responsible
members) of a client or an audit committee (if such committee has
been established) of the issues not included in the opinion (for
example, shortcomings, errors and violations of the internal
control system), which shall not affect the opinion
delivered.
(2) A sworn auditor or a commercial company of sworn auditors
has a duty to, without delay, submit a report in writing to the
Financial and Capital Market Commission in accordance with
Article 12(1)(a), (b) and (c) of Regulation No 537/2014 on the
facts which were discovered during the provision of audit
services in respect of a public-interest entity, electronic money
institution, payment institution, investment brokerage company,
regulated market operator or data reporting services
provider.
(3) A sworn auditor or a commercial company of sworn auditors
has a duty to, without delay, submit a report in writing to the
Financial and Capital Market Commission on the facts referred to
in Paragraph two of this Section, which have been discovered
while providing audit services to a client who is in close
relations with a public-interest entity, electronic money
institution, payment institution, investment brokerage company,
regulated market operator or data reporting services provider
within the meaning of Article 4(1)(38) of Regulation (EU) No
575/2013 of the European Parliament and of the Council of 26 June
2013 on prudential requirements for credit institutions and
investment firms and amending Regulation (EU) No 648/2012.
(31) A sworn auditor or a commercial company of
sworn auditors has a duty to submit information and documents to
the Financial and Capital Market Commission it has requested in
writing, in accordance with the laws and regulations governing
the finance and capital market, to ensure the performance of its
functions.
(32) A sworn auditor or a commercial company of
sworn auditors has a duty to submit a report in writing to the
Corruption Prevention and Combating Bureau on the facts which
have been discovered during the provision of audit services and
might be related to transfer of financial values, property
benefits, or benefits of other nature to a public official in the
form of a bribe or related to intermediation in transfer of such
financial values, property benefits, or benefits of other nature.
A sworn auditor or a commercial company of sworn auditors shall
submit a report not later than within three working days after
the discovery of such facts. The Latvian Association of Sworn
Auditors shall determine the procedures in which a set of
measures is included which have to be performed by sworn auditors
and commercial companies of sworn auditors in order to meet with
the requirements of this Paragraph. Within the meaning of this
Section, the term "a public official" shall have the same meaning
as the term "a public official" in the Criminal Law.
(4) The reporting of information specified in this Section and
the submittal of documents shall not be regarded as a violation
of any contracts, provisions, laws and regulations or laws, and
shall not create a civil legal liability for the sworn auditor or
the commercial company of sworn auditors.
[22 January 2004; 29 March 2007; 12 June 2008; 11 February
2010; 3 March 2011; 29 October 2015; 19 April 2018; 21 June
2018]
Section 33.1 Transparency
Report of a Sworn Auditor and a Commercial Company of Sworn
Auditors
(1) A sworn auditor and a commercial company of sworn auditors
providing audit services to a public-interest entity shall post a
transparency report on their website no later than within four
months after the end of a reporting year. The transparency report
shall be prepared and published in conformity with the
requirements of Article 13 of Regulation No 537/2014.
(2) [15 December 2016]
(3) The transparency report of a commercial company of sworn
auditors referred to in Paragraph one of this Section shall be
signed by a person acting on behalf of this commercial company of
sworn auditors.
[12 June 2008; 29 October 2015; 15 December 2016]
Section 34. Audit Working Papers,
Reports and Other Documents
(1) Audit working papers shall be the property of the provider
of the audit service - the sworn auditor or the commercial
company of sworn auditors accordingly.
(2) A sworn auditor or the management of a commercial company
of sworn auditors has a duty to keep properly the audit working
papers. They may not be revealed to third parties or passed to
third parties without the permission of the client, except in
cases specified by this Law. The time period for the storage of
audit working papers shall be six years.
(21) Auditor's reports prepared by a sworn auditor
or a responsible auditor appointed by a commercial company of
sworn auditors and other reports and documents referred to in
Article 15 of Regulation No 537/2014 and also descriptions of the
policies and procedures referred to in the laws and regulations
governing the requirements for work organisation, resource
planning, document management, establishment of registers and
files for sworn auditors and commercial companies of sworn
auditors, registers for the record of clients, received written
claims, complaints and registers for the record thereof, and also
other documented information related to audits of the annual
statement or consolidated annual statement shall be kept for at
least five years.
(3) Audit working papers and also reports and other documents
referred to in Paragraph 2.1 of this Section shall be
available for the needs of the audit services quality control and
inspection of compliance with the requirements for the audit
services quality control. The same confidentiality requirements
which are laid down for a sworn auditor and commercial company of
sworn auditors in Paragraph two of this Section shall also apply
to the persons who perform the audit services quality control.
The same confidentiality requirements, which apply to sworn
auditors, shall also apply to the persons who perform the audit
services quality control.
[22 January 2004; 15 December 2016; 19 April 2018]
Section 34.1 Audit
Working Papers of Consolidated Annual Statement
(1) A sworn auditor and a responsible sworn auditor appointed
by the management of a commercial company of sworn auditors who
performs an audit (review) of the consolidated annual statement
(hereinafter - the responsible auditor of a group of companies)
shall have full responsibility for an auditor's report on the
consolidated annual statement, but in the relevant case - for the
auditor's report referred to in Article 10 of Regulation No
537/2014 and the additional report referred to in Article 11.
(11) If the same responsible sworn auditor audits
(reviews) the annual statement and consolidated annual statement
of a parent company of a group of companies, the auditor's report
on the consolidated annual statement of a group of companies may
be combined with the auditor's report on the annual statement of
a parent company of a group of companies.
(2) The responsible auditor of a group of companies shall
review the work of the audit conducted by another person during
the audit (review) of the group of companies - another sworn
auditor or a third country auditor, another commercial company of
sworn auditors or a third country commercial company of auditors.
The responsible auditor of a group of companies shall prepare
review materials of an audit work conducted by another person and
include them in his or her audit working papers. The review
materials shall be prepared in such a way that the competent
authority could review the work of the responsible auditor of a
group of companies on an audit review process conducted by
another person.
(3) If an audit (review) of the annual statement of a
subsidiary of the group of companies involved in consolidation is
conducted by a third country auditor or a third country
commercial company of auditors and if there is no cooperation
with the competent authority of this third country in the field
of audit, the responsible auditor of a group of companies shall
have a responsibility to ensure that the audit working papers
prepared by a third country auditor or a third country commercial
company of auditors pertaining to the relevant audit (review) of
the consolidated annual statement are submitted to the competent
authority upon request.
(4) To ensure the compliance with the requirement referred to
in Paragraph three of this Section, the responsible auditor of a
group of companies shall include in his or her audit working
papers the copies of the audit working papers prepared by a third
country auditor or a third country commercial company of auditors
or shall agree with a third country auditor or a third country
commercial company of auditors on adequate and unlimited access
to these papers upon request.
(5) If legal or other conditions impede access to the audit
working papers prepared by a third country auditor or a third
country commercial company of auditors, the responsible sworn
auditor of a group of companies shall attach to his or her audit
working papers the evidence that he or she has carried out all
the necessary measures to gain access to the audit working papers
prepared by a third country auditor or a third country commercial
company of auditors and the evidence of existence of the delaying
conditions and inform the Ministry of Finance thereof. Where
necessary, the responsible sworn auditor of a group of companies
(himself or herself or by involving another person referred to in
Paragraph two of this Section) shall ensure additional audit
procedures which he or she considers as necessary in relation to
the audit (review) of the annual statement of the subsidiary of
the group of companies involved in the consolidation.
(6) If a quality assurance control of the provided audit
services or inspection of compliance with the requirements for
the audit services quality control, or investigation activities
in relation to the audit of the consolidated annual statement are
carried out for the responsible sworn auditor of a group of
companies, the responsible sworn auditor of a group of companies
shall submit the relevant documents to the Latvian Association of
Sworn Auditors or the Ministry of Finance accordingly upon its
request which he or she has kept in respect of the audit work in
the audit of the consolidated annual statement carried out by a
third country auditor or third country commercial company of
auditors, including all audit working papers which refer to the
audit of the consolidated annual statement.
(7) The Ministry of Finance has the right to request and
receive from other competent authorities the information
necessary for the quality assurance control, inspection of
compliance with the requirements for the audit services quality
control, or investigation referred to in Paragraph six of this
Section and documents regarding the work carried out by a sworn
auditor or commercial company of sworn auditors in the audit of
the group of companies. When cooperating with other competent
authorities, the Ministry of Finance shall comply with the
confidentiality requirements in respect of exchange of
information and documents.
(8) If the audit of the annual statement of the parent company
or subsidiary of the group of companies is carried out by a third
country auditor or third country commercial company of auditors,
the Ministry of Finance has the right to request additional
documents and information from the competent authority of the
relevant third country regarding the audit carried out by such
third country auditor or third country commercial company of
auditors by applying the cooperation measures referred to in
Section 37.4 of this Law.
