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Luxembourg

International Standards on Auditing

Summary
According to a 2006 self-assessment prepared by the Institute of Registered Auditors (IRE) as a part of the International Federation of Accountants' (IFAC) Member Body Compliance Program, in Luxembourg, audit of financial statements is conducted in accordance with International Standards on Auditing (ISAs). The IRE adopts the pronouncements of the International Auditing and Assurance Standards Board (IAASB) without any modifications and, as explained in the self-assessment, ISAs are supplemented with additional guidance for application in Luxembourg. However, the self-assessment noted that at the national level there is a timing difference between the International Federation of Accountants (IFAC) and IRE effective dates. Nevertheless, at the European level, due to the enactment of European Union (EU) Directive 2006/43/EC of the European Parliament and Council, which came into force in May 2006, all statutory audits of annual and consolidated accounts in the EU countries must be conducted on the basis of ISAs as adopted by the European Commission (EC). EU member states shall adopt and publish the provisions necessary to comply with this Directive before June 29, 2008. Member states may impose additional requirements relating to the statuary audits of annual and consolidated accounts for periods expiring on June 29, 2010. The auditing standards for listed entities and non-listed entities are the same.

    General Overview

    According to the description of the legal framework provided in the 2005 IRE self-assessment, financial reporting requirements in Luxembourg are governed by the Law on Commercial Companies. Additionally, listed companies must comply with the 1998 Law concerning the supervision of markets of financial assets and the Rules and Regulations of the Luxembourg Stock Exchange (Bourse de Luxembourg, or LSEX). Listed companies must also have their annual accounts audited by one or more registered auditors appointed by the IRE. Apart from listed companies, companies operating within the financial and insurance sector -- irrespective of size and legal form -- must be audited. Other companies that fulfill the required size criteria may be exempted from the audit requirement.
    According to a 2006 IRE self-assessment, the audit of financial statements is conducted in accordance with ISAs. Further, pronouncements of the IAASB are adopted without any modifications. The self-assessment explained that the IRE enacted ISAs into its national auditing standards and "ISAs are completed with additional guidance to help apply ISAs in the Luxembourg context. It should be noted that there is a timing difference between the IFAC effective date of an ISA and the date the IRE enacts the same ISA into its national standards" (pp. 36-37). Moreover, due to the enactment of Directive 2006/43/EC of the European Parliament and Council, which came into force in May 2006, all statutory audits of annual and consolidated accounts in the EU countries must be conducted on the basis of ISAs as adopted by the EC. EU member states shall adopt and publish the provisions necessary to comply with this Directive before June 29, 2008. Member states may impose additional requirements relating to the statuary audits of annual and consolidated accounts for periods expiring on June 29, 2010. The auditing standards for listed entities and unlisted entities are the same.
    Per the 2005 IRE self-assessment, the financial sector is governed by the 1993 Law regarding the Financial Sector, the 1988 Law regarding Undertakings for the Collective Investment for Transferable Securities (UCITS) and the 1999 Law regarding Pension-Funds. Further, the insurance sector must comply by requirements laid out in the 1991 Law regarding the Insurance Sector and the 1994 Law regarding the Annual Accounts and Consolidated Annual Accounts of Insurance Companies. The Commission for the Supervision of the Financial Sector (Commission de Surveillance du Secteur Financier, or CSSF) is the financial market regulator that supervises listed companies (including listed financial institutions and insurance companies) and banks. The CSSF reports to the Ministry of Finance. Experts from the legal, auditing, accounting professions and representatives of the business are invited to discuss developments in the CSSF committees. These committees have an advisory role to the government agency. Insurance companies are supervised by the Insurance Commission (Commissariat aux Assurances, or CAA). Appointment/dismissal of auditors of companies operating in the financial or insurance sector must be authorized by the related supervisory body. As noted in the self-assessment, although the applicable authorities do not set any auditing standards, they can extend the scope of the audit.
    According to the 2005 self-assessment, the IRE, empowered by Article 22 of the law of June 28, 1984, is responsible for setting auditing standards in Luxembourg, and is accountable to the Ministry of Justice. With regard to the national ethics requirements, the 2006 self-assessment noted that the IRE had adopted the IFAC Code of ethics, with modifications. As explained in the self-assessment, "the Institute [IRE] has enacted into its national standards the IFAC Code of Ethics completed with: (1) some specific aspects of national legislation; (2) some provisions of the EU Recommendation on the Independence of the Statutory Auditors when more stringent" (p. 47). The IRE is listed as a member on the International Federation of Accountants website.


    The Principles

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

    According to the text of Luxembourg ISA 200, the IRE adopted ISA 200 effective for periods beginning on or after December 15, 2005. However, the IAASB subsequently revised ISA 700 which led to conforming amendments in ISA 200. As explained in the 2006 IRE self-assessment "ISA 700 revised version is currently being analyzed. It is planned to be adopted in June 2007 with an effective date of July 1, 2007 or January 1, 2008" (p. 84). No further information is publicly available.

