In its 2002 Report on the Observance of Standards and Codes on Accounting and Auditing in Lithuania, the World Bank explains that audits are conducted in accordance with National Standards on Auditing (NSAs), which are based on International Standards on Auditing (ISAs). However, the Lithuanian Chamber of Auditors (LCA), the auditing standard-setter, points out in a 2006 self-assessment that there are some differences between NSAs and ISAs which mainly exist because of timing differences in the work programs of the LCA and the International Auditing and Assurance Standards Board, which issues ISAs. Also, some NSAs are applied later than the corresponding ISAs. Furthermore, the Lithuanian auditing standards framework does not provide a national equivalent to every single ISA. However, as stated by the LCA, those gaps were supposed to be closed in 2007. In addition to the LCA, the Bank of Lithuania, the Securities Commission, and the Insurance Supervisory Commission have the power to set additional audit requirements for entities under their respective supervision. Since Lithuania is a member of the European Union, it must also implement European Commission (EC) Directive 2006/43, which requires all statutory audits to be carried out on the basis of ISAs as adopted by the EC by June 29, 2008.

General Overview

According to the 2002 World Bank Report on the Observance of Standards and Codes (ROSC) on Accounting and Auditing in Lithuania, the main legislation governing audits is the 1999 Law on Audit, which was amended in 2004. Audits are conducted by qualified auditors in accordance with Lithuanian Auditing Standards (NSAs), which are based on International Standards on Auditing (ISAs). KPMG, in its 2007 Doing Business Guide, explains that pursuant to the Commercial Code, audits are required for all public limited-liability companies. Private limited-liability companies have to be audited if their share capital exceeds 400,000 EEK or the law or the articles of incorporation set forth an audit obligation. In addition, the Accounting Act makes audits compulsory for entities that fulfill two of the following three criteria: (1) net sales exceed 10 million EEK; (2) number of employees exceeds 10; or (3) total assets exceed 5 million EEK.

The International Federation of Accountants' (IFAC) website lists the Lithuanian Chamber of Auditors (LCA) as its member. According to the 2002 ROSC, the LCA is responsible for the development, monitoring, and enforcement of auditing standards in Lithuania. In addition, it released a Professional Code of Ethics, which is based on the 2000 IFAC Code of Ethics. According to a 2006 LCA self-assessment, differences between NSAs and ISAs are primarily due to differences in timing between the LCA's work program and the work program of the International Auditing and Assurance Standards Board (IAASB), adding that some national standards are applied later than ISAs. The report adds that the NSAs lack coverage on the public sector perspective. In addition, the assessment notes that "[three] NSAs are more specific because they are related to the Law on Audit and other legal acts of [the] Republic of Lithuania which require auditors to comply with the Auditors' Code of Professional Ethics and to review [the] company's annual report" (p. 44). The 2002 ROSC points out that the Audit Law grants the Bank of Lithuania (BoL), the Securities Commission, and the Insurance Supervisory Commission the power to set additional audit requirements for entities under their respective supervision.

Lithuania became a member of the European Union on May 1, 2004, and therefore is required to comply with Directive 2006/43/EC of the European Parliament and the Council, which came into force on May 17, 2006. The Directive requires all statutory audits to be carried out on the basis of ISAs as adopted by the European Commission. The Directive aims at high-level -- though not full -- harmonization of statutory audit requirements. European Union member states shall adopt and publish the provisions necessary to comply with the Directive before June 29, 2008. According to the Directive, in order to achieve a maximum degree of harmonization, member states should be allowed to impose additional national audit procedures or requirements only if these stem from specific national legal requirements relating to the scope of the statutory audit of annual or consolidated accounts, meaning that those requirements have not been covered by the adopted ISAs. The directive provides member states with the option to maintain those additional audit procedures until the audit procedures or requirements have been covered by subsequently adopted international auditing standards. If, however, the adopted ISAs contain audit procedures whose performance would create a specific legal conflict with national law stemming from specific national requirements related to the scope of the statutory audit, member states may carve out the conflicting part of the ISA as long as those conflicts exist. According to the directive, member states may impose these additional requirements relating to the statuary audits of annual and consolidated accounts for periods expiring on June 29, 2010.

The Principles

ISA 200 Objective and General Principles Governing an Audit of Financial Statements (effective 2006)

II

According to the 2006 LCA self-assessment, the corresponding national auditing standard is NSA 1 "Objective and General Principles Governing an Audit of Financial Statements" adopted on June 16, 2000 and revised on May 4, 2006. However, there is insufficient information publicly available as to Lithuania's compliance with this principle.