[12 June 2008; 29 October 2015; 15 December 2016]
Section 34.2 Audit
(Review) of Adjusted Annual Statements and Consolidated Annual
Statements
If a client submits an adjusted annual statement or
consolidated annual statement before the date when a responsible
sworn auditor signs the auditor's report or review report, a
sworn auditor shall audit (review) it repeatedly directly in
relation to the adjustments made. A sworn auditor shall indicate
the fact of a repeated audit (review) of an annual statement or
consolidated annual statement in the auditor's report.
[29 October 2015]
Section 35. Assistants of a Sworn
Auditor
[15 December 2016]
Section 35.1 Audit
Services Quality Control
(1) The Ministry of Finance shall, in cooperation with the
Latvian Association of Sworn Auditors, ensure audit services
quality control based on risk approach in order to comply with
the requirements of the laws and regulations, the International
Standards on Auditing recognised in Latvia and the International
Standards on Auditing for public sector recognised in Latvia, the
norms of the professional code of ethics, independence and
objectivity in the provision of audit services. The Ministry of
Finance shall ensure audit services quality control based on risk
assessment (inspection of the compliance with the requirements
for the audit services quality control) for those commercial
companies of sworn auditors and those sworn auditors who have
provided audit services to public-interest entities during the
last three years since the last audit services quality control
performed for them.
(2) The following shall be subject to the audit services
quality control referred to in Paragraph one of this Section:
1) all commercial companies of sworn auditors and sworn
auditors who perform professional activities as individual
merchants or self-employed persons - not less than once every six
years;
2) all commercial companies of sworn auditors and sworn
auditors providing audit services to public-interest entities -
not less than once every three years;
3) all commercial companies of sworn auditors and sworn
auditors providing audit services to State and local government
authorities - not less than once every six years.
(3) The Latvian Association of Sworn Auditors shall ensure an
inspection of the audit services quality control for commercial
companies of sworn auditors and sworn auditors and inform the
Ministry of Finance regarding the results thereof, including
regarding findings and conclusions made. The inspection of audit
services quality control for commercial companies of sworn
auditors and those sworn auditors who do not provide audit
services to public-interest entities shall be carried out in
accordance with the by-laws which after coordination with the
Ministry of Finance are approved by the Latvian Association of
Sworn Auditors.
(31) The Latvian Association of Sworn Auditors
shall inform the Ministry of Finance regarding sworn auditors and
commercial companies of sworn auditors, which are subject to
quality control not less than once every three years and once in
six years in accordance with the provisions of this Section, each
year as soon as possible, however, no later than a month prior to
commencing the audit services quality control.
(32) Commercial companies of sworn auditors and
sworn auditors who provide audit services to public-interest
entities shall, each year by 1 July, submit the information
referred to in Article 14 of Regulation No 537/2014 to the
Ministry of Finance, and also information regarding vocational
qualification (continuing education) programmes acquired in the
previous calendar year. The Ministry of Finance shall compile and
analyse the received information and take measures to rectify the
detected non-conformities.
(4) An authorised representative of the Ministry of Finance
shall, not less than once every three years, inspect how the
requirements for the audit services quality control are complied
with by those commercial companies of sworn auditors and sworn
auditors who provide audit services to public-interest entities,
and draw up an inspection report thereon. The inspection of
compliance with the requirements for the audit services quality
control shall be carried out in accordance with the requirements
of this Law and Article 26 of Regulation No 537/2014. The Cabinet
shall determine the procedures for the inspection of the
compliance with the requirements for the audit services quality
control, the requirements for qualification of authorised
representatives, the information to be included in an inspection
report, and also the content of the inspection programme. The
authorised representative of the Ministry of Finance has the
right to carry out an inspection of the compliance with the
requirements for the audit services quality control at the
practice place of a sworn auditor or a commercial company of
sworn auditors providing audit services to public-interest
entities.
(41) In order to ensure inspections of compliance
with the requirements for the audit services quality control in
conformity with the requirements of Article 26 of Regulation No
537/2014 the Ministry of Finance is entitled to attract experts
for carrying out certain inspections at the place of practice of
the sworn auditor or commercial company of sworn auditors which
provides audit services to public-interest entities. Within the
meaning of this Section the term "expert" complies with the term
"expert" used in Article 26(1)(c) of Regulation No 537/2014.
(5) An authorised representative of the Ministry of Finance,
in performing an inspection of the compliance with the
requirements for the audit services quality control at the place
of practice of the sworn auditor or commercial company of sworn
auditors which provides audit services to public-interest
entities, has the right to become familiar with audit working
papers and transparency report of the sworn auditor or commercial
company of sworn auditors, and also to request other data,
documents and explanations from the sworn auditor or commercial
company of sworn auditors to be inspected which are necessary for
the performance of the obligations laid down in Article 26(6) of
Regulation No 537/2014 and performance of the inspection of the
compliance with the requirements for the audit services quality
control and are at the disposal of the sworn auditor or
commercial company of sworn auditors. In performing an inspection
of the compliance with the requirements for the audit services
quality control at the Latvian Association of Sworn Auditors, the
authorised representative of the Ministry of Finance has the
right to get acquainted with reports on the quality control of
audit carried out by the Latvian Association of Sworn Auditors,
and also to request other information, documents and explanations
obtained during the quality control process of audit services of
the Latvian Association of Sworn Auditors which are necessary for
the inspection of the compliance with the requirements for the
audit services quality control.
(51) The authorised representative of the Ministry
of Finance is prohibited from disclosing commercial secret or
personal data obtained when getting acquainted with the
documents, information or explanations referred to in Paragraph
five of this Section, except the cases specified in laws. The
authorised representative of the Ministry of Finance shall submit
a written declaration to the Ministry of Finance regarding
compliance with the confidentiality requirements. The Ministry of
Finance shall send a copy of such declaration to the Latvian
Association of Sworn Auditors within five working days after
receipt of the declaration, which has been prepared in accordance
with the laws and regulations regarding development and drawing
up of documents.
(52) The authorised representative of the Ministry
of Finance has the right to participate in general meetings,
meetings of the board, commission and committee meetings of the
Latvian Association of Sworn Auditors in which issues and
documents related to the audit services quality control are
examined, and also to get acquainted with the decisions taken in
such general meetings and meetings which are related to the audit
services quality control.
(6) A sworn auditor to be checked or a person who provides
audit services or has provided them in accordance with the
provisions laid down in Article 26(5)(c) of Regulation No
537/2014 during the last three years under the supervision of
this sworn auditor or is otherwise connected or has been
connected for the last three years with the sworn auditor or
commercial company of sworn auditors to be checked may not be as
the authorised representative of the Ministry of Finance who
inspects the compliance with the requirements for the audit
services quality control. A relative of a sworn auditor up to the
third degree kinship, a spouse, as well as a person who is
otherwise interested in the result of an audit also may not be as
the authorised representative of the Ministry of Finance, who
inspects the compliance with the requirements for the audit
services quality control. The authorised representative of the
Ministry of Finance shall submit to the Ministry of Finance a
declaration in writing that the restrictions referred to in this
Paragraph do not apply to him or her. The Ministry of Finance
shall send a copy of such declaration to the Latvian Association
of Sworn Auditors within five working days after receipt of the
declaration, which has been prepared in accordance with the laws
and regulations regarding development and drawing up of
documents.
(7) The authorised representative of the Ministry of Finance
who inspects the compliance with the requirements for the audit
services quality control is prohibited from holding an office in
the executive board or supervisory board (if a supervisory board
has been established) of such commercial company of sworn
auditors in which he or she has carried out inspections of the
compliance with the requirements for the audit services quality
control for two years after the inspection of the compliance with
the requirements for the audit services quality control.
(8) When performing a quality control for a sworn auditor or
commercial company of sworn auditors which provides audit
services to a State and local government authorities, the Latvian
Association of Sworn Auditors has an obligation to obtain
information from the State Audit Office on whether the State
Audit Office as a group auditor, in preparing an opinion
regarding the report on the financial year of the Republic of
Latvia on implementation of the State budget and local government
budgets regarding the previous reporting year, could use the
financial audit carried out by the relevant sworn auditor or
commercial company of sworn auditors in the State or local
government authority and the opinion provided in the result
thereof.
[22 January 2004; 12 June 2008; 29 January 2009; 22 March
2012; 29 October 2015; 15 December 2016; 19 April 2018]
Chapter VIII
Supervision of Operations of the Latvian Association of Sworn
Auditors and Commercial Companies of Sworn Auditors
Section 36. Supervision of
Operations of Commercial Companies of Sworn Auditors
(1) The Latvian Association of Sworn Auditors shall inspect
the compliance of commercial companies of sworn auditors with the
criteria specified in Section 21 of this Law.
