Regulations for Work Organisation of Sworn Auditors and Commercial Companies of Sworn Auditors

Issued pursuant to
Section 31.¹ of the Law On Audit Services

I. General Provisions

1. This Regulation prescribes the requirements for the work organisation, resource planning, document management, creation of registers and files for sworn auditors and commercial companies of sworn auditors.

2. The Regulation shall apply to a sworn auditor who provides an audit service or a sustainability report assurance service (hereinafter - the professional services) as a sole proprietorship or self-employed person (hereinafter - the self-employed sworn auditor) and a commercial company of sworn auditors which provides the professional services.

3. The self-employed sworn auditor and a commercial company of sworn auditors which provides the professional services to a public-interest entity shall apply also 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) in addition to the requirements laid down in this Regulation and the Law on Audit Services (hereinafter - the Law) in respect of work organisation, document management, and internal quality control of audit tasks or sustainability report assurance engagements.

4. When applying the requirements of the Law, Regulation No 537/2014, and this Regulation, it shall be taken into account that the professional services provided in accordance with the requirements laid down in the Law and this Regulation as well as the auditor's report or assurance report on the sustainability report do not guarantee the ability of a client to continue its operation in the future or effectiveness or efficiency of the previous or further activity of the management of the client.

II. Work Organisation and Resource Planning

5. The self-employed sworn auditor and a commercial company of sworn auditors have the obligation to dedicate sufficiently long time for each professional service in order to fulfil the commitments laid down in the contract for the provision of the professional services in conformity with the requirements laid down in the Law, and also to ensure the resources necessary for the qualitative provision of the professional service. Where necessary, experts, specialists, or assistants whose competence, abilities, motivation and compliance with the ethical requirements are sufficient to provide the professional service in accordance with the requirements of the Law but, if a client is a public-interest entity, also in accordance with the requirements of Regulation No 537/2014 shall be attracted for carrying out certain audit or assurance procedures.

6. A commercial company of sworn auditors shall, when appointing the sworn auditor responsible for the provision of audit services or the principal sustainability auditor responsible for the provision of sustainability report assurance service (hereinafter - the responsible auditor), evaluate the ability of the responsible auditor to deliver the abovementioned professional service in adequate quality as well as his or her independence, objectivity, and competence.

7. The self-employed sworn auditor and the responsible auditor shall retain professional scepticism during the provision of the professional service and allow for a possibility that a substantial non-conformity may be present in the annual statement and the consolidated annual statement (if the obligation to prepare such exists) or in the sustainability report and the consolidated sustainability report (if the obligation to prepare such exists) of the client within the meaning of the international standards recognised in Latvia on auditing or assurance standards for sustainability reporting which has arisen due to an error or fraud, therefore he or she shall evaluate all the circumstances and evidence which could indicate to substantial non-conformity caused by a potential fraud and errors.

8. Within the meaning of this Regulation, professional scepticism shall be considered as the doubting of the credibility of information provided for in the financial statement of the client and other information provided in relation to such statement, vigilance in respect to circumstances which could indicate to potential misstatement, fraud or error, and also critical assessment of the audit evidence.

9. Professional scepticism shall be retained during the provision of the professional service regardless of the previous co-operation experience of the self-employed sworn auditor, commercial company of sworn auditors, or responsible auditor with the relevant client or opinions on the integrity of the management of the client or the relevant officials of the client, especially when assessing the estimates made by the management of the client for the fair value of assets and its reduction, provisions, and cash flow expected in the future which are essential for the continuation of the activity of the client in the future.

10. So that the independence and objectivity of the responsible auditor would not be jeopardised in accordance with the requirements laid down in Section 26 of the Law, a commercial company of sworn auditors shall develop a policy and procedures conforming to the scope and complexity of its activity by ensuring that members, stockholders, or shareholders of the commercial company of sworn auditors, members of the executive body, and a party related to such commercial company do not intervene in any way in the provision of the professional service of the responsible auditor and the preparation of a report.