ISA 210 Terms of Audit Engagements (effective 2006)

II

According to the 2006 LCA self-assessment, the corresponding national auditing standard is NSA 2 "Audit Agreement" adopted on July 2, 2000. However, there is insufficient information publicly available as to Lithuania's compliance with this principle.

ISA 220R Quality Control for Audits of Historical Financial Information (effective 2005)

NC

According to the 2006 LCA self-assessment, NSA 7 "Quality Control for Audit Work" adopted on June 16, 2000 corresponds to the prior version of ISA 220.

ISA 230R Documentation (effective 2006)

II

According to the 2006 LCA self-assessment, the corresponding national auditing standard is NSA 9 "Documentation" adopted on June 6, 2000. However, there is insufficient information publicly available as to Lithuania's compliance with this principle.

ISA 240 The Auditor’s Responsibility to Consider Fraud in an Audit of Financial Statements (effective 2004)

ID

According to the 2006 LCA self-assessment, NSA 11 "Fraud and Error" adopted on June 6, 2000 corresponds to the prior version of ISA 240. However, at the time of the self-assessment, a revised NSA 11 had been prepared, but had not yet been approved.

ISA 250 Consideration of Laws and Regulations in an Audit of Financial Statements (effective 2004)

II

According to the 2006 LCA self-assessment, the corresponding national auditing standard is NSA 31 "Consideration of Laws and Regulations in an Audit of Financial Statements" adopted on April 2, 2004. However, there is insufficient information publicly available as to Lithuania's compliance with this principle.

ISA 260 Communications of Audit Matters With Those Charged With Governance (effective 2004)

ID

In its 2006 self-assessment, the LCA stated that Lithuania was expected to issue a corresponding NSA in 2007.

ISA 300 Planning an Audit of Financial Statements (effective 2004)

II

According to the 2006 LCA self-assessment, the corresponding national auditing standard is NSA 4 "Planning an Audit" adopted on June 16, 2000 and revised on October 14, 2005. However, there is insufficient information publicly available as to Lithuania's compliance with this principle.

ISA 315 Understanding the Entity and Its Environment and Assessing the Risks of Material Misstatement (effective 2004)

II

According to the 2006 LCA self-assessment, the corresponding national auditing standard is NSA 34 "Understanding the Entity and Its Environment and Assessing the Risks of Material Misstatement" adopted on October 14, 2004. However, there is insufficient information publicly available as to Lithuania's compliance with this principle.

ISA 320 Audit Materiality (effective 2004)

II

According to the 2006 LCA self-assessment, the corresponding national auditing standard is NSA 25 "Audit Materiality" adopted on June 16, 2000. However, there is insufficient information publicly available as to Lithuania's compliance with this principle.

ISA 330 The Auditor’s Procedures in Response to Assessed Risks (effective 2006)

II

According to the 2006 LCA self-assessment, the corresponding national auditing standard is NSA 35 "The Auditor's Procedures in Response to Assessed Risks" adopted on October 14, 2005. However, there is insufficient information publicly available as to Lithuania's compliance with this principle.

ISA 402 Audit Considerations Relating to Entities Using Service Organizations (effective 2004)

II

According to the 2006 LCA self-assessment, the corresponding national auditing standard is NSA 16 "Audit Considerations Relating to Entities Using Service Organizations" adopted on February 28, 2003. However, there is insufficient information publicly available as to Lithuania's compliance with this principle.

ISA 500 Audit Evidence (effective 2004)

II

According to the 2006 LCA self-assessment, the corresponding national auditing standard is NSA 8 "Audit Evidence" adopted on June 16, 2000 and revised on October 14, 2005. However, there is insufficient information publicly available as to Lithuania's compliance with this principle.

ISA 501 Audit Evidence - Additional Considerations for Specific Items (effective 2004)

II

According to the 2006 LCA self-assessment, the corresponding national auditing standard is NSA 20 "Audit Evidence - Additional Considerations for Specific Items" adopted on February 28, 2003. However, there is insufficient information publicly available as to Lithuania's compliance with this principle.

ISA 505 External Confirmations (effective 2004)

ID

In its 2006 self-assessment, the LCA stated that Lithuania is expected to issue a corresponding NSA in 2007.

ISA 510 Initial Engagements — Opening Balances (effective 2004)

II

According to the 2006 LCA self-assessment, the corresponding national auditing standard is NSA 28 "Initial Engagements -- Opening Balances" adopted on January 11, 2002. However, there is insufficient information publicly available as to Lithuania's compliance with this principle.