(2) The Latvian Association of Sworn Auditors has the right to
request from commercial companies of sworn auditors information
and documents regarding their operations.
(3) A representative of the Latvian Association of Sworn
Auditors is entitled to check documents of commercial companies
of sworn auditors to such extent as is necessary to decide on
questions regarding the review of compliance, the issuance,
suspension or cancellation of a licence, and to participate,
without having the right to vote, in meetings of the management
institutions of such company.
(4) If the Latvian Association of Sworn Auditors finds that a
commercial company of sworn auditors has violated the criteria
specified in Section 21 of this Law, it shall take a decision on
the suspension of validity of the licence of such company within
30 days from the date when the violation was determined. If,
within a six-month period from the date the decision on the
suspension of the licence has been received, the commercial
company of sworn auditors has not terminated the said violations,
a decision shall be taken to cancel the licence issued.
(5) The Latvian Association of Sworn Auditors and its
employees do not have the right to disclose information which has
been obtained while performing the supervision functions
prescribed by this Law, except in cases prescribed by law.
[22 January 2004]
Section 36.1 Responsible
Institution
(1) The State policy in the field of auditing of commercial
companies shall be developed and implemented by the Ministry of
Finance.
(2) The Ministry of Finance shall perform State supervision of
the Latvian Association of Sworn Auditors and cooperate with the
competent authorities in the field of audit of other Member
States and third countries.
(3) The Ministry of Finance shall include information
regarding implementation of the State policy in the field of
audit of commercial companies and measures taken throughout the
year in relation to State supervision of the Latvian Association
of Sworn Auditors in the annual public report thereof.
[29 January 2009; 3 June 2010; 22 March 2012; 15 December
2016]
Section 37. State Supervision of the
Latvian Association of Sworn Auditors
(1) As regards issues which are associated with the
certification of sworn auditors, the licensing of commercial
companies of sworn auditors and other tasks delegated to the
Latvian Association of Sworn Auditors by this Law and related to
the supervision of audit services, the Latvian Association of
Sworn Auditors shall be under the supervision of the Ministry of
Finance. The legal acts of the Latvian Association of Sworn
Auditors which govern the certification of sworn auditors, the
licensing of commercial companies of sworn auditors and the
execution of other tasks delegated to the Latvian Association of
Sworn Auditors by this Law shall be approved by the Latvian
Association of Sworn Auditors after coordination with the
Ministry of Finance.
(2) An authorised representative of the Ministry of Finance
who implements the supervision of the Latvian Association of
Sworn Auditors and cooperation with the competent authorities of
other Member States and third countries in the field of audit is
entitled to participate in meetings of the board, general
meetings, committee and commission meetings of the Latvian
Association of Sworn Auditors, and also to become acquainted with
the decisions taken during the meetings of the board of the
Latvian Association of Sworn Auditors. The Latvian Association of
Sworn Auditors has an obligation to inform the Ministry of
Finance of the convening of a general conference, the board
meetings, committee and commission meetings no later than three
working days before the general meeting or meeting in question
and to inform the Ministry of Finance of the adopted decisions in
writing.
(3) The authorised representative of the Ministry of Finance
who implements the supervision of the Latvian Association of
Sworn Auditors and cooperation with the competent authorities of
other Member States and third countries in the field of audit is
entitled to request from the Latvian Association of Sworn
Auditors all information, documents and explanations which are
necessary to ensure supervision.
(4) A person who during the last three years before the
commencement of fulfilment of duties which are connected with the
supervision and cooperation has provided audit services or has
been a voting participant or a shareholder or the member of the
executive board or supervisory board, or an employee in a
commercial company of sworn auditors, or has been otherwise
connected with a commercial company of sworn auditors may not be
the authorised representative of the Ministry of Finance who
implements the supervision of the Latvian Association of Sworn
Auditors and cooperation with competent authorities of other
Member States and third countries in the field of audit.
(5) The authorised representative of the Ministry of Finance
who implements the supervision of the Latvian Association of
Sworn Auditors and cooperation with the competent authorities of
other Member States and third countries in the field of audit is
prohibited from disclosing commercial secret and personal data
obtained in carrying out the supervision and cooperation
specified in this Law, except the cases specified in laws.
[22 January 2004; 12 June 2008; 29 January 2009; 3 June
2010; 22 March 2012; 19 April 2018]
Section 37.1 Cooperation
with the Competent Authorities of Other Member States
(1) The Ministry of Finance shall be the institution
responsible for the cooperation with the competent authorities of
other Member States and third countries in the field of
audit.
(2) Upon request by the competent authority of another Member
State, the Ministry of Finance shall without delay provide
assistance in investigatory activities that are associated with
audits (reviews) of annual statements and consolidated annual
statements of commercial companies conducted by sworn auditors or
commercial companies of sworn auditors. Within the meaning of
this Section, the assistance shall be understood as investigation
and communication of information upon request by the competent
authority of the Member State, as well as securing of permission
to the competent authority of another Member State or to persons
authorised by that institution to participate in the
investigation. If the Ministry of Finance is unable to provide,
without delay, the requested assistance, it shall inform the
requesting body of this circumstance and indicate the reasons for
delay.
(3) The Ministry of Finance may refuse to provide the
assistance referred to in Paragraph two of this Section if:
1) the communication of information or investigation could
interfere with the interests of the State or are in conflict with
the State security standards;
2) legal proceedings have been initiated against the same
sworn auditors or the same commercial companies of sworn auditors
regarding whom or regarding which the same audit services were
provided, the request for assistance referred to in Paragraph two
of this Section has been received;
3) for the same actions the final decision has already been
taken regarding the same sworn auditors or the same commercial
companies of sworn auditors regarding whom or regarding which the
same audit services were provided, the request for assistance
referred to in Paragraph two of this Section has been
received.
(4) The Ministry of Finance has the right to request
information from the competent authority of another Member State
which is necessary to provide assistance in investigatory
activities that are associated with audits (reviews) of annual
statements and consolidated annual statements of commercial
companies conducted by sworn auditors or commercial companies of
sworn auditors of another Member State eligible to conduct audits
(reviews) of annual statements and consolidated annual statements
of commercial companies registered in this Member State. The
Ministry of Finance shall use the received information only for
the provision of assistance in investigatory activities referred
to in this Section.
(41) The Ministry of Finance shall immediately
inform the competent authority of another Member State if in
providing the investigatory activities referred to in Paragraph
four of this section at least one of the following conditions is
determined:
1) a person which is entitled to conduct audits (reviews) of
annual statements and consolidated annual statements of
commercial companies registered in another Member State has not
observed the requirements connected with professional ethics,
independence, objectiveness, confidentiality or has not been
registered in the public register or has not been subject to
quality assurance system;
2) an audit (review) of an annual statement or consolidated
annual statement of the commercial company registered in another
Member State has not been performed in accordance with the
international auditing standards recognised in Latvia or equal
international auditing standards;
3) an audit (review) of an annual statement or consolidated
annual statement of the commercial company registered in another
Member State has been performed by a person who is not entitled
to conduct it.
(42) The Ministry of Finance is entitled to request
the information form the competent authority of another Member
State regarding investigatory activities which have been
performed after the receipt of the information regarding the
conditions referred to in Paragraph 4.1 of this
Section and regarding significant facts discovered during the
investigation, which may be the basis for performance of
appropriate measures in order to eliminate these conditions.
(43) If the Ministry of Finance receives the
information from a competent authority of another Member State
that a sworn auditor or a commercial company of sworn auditors
has not observed the requirements of this Law or that an audit
(review) of annual statement or consolidated annual statement has
been performed by a person who is not entitled to conduct it, the
Ministry of Finance shall perform the necessary investigatory
activities and inform a competent authority of another Member
State of the results of this investigation and performed
measures.
(44) The Ministry of Finance has the right to
request that the investigatory activities within the territory of
another Member State are performed by the competent authority of
this Member State or that the competent authority of another
Member State permits the authorised representative of the
Ministry of Finance to participate in the investigation conducted
by the competent authority of this Member State.
(45) If the investigation is performed in the
territory of Latvia, the Ministry of Finance shall supervise the
investigation during the course thereof.
(5) The Ministry of Finance shall observe the confidentiality
requirements in its cooperation with the competent authorities of
other Member States in the field of audit. When communicating the
information referred to in Paragraphs two and six of this Section
to the competent authority of another Member State, the Ministry
of Finance shall indicate whether the relevant information
contains commercial secret or personal data. All persons who have
become aware of the information referred to in Paragraph two of
this Section in carrying out the investigation referred to in
this Section and who have participated in the provision of the
information referred to in Paragraph six of this Section, are
prohibited from disclosing commercial secret or personal data
obtained in carrying out the investigation referred-to and
providing information, except the cases laid down in laws.