11. Within the meaning of this Regulation, relevant principles, methods and regulations shall be regarded to be policy, but the activities to be carried out in order to implement certain policy developed by a commercial company of sworn auditors shall be regarded to be procedures.

12. The self-employed sworn auditor and a commercial company of sworn auditors shall create an internal control system conforming to the scope and complexity of their activity and an internal control system for the quality management of the professional services (hereinafter - the internal quality management system), develop the relevant procedures for risk assessment, the risk mitigation measures, and the safeguards for information processing systems. The systems, procedures, and measures referred to in this Paragraph must ensure the control and conformity of the activities of the self-employed sworn auditor, the responsible auditor, or employees of the commercial company of sworn auditors, and also of all experts, specialists, or assistants invited by the self-employed sworn auditor and the commercial company of sworn auditors with the decisions, policies, and procedures adopted by the self-employed sworn auditor or commercial company of sworn auditors. In a practice of the self-employed sworn auditor or commercial company of sworn auditors, a sworn auditor shall be the employee responsible for the internal quality management system.

13. The self-employed sworn auditor and a commercial company of sworn auditors shall develop also other policies and procedures corresponding to the scope and complexity of their activities in addition to the policy and procedures referred to in Paragraph 10 of this Regulation, insofar it is necessary to ensure that:

13.1. employees of the self-employed sworn auditor and commercial company of sworn auditors and any other natural persons whose services are used by the self-employed sworn auditor or commercial company of sworn auditors and who are directly involved in the provision of the professional service have adequate knowledge and experience for the duties to be carried out;

13.2. delegation of material activities through the use of outsourced services does not decrease the possibilities of the self-employed sworn auditor or commercial company of sworn auditors to carry out internal quality control and also the possibilities of the Ministry of Finance and the Latvian Association of Sworn Auditors to supervise directly or in mutual co-operation the conformity of the self-employed sworn auditor and the commercial company of sworn auditors with the requirements laid down in the Law and, if the self-employed sworn auditor or commercial company of sworn auditors provides the professional services to a public-interest entity, in Regulation No 537/2014. The condition that the self-employed sworn auditor or commercial company of sworn auditors uses outsourced services shall not exempt it from the liability laid down in the Law and the contract for professional services entered into - the self-employed sworn auditor and the commercial company of sworn auditors shall be responsible for the activities of the provider of outsourced services and the results thereof to the same extent as for its own activity.

14. The self-employed sworn auditor, if he or she involves other employees in the provision of the professional service, and a commercial company of sworn auditors shall develop a policy and procedures for the provision of the professional service, a policy for the training of employees, an internal control policy for work quality of the employees involved in the provision of professional service, and also the procedures for ensuring the creation of the audit file referred to in Paragraph 25 of this Regulation and, in the relevant cases, the assurance file referred to in Paragraph 28 of this Regulation.

15. The self-employed sworn auditor and a commercial company of sworn auditors shall introduce organisational and administrative measures conforming to the scope and complexity of their activity which are necessary in order to be able to:

15.1. detect, discover, and prevent threats to the independence and objectivity of the self-employed sworn auditor, the responsible auditor, and the commercial company of sworn auditors which are referred to in Section 26 of the Law and to fulfil the requirement for indicating the conditions (if any detected) jeopardising independence and objectivity in audit working papers and, in the relevant cases, in sustainability report assurance working papers (hereinafter both together - the auditor's working papers);

15.2. control whether independence of the self-employed sworn auditor, responsible auditor, or commercial company of sworn auditors and the conditions jeopardising it are evaluated before entering into a contract for the provision of the professional services with the client, and also during the provision of the professional service provided for in such contract;

15.3. control whether the restrictions for holding a position laid down in Section 29, Paragraph five of the Law are not violated.