ISA 520 Analytical Procedures (effective 2004)

II

According to the 2006 LCA self-assessment, NSA 12 "Analytical Procedures" adopted on January 11, 2002 corresponds to ISA 520. At the time of the self-assessment, a revised NSA 12 had been prepared, but had not been approved yet.

ISA 530 Audit Sampling and Other Selective Testing Procedures (effective 2004)

II

According to the 2006 LCA self-assessment, the corresponding national auditing standard is NSA 19 "Audit Sampling and Other Selective Testing Procedures" adopted on May 3, 2002. However, there is insufficient information publicly available as to Lithuania's compliance with this principle.

ISA 540 Audit of Accounting Estimates (effective 2004)

II

According to the 2006 LCA self-assessment, the corresponding national auditing standard is NSA 26 "Audit of Accounting Estimates" adopted on February 28, 2003. However, there is insufficient information publicly available as to Lithuania's compliance with this principle.

ISA 545 Auditing Fair Value Measurements and Disclosures (effective 2004)

ID

In its 2006 self-assessment, the LCA stated that Lithuania is expected to issue a corresponding NSA in 2007.

ISA 550 Related Parties (effective 2004)

II

According to the 2006 LCA self-assessment, the corresponding national auditing standard is NSA 26 "Related Parties" adopted on January 11, 2002. However, there is insufficient information publicly available as to Lithuania's compliance with this principle.

ISA 560 Subsequent Events (effective 2006)

II

According to the 2006 LCA self-assessment, the corresponding national auditing standard is NSA 21 "Subsequent Events" adopted on January 11, 2002. However, there is insufficient information publicly available as to Lithuania's compliance with this principle.

ISA 570 Going Concern (effective 2004)

II

According to the 2006 LCA self-assessment, the corresponding national auditing standard is NSA 23 "Going Concern" adopted on January 11, 2002 and revised on May 4, 2006. However, there is insufficient information publicly available as to Lithuania's compliance with this principle.

ISA 580 Management Representations (effective 2004)

II

According to the 2006 LCA self-assessment, the corresponding national auditing standard is NSA 22 "Management Representations" adopted on June 16, 2002. However, there is insufficient information publicly available as to Lithuania's compliance with this principle.

ISA 600 Using the Work of Another Auditor (effective)

II

According to the 2006 LCA self-assessment, the corresponding national auditing standard is NSA 5 "Using the Work of Another Auditor" adopted on February 28, 2003. However, there is insufficient information publicly available as to Lithuania's compliance with this principle.

ISA 610 Considering the Work of Internal Auditing (effective 2004)

II

According to the 2006 LCA self-assessment, the corresponding national auditing standard is NSA 10 "Considering the Work of Internal Auditing" adopted on February 28, 2003. However, there is insufficient information publicly available as to Lithuania's compliance with this principle.

ISA 620 Using the Work of an Expert (effective 2005)

II

According to the 2006 LCA self-assessment, the corresponding national auditing standard is NSA 18 "Using the Work of an Expert" adopted on April 2, 2004. However, there is insufficient information publicly available as to Lithuania's compliance with this principle.

ISA 700 The Auditor’s Report on Financial Statements (effective 2006)

II

According to the 2006 LCA self-assessment, the corresponding national auditing standard is NSA 13 "Auditor's Report" adopted on June16, 2000 and last revised on October 14, 2005. However, there is insufficient information publicly available as to Lithuania's compliance with this principle.

ISA 701 Modifications to the Independent Auditor's Report (effective 2006)

II

There is insufficient information publicly available as to Lithuania's compliance with this principle.

ISA 710 Comparatives (effective 2004)

II

According to the 2006 LCA self-assessment, the corresponding national auditing standard is NSA 32 "Comparatives" adopted on October 14, 2005. However, there is insufficient information publicly available as to Lithuania's compliance with this principle.

ISA 720 Other Information in Documents Containing Audited Financial Statements (effective 2004)

II

According to the 2006 LCA self-assessment, the corresponding national auditing standard is NSA 14 "Other Information in Documents Containing Audited Financial Statements" adopted on April 2, 2004. However, there is insufficient information publicly available as to Lithuania's compliance with this principle.

ISA 800 The Auditor’s Report on Special Purpose Audit Engagements (effective 2006)

II

According to the 2006 LCA self-assessment, the corresponding national auditing standard is NSA 33 "The Auditor's Report on Special Purpose Audit Engagements" adopted on October 14, 2005. However, there is insufficient information publicly available as to Lithuania's compliance with this principle.