(6) The Ministry of Finance shall co-operate with the
competent authorities of Member States in the field of audit,
providing them with information regarding supervision of sworn
auditors and commercial companies of sworn auditors and receiving
information from them regarding supervision of foreign auditors
and foreign commercial companies of auditors recorded in their
register. In cooperation with the competent authorities of other
Member States in the field of audit, the Ministry of Finance
shall rely on the supervision conditions of foreign auditors and
foreign commercial companies of auditors in such Member State in
the relevant register of which the foreign auditor or the foreign
commercial company of auditors is recorded.
(7) If an auditor of another Member State or a commercial
company of auditors of another Member State carries out the audit
(review) of the annual statement or consolidated annual statement
(if such has been prepared) of a subsidiary of a group of
companies of the Republic of Latvia registered in another Member
State which is used for the preparation of the consolidated
annual statement of a group of companies of the Republic of
Latvia, then the audit (review) of such annual statement or
consolidated annual statement (if such has been prepared) shall
be recognised as equivalent to the audit (review) of the annual
statement or consolidated annual statement carried out by a sworn
auditor or a commercial company of sworn auditors and the auditor
of another Member State or the commercial company of auditors of
another Member State which carries out the audit (review) of such
annual statement or consolidated annual statement (if such has
been prepared) are not subject to additional requirements in
relation to registration, quality control, independence, the
auditing standards applied during auditing (review) of the
consolidated annual statement and the conformity with the ethical
norms.
(8) If an auditor of another Member State or a commercial
company of auditors of another Member State provides audit
services to such commercial company which is not registered in
the Republic of Latvia but whose transferable securities are
admitted to trading on the regulated market of the Republic of
Latvia, then such audit services shall be recognised as
equivalent to the audit services provided by a sworn auditor or a
commercial company of sworn auditors, and the auditor of another
Member State or the commercial company of auditors of another
Member State which provides such audit services are not subject
to additional requirements in relation to registration, quality
control, independence, the auditing standards applied during the
audit (review) of the consolidated annual statement and the
conformity with the ethical norms.
[12 June 2008; 29 January 2009; 22 March 2012]
Section 37.2 The Audit
Advisory Council
(1) The Audit Advisory Council (hereinafter - the Council) is
a consultative body which is established by and whose staff is
approved by the Minister for Finance. The purpose of the
operation of the Council is promoting the increase of quality of
audit services.
(2) The Council shall be composed of one member from each of
the following: the Ministry of Finance, the Ministry of Justice,
the Financial and Capital market Commission, the Latvian
Association of Sworn Auditors, the Latvian Association of
Accountants, Riga Stock Exchange, the Foreign Investors Council
in Latvia, the Employers' Confederation of Latvia and one of the
higher education institutions.
(3) The Council shall act in accordance with a by-law approved
by the Cabinet. The activities of the Council shall be
technically ensured by the Ministry of Finance from the funds
allocated for this purpose in the State budget.
[12 June 2008; 3 June 2010; 18 April 2013]
Section 37.3 Tasks and
Rights of Audit Advisory Council
(1) The Council shall examine the documents prepared by the
Latvian Association of Sworn Auditors regarding examination and
certification of applicants of sworn auditors, licensing of
commercial companies of sworn auditors, maintaining the
qualification of sworn auditors and the quality control of the
professional activity, as well as regarding international
auditing standards and ethical guidelines recognised in Latvia
and shall make recommendations to the Latvian Association of
Sworn Auditors for their improvement while concurrently informing
the Ministry of Finance of the recommendations it has made.
(2) The Council has a right to receive from the Latvian
Association of Sworn Auditors information and documents necessary
for the execution of the tasks of the Council.
(3) The authorised members of the Council have a right to
participate in general meetings and meetings of the board of
directors and committees of the Latvian Association of Sworn
Auditors where the documents referred to in Paragraph one of this
Section are reviewed, as well as to get familiarised with the
decisions pertaining to the documents referred to in Paragraph
one of this Section, taken in these general meetings and
sessions.
(4) The Council has a right to make recommendations to the
Ministry of Finance regarding the necessary amendments to the
laws and regulations concerning the field of auditing.
(5) The Council members who, while performing the assignments
of the Council, have become informed of commercial secret, shall
observe the confidentiality requirements. The confidentiality
requirements shall apply to all members of the Council, including
persons who have completed their term in the Council.
(6) Once every year, the Council shall submit summarised
information on its activities to the Ministry of Finance.
[12 June 2008]
Section 37.4 Co-operation
with the Third Countries' Competent Authorities
(1) The Ministry of Finance shall enter into a mutual
agreement with a third country competent authority in the field
of audit, if a request for the audit working papers and other
documents referred to in Paragraph two of this Section has been
received therefrom. The Ministry of Finance shall inform the
European Commission regarding entering into a mutual agreement
without delay.
(2) Upon request of a third country competent authority the
Ministry of Finance shall hand over thereto copies of audit
working papers and other documents of a sworn auditor and a
commercial company of sworn auditors, which are at the disposal
of the sworn auditor or the commercial company of sworn auditors,
if all of the following conditions referred to in this Paragraph
of the Section exist:
1) the audit working papers and other documents requested are
related to the provision of audit services to such commercial
companies whose transferable securities are admitted to trading
on the regulated market of the relevant third country, or to such
commercial company which is a subsidiary of the group of
companies involved in consolidation the audit (review) of the
annual statement of which is carried out by an auditor of the
relevant third country or a commercial company of auditors of the
relevant third country;
2) the third country competent authority has provided a
justification for the request of audit working papers and other
documents;
3) confidentiality requirements apply to the employees of the
third country competent authority who receive copies of the audit
working papers or other documents requested;
4) the third country competent authority is from such third
country, the supervision, quality control, investigation and
penalty systems have been recognised by the European Commission
as equivalent to the supervision, quality control, investigation
and penalty systems of Member States.
(3) The Ministry of Finance is entitled to refuse to hand over
copies of the documents referred to in Paragraph two of this
Section, if at least one of the following conditions referred to
in this Paragraph of the Section exists:
1) the handing over of copies of documents may harm national
interest or is in contradiction with the national security
regulations;
2) judicial proceedings have been commenced against the same
sworn auditors or the same commercial companies of sworn
auditors, regarding which or regarding the same audit services
provided by which the request referred to in Paragraph one of
this Section was received.
(4) Within a month after receiving the request of a third
country competent authority referred to in Paragraph one of this
Section the Ministry of Finance shall send a request to the
Latvian Association of Sworn Auditors to lodge the copies of the
audit working papers and other documents referred to in Paragraph
two of this Section to the Ministry of Finance.
(5) Upon request of the Ministry of Finance referred to in
Paragraph four of this Section the Latvian Association of Sworn
Auditors shall request copies of the audit working papers or
other documents referred to in the request of the Ministry of
Finance from the relevant sworn auditor or commercial company of
sworn auditors, which have been certified in accordance with the
laws and regulations on development and drawing up of
documents.
(6) Within a month after receiving the request of the Ministry
of Finance the Latvian Association of Sworn Auditors shall submit
copies of the audit working papers and other documents referred
to in Paragraph two of this Section to the Ministry of Finance
for handing over thereof to the relevant third country competent
authority. The Latvian Association of Sworn Auditors shall submit
the referred to copies of documents, them being certified in
accordance with the laws and regulations on development and
drawing up of documents. The Latvian Association of Sworn
Auditors shall conform to the confidentiality requirements and,
in submitting copies of the referred to audit working papers and
other documents, indicate whether the particular documents
contain commercial secret or personal data. Handing over of
personal data to third country competent authorities shall take
place in accordance with the Personal Data Protection Law. All
persons who have become aware of commercial secret and personal
data in handing over copies of the referred to audit working
papers and other documents to the Ministry of Finance are
prohibited from disclosing them, except the cases specified in
laws.
(7) If the Latvian Association of Sworn Auditors cannot submit
copies of the requested documents within the time period referred
to in Paragraph six of this Section due to objective reasons, it
shall notify the Ministry of Finance thereof in writing,
indicating the reasons for delay and the date when copies of
documents will be submitted.
(8) The Ministry of Finance shall conform to the
confidentiality requirements in co-operating with the third
country competent authorities in the field of audit. In handing
over copies of the audit working papers and other documents
referred to in Paragraph two of this Section the Ministry of
Finance shall indicate whether the particular documents contain
commercial secret or personal data. All persons who have become
aware of commercial secret or personal data in handing over
copies of audit working papers and other documents to the third
country competent authority are prohibited from disclosing them,
except the cases specified in laws.