16. In order to ensure the quality of the professional service, the self-employed sworn auditor and a commercial company of sworn auditors shall develop a staff motivation policy and remuneration (wage and bonus system related to profit) system corresponding to the scope and complexity of their activities. Income which is received by the self-employed sworn auditor or commercial company of sworn auditors for the provision of non-audit services to a client may not form a part of the remuneration which is received by the person involved in the professional service provided to the same client or by such person who can influence the result of the audit or assurance task.

17. The self-employed sworn auditor and a commercial company of sworn auditors shall take the necessary organisational and administrative measures to:

17.1. by using the resources and procedures corresponding to the activity thereof, in a timely manner take the necessary measures which ensure continuity of the activity and regularity (consistency) of the provision of the professional services;

17.2. prevent and register all incidents which have or may have a significant impact on the quality of the professional service provided.

18. The self-employed sworn auditor and a commercial company of sworn auditors shall, each year, examine and evaluate the operation of the internal quality management system, immediately register the deficiencies found and the recommendations received, and also take the necessary actions to improve such system. The self-employed sworn auditor and a commercial company of sworn auditors shall regularly evaluate also effectiveness and efficiency of other measures taken in accordance with the Law or Regulation No 537/2014 and shall take the necessary measures to prevent the deficiencies found.

19. The self-employed sworn auditor and a commercial company of sworn auditors have the following duties:

19.1. to make the employees familiar with the policies, procedures, and measures referred to in Paragraphs 10, 12, 13, 14, 15, and 16 of this Regulation. If a relevant written request is received from the Ministry of Finance or Latvian Association of Sworn Auditors, to provide evidence that the policies and procedures correspond to the scope and complexity of its activity;

19.2. to develop appropriate internal notification procedures and ensure necessary means to enable the employees to notify of potential violations of the Law and Regulation No 537/2014.

20. The self-employed sworn auditor and a commercial company of sworn auditors may choose to document the policies and procedures referred to in Paragraphs 10, 12, 13, 14, 15, and 16 of this Regulation electronically or in printed form, and also in one or several appropriately named documents (for example, internal rules of procedure).

21. The self-employed sworn auditor and a commercial company of sworn auditors may not apply the requirements referred to in Paragraph 19 of this Regulation if the following conditions are met:

21.1. the self-employed sworn auditor and commercial company of sworn auditors provide professional services only to small commercial companies the performance indicators of which do not exceed the thresholds of the criteria referred to in Section 5, Paragraph three of the Law on the Annual Statements and Consolidated Annual Statements;

21.2. the small commercial company referred to in Sub-paragraph 21.1 of this Regulation is not a public-interest entity;

21.3. the self-employed sworn auditor and commercial company of sworn auditors develop (electronically or in printed form) the internal quality management system, the quality management policy, and the procedures related to the provision of professional services in accordance with the requirements of the international auditing standard recognised in Latvia - the International Standard on Quality Management 1, Quality Management for Firms that Perform Audits or Reviews of Financial Statements, or Other Assurance or Related Services Engagements.

III. Document Management, Creation of Registers and Files

22. The self-employed sworn auditor and a commercial company of sworn auditors shall ensure the registration of all violations referred to in the Law, but in respect of public-interest entities - the registration of the violations referred to in Regulation No 537/2014 in a relevant register. The self-employed sworn auditor and a commercial company of sworn auditors shall register also information on any consequences arising from the violations of the abovementioned laws and regulations, including the measures taken to prevent the abovementioned violations and to make the necessary changes in the internal quality management system. The self-employed sworn auditor and a commercial company of sworn auditors shall, once a year, prepare a report on the measures referred to in this Paragraph and inform their employees thereof.

23. If the self-employed sworn auditor or a commercial company of sworn auditors has requested an opinion of an external expert, it shall document (electronically or in printed form) the request sent and the opinion received.