[22 March 2012]
Chapter
VIII.1
Regulations for Ensuring Application of
Regulation No 537/2014
[15 December 2016]
Section 37.5 Competent
Authorities
(1) In accordance with Article 20(1) of Regulation No 537/2014
a competent authority which is responsible for the performance of
the tasks provided for in this Regulation and ensuring
application of the provisions of this Regulation (except for the
performance of the tasks and ensuring application of the
provisions provided for in Regulation No 537/2014 for the
performance of and ensuring application of which the Financial
and Capital Market Commission is determined to be responsible
institution in Paragraph two of this Section) shall be the
Ministry of Finance.
(2) In accordance with Article 20(2) of Regulation No 537/2014
a competent authority which is responsible for ensuring
application of the provisions of Chapter III, Articles 16, 17 and
19 of this Regulation shall be the Financial and Capital Market
Commission. The Financial and Capital Market Commission shall
carry out the following obligations as the competent authority
abovementioned in this Paragraph:
1) supervise whether a public-interest entity complies with
the provisions of this Law and Article 16 of Regulation No
537/2014 in respect of appointing of a sworn auditor or
commercial company of sworn auditors in the public-interest
entity and whether the public-interest entity, when entering into
an audit services contract or extending the validity of the
abovementioned contract, has complied with the provisions of
Section 37.8 of this Law and Article 17 of Regulation
No 537/2014 regarding a duration of the time period for
performance of the audit task in the public-interest entity;
2) within 10 days starting from the day when a report referred
to in Section 29, Paragraph 3.1 or 3.3 of
this Law regarding termination of the audit services contract
before the expiry thereof, in accordance with the requirements of
Article 19 of Regulation No 537/2014, notify the Ministry of
Finance thereof in writing;
3) immediately notify the Ministry of Finance in writing
regarding the possible violations of the requirements of this Law
and Regulation No 537/2014 in which a sworn auditor or commercial
company of sworn auditors appointed by the public-interest entity
is involved and which are detected during the supervision process
carried out by the Financial and Capital Market Commission as a
competent authority;
4) not later than until 1 February of the next year, compile
and submit a written information to the Ministry of Finance
regarding the measures taken in the previous year and issued
administrative acts which are related to the supervision referred
to in Clause 1 of this Paragraph.
(3) The Financial and Capital Market Commission is entitled to
issue regulations regarding the procedures for compliance with
Chapter III, Articles 16, 17 and 19 of Regulation No
537/2014.
(4) Competent authorities referred to in Article 8(5)(g) of
Regulation No 537/2014 shall be the Ministry of Finance and the
Financial and Capital Market Commission.
[15 December 2016]
Section 37.6 Non-audit
Services
(1) A sworn auditor and a commercial company of sworn auditors
which carry out the audit of annual statements or consolidated
annual statements of a public-interest entity, but if the
abovementioned sworn auditor or commercial company of sworn
auditors is a cooperation partner of the network of commercial
companies of auditors - also any cooperation partner of such
network of commercial companies of auditors are prohibited to
provide prohibited non-audit services referred to in the second
sub-paragraph of Article 5(1) of Regulation No 537/2014 to such
public-interest entity, the parent company thereof and
subsidiaries of such public-interest entity in the European Union
during a time period indicated in the first sub-paragraph of
Article 5(1) of Regulation No 537/2014. Exception is such
non-audit services which are referred to in Paragraph two of this
Section if all provisions of Paragraph three of this Section are
complied with.
(2) Non-audit services which a sworn auditor, commercial
company of sworn auditors and cooperation partner of the network
of commercial companies of auditors referred to in Paragraph one
of this Section are entitled to provide if all provisions of
Paragraph three of this Section are complied with shall be as
follows:
1) provision of tax consultancy services including
consultations in respect of tax reliefs, tax calculation and
preparation of tax declarations;
2) provision of consultations in respect of receipt of
financial aid and support payments.
(3) A sworn auditor, commercial company of sworn auditors and
cooperation partner of the network of sworn auditors referred to
in Paragraph one of this Section are entitled to provide the
non-audit services referred to in Paragraph two of this Section
provided that all of the following conditions are met:
1) these services (separately or in the aggregate) have no
direct or have immaterial effect on the annual statement or
consolidated annual statement of the public-interest entity;
2) these services have no relation to management or
decision-taking of the public-interest entity;
3) the estimation of the effect of these services on the
annual statement or consolidated annual statement of the
public-interest entity is comprehensively documented and
explained to the audit committee of the public-interest entity or
equal entity in conformity with Article 11 of Regulation No
537/2014;
4) a sworn auditor or commercial company of sworn auditors
complies with the independence requirements laid down in this
Law;
5) provision of these services, before the commencement
thereof, has been approved by the audit committee of the
public-interest entity or an entity equal to audit committee.
[15 December 2016; 19 April 2018]
Section 37.7 Restriction
of Receipt of Fee for Non-audit Services and Granting
Exemption
(1) In conformity with the first sub-paragraph of Article 4(2)
of Regulation No 537/2014 when the sworn auditor or commercial
company of sworn auditors provides audit services to a
public-interest entity and concurrently provides also non-audit
services to such company or parent company or subsidiary thereof
other than prohibited non-audit services referred to in Article
5(1) of this Regulation for three consecutive reporting years or
more, the total amount of calculated remuneration (hereinafter -
the fee) for such non-audit services shall be limited to no more
than 70 % of the average of the annual fee paid in the
abovementioned time period of three reporting years for an audit
(review) of the annual statement and consolidated annual
statement. The average fee of the reporting year shall be
calculated on the basis of the fee calculated during the last
three reporting years for an audit (review) of the annual
statement and consolidated annual statement which is carried out
for a public-interest entity and, in the relevant case, for a
parent company or subsidiary thereof.
(2) In exceptional case when a submission of the sworn auditor
or commercial company of sworn auditors which carries out an
audit (review) of the annual statement and consolidated annual
statement for a public-interest entity is received where the need
to receive exemption in respect of a particular public-interest
entity is substantiated, the Financial and Capital Market
Commission is entitled to exempt the abovementioned sworn auditor
or commercial company of sworn auditors from the requirement of
the first sub-paragraph of Article 4(2) of Regulation No 537/2014
referred to in Paragraph one of this Section in respect of the
particular public-interest entity. Such exemption may be granted
for a time period not exceeding two reporting years.
[15 December 2016]
Section 37.8 Maximum
Duration of Audit Task and Extension Thereof
(1) In conformity with the second sub-paragraph of Article
17(1) of Regulation No 537/2014, a sworn auditor or commercial
company of sworn auditors have no right to carry out an audit
(review) of the annual statement and consolidated annual
statement for more than 10 consecutive years in the same
public-interest entity (hereinafter in this Section - the maximum
duration of audit task).
(2) By way of derogation from the provisions of Paragraph one
of this Section, a public-interest entity is entitled to extend
the duration of carrying out the audit task for a commercial
company of sworn auditors in order for such time period to be
longer than the maximum duration of audit task referred to in
Paragraph one of this Section provided that both of the following
conditions are complied with:
1) after expiry of the maximum duration of audit task the
public-interest entity shall organise an open procurement
regarding provision of audit services by using a tender
procedure;
2) the maximum duration of audit task together with the
extension thereof (hereinafter in this Section - the extended
duration of audit task) does not exceed 20 years.
(3) In conformity with Article 17(3) of Regulation No 537/2014
after the expiry of the maximum duration of audit task referred
to in Paragraph one of this Section, or after the expiry of the
extended duration of audit task referred to in Paragraph two of
this Section, a sworn auditor and commercial company of sworn
auditors are prohibited to undertake a new audit task in the
abovementioned public-interest entity within the following
four-year period. If the sworn auditor or commercial company of
sworn auditors belongs to the network of commercial companies of
sworn auditors, the prohibition referred to in this Paragraph
shall apply also to cooperation partners of such network.
[15 December 2016 / See Paragraph 18 of Transitional
Provisions]
Section 37.9
Establishment of Audit Committee
(1) A commercial company which is registered in Latvia and
transferable securities of which are admitted to trading on the
regulated market of a Member State shall establish an audit
committee and ensure its operation in conformity with the
requirements of the Financial Instrument Market Law.
(2) A public-interest entity other than the commercial company
referred to in Paragraph one of this Section shall establish an
audit committee or similar entity thereto by accordingly applying
the requirements for the establishment and operation of the audit
committee laid down in Part D, Chapter II1 of the
Financial Instrument Market Law. The public-interest entity need
not establish the audit committee if such entity complies with
any of the conditions of Section 55.11, Paragraph four
of the Financial Instrument Market Law or it is a private pension
fund within the meaning of the Law On Private Pension Funds, or a
manager of the State funded pension scheme resources within the
meaning of the Law On State Funded Pensions.
(3) A public-interest entity has an obligation to provide
additional report to the audit committee referred to in Article
11 of Regulation No 537/2014 to the Financial and Capital Market
Commission within five working days after a written request by
the Financial and Capital Market Commission.
[15 December 2016 / See Paragraph 19 of Transitional
Provisions]
Section 37.10
Responsibility of Public-interest Entity
(1) If a commercial company which is registered in Latvia and
transferable securities of which are admitted to trading on the
regulated market of a Member State has not complied with the
requirements of Section 37.9, Paragraph one or three
of this Law, the Financial and Capital Market Commission is
entitled to apply the sanction or supervisory measures laid down
in Section 148, Paragraph eighteen of the Financial Instrument
Market Law to the abovementioned commercial company. The
Financial Instrument Market Law determines the procedures for
application and publication of such sanctions or supervisory
measures, and also the procedures for appealing the
administrative act issued by the Financial and Capital Market
Commission by which such sanctions or supervisory measures are
applied.
(2) If a public-interest entity other than the commercial
company referred to in Paragraph one of this Section has failed
to comply with the requirements of Section 37.9,
Paragraph two or three of this Law, the Financial and Capital
Market Commission is entitled to apply one or several such
sanctions or supervisory measures to the abovementioned
public-interest entity:
1) issue a warning;
2) publish a public announcement on the website of the
Financial and Capital Market Commission by indicating the person
liable for the violation and the essence of such violation;
3) require that the person liable for the violation ceases the
relevant activity;
4) determine a temporary prohibition to a member of the
supervisory board or executive board of the commercial company
who is liable for the relevant violation to fulfil the duties
determined for him or her in the commercial company for a time
period up to three years;
5) impose a fine to the commercial company up to 10 per cent
of the net turnover amount of the previous reporting year. If 10
per cent of the net turnover amount of the previous reporting
year is less than EUR 142 300, the Financial and Capital Market
Commission is entitled to impose a fine up to EUR 142 300;
6) impose a fine of up to one million euros on the natural
person who is responsible for the violation.
(3) If a public-interest entity has failed to comply with the
provisions of this Law and Article 16 of Regulation No 537/2014
in respect of appointment of a sworn auditor or commercial
company of sworn auditors in a public-interest entity or if it,
in entering into an audit services contract with a sworn auditor
or commercial company of sworn auditors or extending the term of
validity of the abovementioned contract, has failed to comply
with the provisions of this Law and Article 17 of Regulation No
537/2014 regarding the duration of performance of audit task in
the public-interest entity, the Financial and Capital Market
Commission is entitled to apply one or several sanctions or
supervisory measures referred to in Paragraph two of this Section
to such public-interest entity.
(4) The fines collected for the violations referred to in
Paragraphs two and three of this Section shall be paid into the
State budget.
(5) The Financial and Capital Market Commission shall post
information regarding sanctions and supervisory measures applied
to persons for the violations referred to in Paragraphs two and
three of this Section on its website by indicating information
regarding appeal of the administrative act issued thereby and
taken decision.
(6) Regarding the information referred to in Paragraph five of
this Section, the Financial and Capital Market Commission is
entitled to:
1) make it available to the public without identifying the
person if upon previous assessment it has been ascertained that
disclosure of data of the natural person to which a sanction or
supervisory measure has been applied is not commensurate or that
disclosure of data of the natural or legal person may pose a
threat to stability of the financial market or the course of
initiated criminal proceedings, or cause incommensurate damage to
the persons involved;
2) not make it available to the public if upon previous
assessment it has been ascertained that disclosure of such
information may pose a threat to stability of the financial
market or is not commensurate with the committed violation.
(7) The administrative act issued by the Financial and Capital
Market Commission regarding sanctions or supervisory measures
applied in accordance with Paragraphs two and three of this
Section may be appealed to the Administrative Regional Court.
(8) The Financial and Capital Market Commission shall, within
five working days after the day of taking a decision, inform the
Ministry of Finance in writing regarding the sanction and
supervisory measures applied for the violations referred to in
Paragraphs two and three of this Section by indicating a
responsible person to whom the abovementioned sanctions and
supervisory measures have been applied, and the type of such
sanctions and measures.
[15 December 2016]
Chapter IX
Liability, Complaints, and Procedures for Examination of
Disputes
[22 January 2004]
Section 38. Initiation and
Examination of a Disciplinary Matter and Procedures for
Application of Sanctions
[22 January 2004]
Section 38.1 Initiation
and Examination of Disciplinary Matters and Application of
Sanctions
(1) A sworn auditor shall have a disciplinary, civil and
criminal-law liability for his or her professional activity, as
prescribed by laws and regulations. The laws and regulations
governing the issue of administrative acts shall lay down the
procedures by which the Latvian Association of Sworn Auditors
shall issue administrative decisions in disciplinary matters.
(2) The Latvian Association of Sworn Auditors may initiate
disciplinary proceedings against a sworn auditor at the proposal
of the court, the complaint of a legal or natural person or on
its own initiative and should inform the Ministry of Finance in
writing thereof. The procedures for initiation and adjudication
of disciplinary matters and imposition of sanctions shall be
prescribed by law and shall be approved by the Latvian
Association of Sworn Auditors, after the consultation with the
Ministry of Finance.
(3) When receiving the information referred to in Paragraph
two of this Section, the Ministry of Finance shall abide by the
confidentiality requirements. The confidentiality requirements
shall apply to all persons who have become informed of commercial
secret during and after the time of receiving the information,
including persons who have ceased performing their duties
associated with the State supervision of the activities of the
Latvian Association of Sworn Auditors.
(4) The disciplinary proceedings referred to in Paragraph two
of this Section shall be initiated for the violation of this Law
and other laws and regulations, decisions of the Latvian
Association of Sworn Auditors, guidelines regulating the
professional activity and norms of ethical rules or if a sworn
auditor has not complied with the requirement of furthering his
or her education and advancing his or her professional
qualification through the process of continuing education
recognised by the Latvian Association of Sworn Auditors.
(5) The Latvian Association of Sworn Auditors shall inform the
Ministry of Finance in writing regarding all the decisions taken
at the disciplinary proceedings. The Latvian Association of Sworn
Auditors shall communicate the aforementioned information within
five working days after the decision has come into force.
[12 June 2008; 15 December 2016; 19 April 2018]
Section 38.2 Sanctions
and Supervisory Measures, Issue and Appeal of Administrative
Acts
(1) The Ministry of Finance shall issue administrative acts
(decisions) regarding application of sanctions and supervisory
measures in the cases laid down in this Section to sworn auditors
and commercial companies of sworn auditors which provide audit
services to public-interest entities. The laws and regulations
governing the issue of administrative acts (decisions) shall lay
down the procedures by which the Ministry of Finance shall issue
administrative acts.
(2) An administrative act (decision) of the Ministry of
Finance issued in relation to sanctions or supervisory measures
referred to in this Section may be appealed to the Administrative
Regional Court. The Administrative Regional Court shall
adjudicate the matter as the court of first instance. The case
shall be reviewed in the composition of three judges. A judgement
of the Administrative Regional Court may be appealed by
submitting a cassation complaint.
(3) Appealing an administrative act (decision) of the Ministry
of Finance issued in relation to sanctions and supervisory
measures referred to in this Section shall not suspend the
operation of such act (decision).
(4) The Ministry of Finance is entitled to apply one or
several of the following sanctions or supervisory measures for
non-compliance with the requirements of this Law and Regulation
No 537/2014:
1) issue a warning;
2) request that a sworn auditor or commercial company of sworn
auditors immediately terminate activities which are to be
considered as such activities in the result of which the
requirements of the laws and regulations governing professional
activities of sworn auditors and Regulation No 537/2014 are or
could be violated;
3) prohibit a sworn auditor, a commercial company of sworn
auditors or a responsible sworn auditor to provide audit services
and sign auditor's report for a period of time up to three
years;
4) publish a public report on the website of the Ministry of
Finance that the signed auditor's report does not comply with the
content of the auditor's report laid down in this Law and the
requirements for the auditor's report laid down in Section 10 of
Regulation No 537/2014;
5) determine a temporary prohibition to a member of the
management body of the commercial company of sworn auditors if it
is a sworn auditor and is liable for the relevant violation to
fulfil the duties determined for him or her in the commercial
company of sworn auditors for a time period up to three
years;
6) publish the information on the website of the Ministry of
Finance where the sworn auditor responsible for the violation
(the given name, surname and certificate number of the sworn
auditor) and commercial company of sworn auditors (the name and
licence number of the commercial company of sworn auditors), and
also the essence of the committed violation shall be
indicated;
7) impose fine on the sworn auditor responsible for the
violation up to EUR 7 200 and on commercial company of sworn
auditors responsible for the violation - up to EUR 14 200.