24. The self-employed sworn auditor and a commercial company of sworn auditors shall keep (electronically or in printed form) one or several registers for the recording of clients. The following information shall be entered in the register (registers) on each client:

24.1. the client's name and type, registration number, legal address (if a client must be registered in accordance with the Law or legal acts of another country) or the address equal to legal address (if the client need not be registered in accordance with the Law or legal acts of another country), and the place (if any) of performance of economic activity where the management of the abovementioned client is located and where the main administrative decisions related to performance of economic activity are taken;

24.2. for the self-employed sworn auditor or a commercial company of sworn auditors - the given name, surname, and sworn auditor's certificate number of the responsible sworn auditor, and, if a sustainability report assurance service is provided, the given name, surname, and sworn auditor's certificate number of the principal sustainability auditor;

24.3. the remuneration received in the relevant reporting year for the professional services in division by the types of services and the remuneration for other services in division by the types of the abovementioned services.

25. In order to ensure that the independence and objectivity of the self-employed sworn auditor and the responsible sworn auditor are not jeopardised and also in order to enable the Ministry of Finance to supervise directly or in co-operation with the Latvian Association of Sworn Auditors compliance with the requirements of the Law and Regulation No 537/2014, the self-employed sworn auditor and the commercial company of sworn auditors shall arrange a separate audit file for each audit task.

26. The information referred to in Section 26, Paragraph nine of the Law shall be indicated in the file referred to in Paragraph 25 of this Regulation but, if the client is a public-interest entity, also the information referred to in Articles 6, 7 and 8 of Regulation No 537/2014. Other audit working papers which are essential for substantiating the information indicated in the drawn up auditor's report or limited review report but, if the client is a public-interest entity, also the information indicated in the reports referred to in Articles 10 and 11 of Regulation No 537/2014 shall also be included in the file.

27. The file referred to in Paragraph 25 of this Regulation shall be closed not later than 60 days after the auditor's report referred to in Section 31.² of the Law but, if the client is a public-interest entity, after the date of signing of the audit report referred to in Article 10 of Regulation No 537/2014 in such a way that, once the file is closed, the auditor's working papers and other information contained therein cannot be altered.

28. In conformity with the conditions referred to in Paragraph 25 of this Regulation, the self-employed sworn auditor and a commercial company of sworn auditors shall arrange a separate assurance file for each sustainability report assurance service.

29. The file referred to in Paragraph 28 of this Regulation for the sustainability report assurance service shall contain the information referred to in Section 26, Paragraph nine of the Law. The file shall also include other auditor's working papers which are essential for the substantiation of the prepared assurance report on the sustainability report.

30. The file referred to in Paragraph 28 of this Regulation shall be closed not later than 60 days after the date of signing of the assurance report on the sustainability report referred to in Section 32.¹ of the Law in such a way that, once the file is closed, the auditor's working papers and other information contained therein cannot be altered.

31. If the same sworn auditor performs the audit of the annual statement and the consolidated annual statement (if one has been prepared) as well as the sustainability report assurance engagement of the client, the file referred to in Paragraph 28 of this Regulation may be included in the audit file referred to in Paragraph 25 of this Regulation.

32. The self-employed sworn auditor and a commercial company of sworn auditors shall register (in a separate register or register for recording clients) all written claims and complaints received in relation to the professional services provided, and also, on the basis of the written request received, provide information on them to the Ministry of Finance and the Latvian Association of Sworn Auditors.

IV. Closing Provision

33. Cabinet Regulation No. 75 of 7 February 2017, Regulations for Work Organisation of Sworn Auditors and Commercial Companies of Sworn Auditors (Latvijas Vēstnesis, 2017, No. 34; 2020, No. 146), is repealed.

Informative Reference to Directive of the European Union

The Regulation contains legal norms arising from:

1) 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;

2) Directive (EU) 2022/2464 of the European Parliament and of the Council of 14 December 2022 amending Regulation (EU) No 537/2014, Directive 2004/109/EC, Directive 2006/43/EC and Directive 2013/34/EU, as regards corporate sustainability reporting.

Acting Prime Minister -
Minister for Justice I. Lībiņa-Egnere

Minister for Finance A. Ašeradens

Translation © 2025 Valsts valodas centrs (State Language Centre)