(5) When taking a decision to apply sanctions and supervisory
measures referred to in Paragraph four of this Section on sworn
auditors and commercial companies of sworn auditors, the Ministry
of Finance shall also take into account:
1) gravity of the violation;
2) duration of the violation;
3) the level of responsibility of the person;
4) income gained by the person as a result of violation,
insofar as they can be determined;
5) compensation of losses caused as a result of violation,
insofar as they can be determined;
6) cooperation of the person with the Ministry of Finance in
investigation of violation;
7) financial situation of the person: for a commercial company
of sworn auditors - total net turnover in the previous reporting
year, for a sworn auditor who carries out professional activities
as an individual merchant or self-employed person - total
turnover (income) from economic transactions in the previous
reporting year;
8) previous violations of the person committed in the field of
provision of professional services.
(6) The Ministry of Finance shall issue recommendations
(guidelines) regarding application of sanctions and supervisory
measures referred to in Paragraph four of this Section and post
them on the website thereof.
(7) The Ministry of Finance shall not apply the sanctions and
supervisory measures referred to in Paragraph four of this
Section in relation to criminal proceedings or disciplinary
matter regarding the same violation.
(8) The Ministry of Finance shall, within one month after the
end of each calendar year, prepare and send compiled information
to the Committee of European Auditing Oversight Bodies regarding
the sanctions and supervisory measures referred to in Paragraph
four of this Section applied in the previous year, and also
applied sanctions and supervisory measures referred to in Section
37.10, Paragraphs one, two and three of this Law by
indicating all the persons to whom the sanctions and supervisory
measures have been applied and the type of the applied sanctions
and supervisory measures.
(9) The Ministry of Finance shall immediately inform the
Committee of European Auditing Oversight Bodies regarding
application of the sanctions and supervisory measures referred to
in Paragraph four, Clauses 3 and 5 of this Section by indicating
the person to whom the sanction or supervisory measure has been
applied and the type of the applied sanction or supervisory
measure, and also regarding application of the sanction or
supervisory measure referred to in Section 37.10,
Paragraph two, Clause 4 of this Law and Section 148, Paragraph
eighteen, Clause 3 of the Financial Instrument Market Law by
indicating the person to whom such sanction or supervisory
measure is applied and the type of the applied sanction or
supervisory measure.
(10) The fine which is collected for violations regarding
which it is imposed in accordance with Paragraph four, Clause 7
of this Section shall be paid into the State budget. The person
shall pay the fine imposed by the Ministry of Finance not later
than within a month from the day when the decision of the
Ministry of Finance to impose the fine has come into effect.
[15 December 2016; 19 April 2018; 14 September
2023]
Section 38.3 Publication
of Decisions
(1) The Ministry of Finance shall post the information
regarding the sanctions and supervisory measures referred to in
Section 38.2 of this Law applied to persons on the
website thereof by indicating a person responsible for the
infringement (the given name, surname, certificate number of the
sworn auditor and the name, registration number and licence
number of the commercial company of sworn auditors), the type of
the infringement and the sanction or supervisory measures applied
by the Ministry of Finance, and also data regarding appeal of the
decision of the issued administrative act and court decision
taken.
(2) The Ministry of Finance shall post the information
referred to in Paragraph one of this Section on the website
thereof within five working days from the day when the time
period for appeal of the act (decision) has expired and it has
not been appealed.
(3) The Ministry of Finance shall make the information
referred to in Paragraph one of this Section available to the
public without identifying the person if upon previous assessment
it has been ascertained that disclosure of data of the natural
person to which a sanction or supervisory measure has been
applied, is not commensurate or that disclosure of data of the
natural or legal person may pose a threat to stability of the
financial market, the course of initiated criminal proceedings,
or cause incommensurate damage to the persons involved.
(4) If it is expected that the circumstances referred to in
Paragraph three of this Section may terminate within a reasonable
time period, making of the information referred to in Paragraph
one of this Section available to the public may be suspended for
this time period.
(5) Information posted on the website of the Ministry of
Finance in accordance with the procedures laid down in this
Section shall be available to the public for at least five years
from the day of the first posting thereof.
[15 December 2016]
Section 39. Disciplinary
Sanctions
[22 January 2004]
Section 40. Dispute and Appeal of
Decisions by the Latvian Association of Sworn Auditors
(1) Complaints regarding unlawful activities of the Latvian
Association of Sworn Auditors, or of activities that do not
comply with the articles of association, shall be adjudicated by
a court.
(2) The Latvian Association of Sworn Auditors decisions which
are associated with the certification of sworn auditors, the
licensing of commercial companies of sworn auditors and other
tasks delegated to the Latvian Association of Sworn Auditors by
this Law, may be disputed to the Ministry of Finance. The
decision of the Ministry of Finance may be appealed to a court
according to procedures specified by law.
[22 January 2004]
Section 41. Civil Liability of a
Sworn Auditor and a Commercial Company of Sworn Auditors, and
Time Periods for Compensation for Losses
(1) A sworn auditor or a commercial company of sworn auditors
shall be liable for the obligations which have arisen as a result
of entering into of an audit services contract.
(2) A sworn auditor or a commercial company of sworn auditors
shall be liable for losses that have occurred to third parties,
i.e. users of the annual statements and consolidated annual
statements of the client, if the opinion submitted in accordance
with the international audit standards recognised in Latvia
substantially contradicts the actual state of things and the
provisions of Section 26, 27, 30 or 34 of this Law have not been
complied with. If an opinion has been signed by two or more sworn
auditors, they are jointly liable for such losses.
(3) A commercial company of sworn auditors shall be liable for
the obligations which it has assumed, as well as for losses
suffered by third parties, if the responsible sworn auditor
appointed by such company has failed to comply with the
provisions of Section 26, 27, 30 or 34 of this Law.
(4) The mutual legal relations and the liability of a
commercial company of sworn auditors and the responsible sworn
auditor appointed by it shall be regulated by the employment
contract they have entered into.
(5) Compensation for losses from a sworn auditor or a
commercial company of sworn auditors shall be covered in
accordance with a mutual agreement or collected by judicial
process, not later than within three years after the day when the
opinion of the relevant sworn auditor was signed.
Section 42. Civil Liability
Insurance of a Sworn Auditor and a Commercial Company of Sworn
Auditors
(1) The minimum liability amount of civil liability insurance
for a sworn auditor - a self-employed person or an individual
merchant - shall be the total sum of income of such sworn auditor
obtained in the previous reporting year from audit services, and
it may not be less than the minimum amount stipulated by the
Cabinet, but in the year of starting the activities of a sworn
auditor the minimum liability amount shall be the amount
stipulated by the Cabinet.
(2) The minimum liability amount of civil liability insurance
for a commercial company of sworn auditors, except for
partnerships which do not employ employees - sworn auditors -
shall be the total sum of income of such company obtained in the
previous reporting year from audit services, and it may not be
less than the minimum amount stipulated by the Cabinet, but in
the year of starting the operation of a commercial company of
sworn auditors the minimum liability amount shall be the amount
stipulated by the Cabinet.
(3) When providing audit services to an entity of public
importance, the minimum liability amount of civil liability
insurance for a service provider - a sworn auditor or a
commercial company of sworn auditors - shall be two per cent of
the amount of assets of the client to be audited for whom such
assets are the largest ones at the end of the previous reporting
year, but not more than EUR 10 million.
(4) For the insurance of their civil liability, a sworn
auditor and a commercial company of sworn auditors may
choose:
1) an insurance company registered in the Commercial Register
which has obtained a licence for the insurance of general civil
liability issued by the Financial and Capital Market
Commission;
2) an insurance company registered in an OECD and EEA state,
entering into a civil liability contract with which the sworn
auditor or the commercial company of sworn auditors shall comply
with the requirements of this Law.
(5) The Cabinet, when determining the minimum civil liability
amount provided for by Paragraphs one and two of this Section, is
entitled to differentiate it depending on whether there is a
State or local government capital share in the commercial
company.
[22 January 2004; 12 June 2008; 12 September 2013; 29
October 2015]
Section 43. Liability for Fraud of a
Person who Does Not Have a Sworn Auditor Certificate
If a person who does not have a sworn auditor certificate or a
licence for a commercial company of sworn auditors accordingly
performs the activities permitted by this Law only to a sworn
auditor or to a commercial company of sworn auditors and submits
an auditor's report, he or she shall be subject to liability as
specified by law.
[14 September 2023]
Transitional Provisions
1. With the coming into force of this Law, the Law On Sworn
Auditors (Latvijas Republikas Saeimas un Ministru Kabineta
Ziņotājs, 1996, No. 24; 2000, No. 10) is repealed.
2. The sworn auditors' certificates that have been issued on
the basis of laws which were in force until the date of coming
into force of this Law shall be recognised as valid.
3. Until 1 January 2003, the mandatory review, prescribed by
law, of annual statements, also consolidated annual statements of
financial institutions, as well as of the commercial companies
the shares of which are admitted to the official stock exchange
listing may be performed by sworn auditors and companies of sworn
auditors which do not comply with the requirements of this Law
and which are appointed by the Financial and Capital Market
Commission.
[22 January 2004]
4. Until 1 January 2005, the sworn auditor qualification
examination may be taken by persons who do not have the three
years practical experience prescribed by Section 8 of this Law.
Such persons shall not be given a sworn auditor certificate after
the passing of the sworn auditor qualification examination. If
such persons acquire, within 5 years after the passing of the
sworn auditor qualification examination, the three years
practical experience determined by this Law, working as
assistants of sworn auditors, they may receive a sworn auditor
certificate in accordance with the procedures specified in
Section 16 of this Law.
5. Until 1 January 2005, not only sworn auditors, but also
other natural persons may be the members of the Latvian
Association of Sworn Auditors, if they have passed the sworn
auditor qualification examinations, are employed as assistants of
sworn auditors and comply with the provisions of the articles of
association of this Association. Until 1 January 2003, all
licensed commercial companies of sworn auditors shall become the
members of the Latvian Association of Sworn Auditors.
6. Until 1 January 2003, all the commercial companies that
provide audit services shall receive a relevant licence of the
Latvian Association of Sworn Auditors.
7. Individual undertakings of sworn auditors providing audit
services are entitled to continue to provide such services in the
status of individual undertakings until the end of the
transitional period specified in the Law on the Procedures for
the Coming into Force of the Commercial Law.
8. The provisions of Section 21, Paragraphs two and three of
this Law shall come into force on 1 January 2004.
9. The amendments to Sections 19 and 24 of this Law and
Sections 24.1, 24.2 and 24.3
shall come into force on 29 June 2009.
[29 January 2009]
10. Amendments to Section 1, Clause 7, Sub-clause "e" of this
Law, and also Clause 7, Sub-clauses "f" and "g" of this Section
shall be applicable to the auditor's report which is prepared by
a sworn auditor and a commercial company of sworn auditors for an
annual statement and consolidated annual statement starting from
reporting year 2016 (the reporting year which starts on 1 January
2016 or during the calendar year 2016).
[29 October 2015; 14 September 2023]
11. A sworn auditor and a commercial company of sworn auditors
shall carry out the limited review of annual statements provided
for in Section 28.1 of this Law starting from
reporting year 2016 (the reporting year which starts on 1 January
2016 or during the calendar year 2016).
[29 October 2015]
12. Amendments to Section 33 of this Law in relation to
provision of information to the Corruption Prevention and
Combating Bureau shall come into force on 1 January 2016.
[29 October 2015]
13. The Latvian Association of Sworn Auditors shall develop
and confirm the procedures referred to in Section
28.1, Paragraph one, and also in Section 33, Paragraph
3.2 of this Law until 1 December 2015.
[29 October 2015]
14. Until making amendments to other laws the reference to the
Law On Sworn Auditors (in the relevant case) shall be understood
as reference to the Law on Audit Services (in the relevant
case).
[15 December 2016]
15. A commercial company of sworn auditors which does not
comply with the requirements of Section 21, Paragraph four of
this Law (not less than 75 per cent of the members of the
executive board are sworn auditors or auditors of the Member
State) is entitled to continue provision of audit services,
however, not longer than until 1 January 2018.
[15 December 2016]
16. Provisions of Section 28, Paragraph 1.1 of this
Law shall be applied starting from the audit of the annual
statement for 2017.
[15 December 2016]
17. In starting application of Section 29, Paragraph
4.1 of this Law, the restriction of the time period
laid down therein shall be counted from the day of coming into
force of this norm.
[15 December 2016]
18. Section 37.8 of this Law shall be applied by
taking into account the provisions of Article 41 of Regulation No
537/2014.
[15 December 2016]
19. Public-interest entities referred to in Section
37.9, Paragraph two of this Law shall establish an
entity equal to an audit committee or elect an audit committee in
the next meeting of shareholders, but not later than within 12
months from the day of coming into force of this norm.
[15 December 2016]
20. The Financial and Capital Market Commission in accordance
with Section 17.1, Paragraph two of the Law On
Financial and Capital Market Commission shall, until 1 January
2018, issue recommendations (guidelines) regarding application of
the sanctions and supervisory measures referred to in Section
37.10 of this Law and post them on the website
thereof.
[15 December 2016]
21. The Ministry of Finance shall, until 1 January 2018, issue
recommendations (guidelines) regarding application of sanctions
and supervisory measures referred to in Section 38.2
of this Law and post them on the website thereof.
[15 December 2016]
22. Section 31.2, Clause 10 of this Law shall be
applicable to the auditor's report which is prepared by a sworn
auditor and a responsible sworn auditor of a commercial company
of sworn auditors for such annual statement and consolidated
annual statement which is prepared for the reporting year that
starts on 22 June 2024 or later.
[14 September 2006]
Informative Reference to Directive
of the European Union
[29 March 2007; 12 June 2008; 11
February 2010; 3 March 2011; 18 April 2013; 29 October 2015; 15
December 2016; 21 June 2018; 14 September 2023]
This Law contains norms arising from:
1) the Eighth Council Directive 84/253/EEC of 10 April 1984
based on Article 54(3)(g) of the Treaty on the approval of
persons responsible for carrying out the statutory audits of
accounting documents;
2) Council Directive 89/48/EEC of 21 December 1988 on a
general system for the recognition of higher-education diplomas
awarded on completion of professional education and training of
at least three years' duration;
3) European Parliament and Council Directive 95/26/EC of 29
June 1995 amending Directives 77/780/EEC and 89/646/EEC in the
field of credit institutions, Directives 73/239/EEC and 92/49/EEC
in the field of non- life insurance, Directives 79/267/EEC and
92/96/EEC in the field of life assurance, Directive 93/22/EEC in
the field of investment firms and Directive 85/611/EEC in the
field of undertakings for collective investment in transferable
securities (Ucits), with a view to reinforcing prudential
supervision;
4) Directive 2004/109/EC of the European Parliament and of the
Council of 15 December 2004 on the harmonisation of transparency
requirements in relation to information about issuers whose
securities are admitted to trading on a regulated market and
amending Directive 2001/34/EC;
5) Directive 2005/68/EC of the European Parliament and of the
Council of 16 November 2005 on reinsurance and amending Council
Directives 73/239/EEC, 92/49/EEC as well as Directives 98/78/EC
and 2002/83/EC;
6) Directive 2006/43/EC of the European Parliament and of the
Council of 17 May 2006 on statutory audits of annual accounts and
consolidated accounts, amending Council Directives 78/660/EEC and
83/349/EEC and repealing Council Directive 84/253/EEC;
7) Directive 2007/64/EC of the European Parliament and of the
Council of 13 November 2007 on payment services in the internal
market amending Directives 97/7/EC, 2002/65/EC, 2005/60/EC and
2006/48/EC and repealing Directive 97/5/EC;
8) Directive 2009/110/EC of the European Parliament and of the
Council of 16 September 2009 on the taking up, pursuit and
prudential supervision of the business of electronic money
institutions amending Directives 2005/60/EC and 2006/48/EC and
repealing Directive 2000/46/EC (Text with EEA relevance);
9) Directive 2006/123/EC of the European Parliament and of the
Council of 12 December 2006 on services in the internal
market;
10) Directive 2013/34/EU of the European Parliament and of the
Council of 26 June 2013 on the annual financial statements,
consolidated financial statements and related reports of certain
types of undertakings, amending Directive 2006/43/EC of the
European Parliament and of the Council and repealing Council
Directives 78/660/EEC and 83/349/EEC (Text with EEA
relevance);
11) Directive 2014/56/EU of the European Parliament and of the
Council of 16 April 2014, amending Directive 2006/43/EC on
statutory audits of annual accounts and consolidated accounts
(Text with EEA relevance);
12) Directive 2014/95/EU of the European Parliament and of the
Council of 22 October 2014 amending Directive 2013/34/EU as
regards disclosure of non-financial and diversity information by
certain large undertakings and groups (Text with EEA
relevance);
13) Directive 2014/65/EU of the European Parliament and of the
Council of 15 May 2014 on markets in financial instruments and
amending Directive 2002/92/EC and Directive 2011/61/EU (Text with
EEA relevance);
14) Directive (EU) 2021/2101 of the European Parliament and of
the Council of 24 November 2021 amending Directive 2013/34/EU as
regards disclosure of income tax information by certain
undertakings and branches.
The Law shall come into force on 1 January 2002.
The Law has been adopted by the Saeima on 3 May
2001.
Acting for the President, the Chairperson
of the Saeima J. Straume
Rīga, 22 May 2001
1 The Parliament of the Republic of
Latvia
Translation © 2024 Valsts valodas centrs (State
Language Centre)