    ISA 210 Terms of Audit Engagements (effective 2006)

    According to the text of Luxembourg ISA 210, the IRE adopted ISA 210 effective for periods beginning on or after December 15, 2004. However, the IAASB subsequently revised ISA 700 which led to conforming amendments in ISA 210. As explained in the self-assessment "ISA 700 revised version is currently being analyzed. It is planned to be adopted in June 2007 with an effective date of July 1, 2007 or January 1, 2008" (p. 84).

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

    According to the text of Luxembourg ISA 220, the IRE adopted ISA 220R, effective for periods beginning on or after June 15, 2005.

    ISA 230R Documentation (effective 2006)

    According to the 2006 self-assessment, the IRE adopted ISA 230 with additional national guidance on "Documentation". However, the IAASB subsequently revised ISA 230. At the time of the self-assessment, as explained by the IRE, "ISA 230 revised version is currently being analyzed. It is planned to be adopted in June 2007 with the effective date of July 1, 2007 or January 1, 2008" (p. 84).

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

    According to the 2006 self-assessment, the IRE adopted ISA 240 with additional national guidance to address Luxembourg legal requirements on money laundering and terrorism financing.

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

    According to the 2006 self-assessment, the IRE adopted ISA 250, which has been effective for audits in Luxembourg.

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

    According to the text of Luxembourg ISA 260, the IRE adopted ISA 260 effective for audits beginning on or after December 15, 2004.

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

    According to the text of Luxembourg ISA 300, the IRE adopted ISA 300 effective for beginning on or after December 15, 2004.

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

    According to the text of Luxembourg ISA 315, the IRE adopted ISA 315, effective for periods beginning on or after December 15, 2004.

    ISA 320 Audit Materiality (effective 2004)

    According to the 2006 self-assessment, the IRE adopted ISA 320, which has been effective for audits in Luxembourg.

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

    According to the text of Luxembourg ISA 330, the IRE adopted ISA 330 effective for audits beginning on or after December 15, 2004.

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

    According to the 2006 self-assessment, the IRE adopted ISA 402, which has been effective for audits in Luxembourg.

    ISA 500 Audit Evidence (effective 2004)

    According to the text of Luxembourg ISA 500, the IRE adopted ISA 500 effective for periods beginning on or after December 15, 2004.

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

    According to the 2006 self-assessment, the IRE adopted ISA 501, which has been effective for audits in Luxembourg.

    ISA 505 External Confirmations (effective 2004)

    According to the text of Luxembourg ISA 505, the IRE adopted ISA 505 effective for periods beginning on or after December 15, 2004.

    ISA 510 Initial Engagements — Opening Balances (effective 2004)

    According to the 2006 self-assessment, the IRE adopted ISA 510, which has been effective for audits in Luxembourg.

    ISA 520 Analytical Procedures (effective 2004)

    According to the 2006 self-assessment, the IRE adopted ISA 520, which has been effective for audits in Luxembourg.

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

    According to the text of Luxembourg ISA 530, the IRE adopted ISA 530 effective for periods beginning on or after December 15, 2004.

    ISA 540 Audit of Accounting Estimates (effective 2004)

    According to the 2006 self-assessment, the IRE adopted ISA 540, which has been effective for audits in Luxembourg.

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

    According to the text of Luxembourg ISA 545, the IRE adopted ISA 545 effective for periods beginning on or after December 15, 2004.

    ISA 550 Related Parties (effective 2004)

    According to the 2006 self-assessment, the IRE adopted ISA 550, which has been effective for audits in Luxembourg.

    ISA 560 Subsequent Events (effective 2006)

    According to the text of Luxembourg ISA 560, the IRE adopted ISA 560 effective for periods beginning on or after December 15, 2006.

    ISA 570 Going Concern (effective 2004)

    According to the text of Luxembourg ISA 570, the IRE adopted ISA 570 effective for periods beginning on or after December 15, 2004.

    ISA 580 Management Representations (effective 2004)

    According to the 2006 self-assessment, the IRE adopted ISA 580, which has been effective for audits in Luxembourg.

    ISA 600 Using the Work of Another Auditor (effective)

    According to the 2006 self-assessment, the IRE adopted ISA 600 has been effective in Luxembourg. As explained in the self-assessment, "there is additional national guidance to address Luxembourg legislation." (p. 80).

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

    According to the 2006 self-assessment, the IRE adopted ISA 610, which has been effective for audits in Luxembourg.

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

    According to the 2006 self-assessment, the IRE adopted ISA 620, which has been effective for audits in Luxembourg.

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

    According to the text of Luxembourg ISA 700, the IRE adopted ISA 700 effective for periods beginning on or after December 31, 2006.

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

    According to the text of Luxembourg ISA 701, the IRE adopted ISA 701 effective for periods beginning on or after December 31, 2006.

    ISA 710 Comparatives (effective 2004)

    According to the text of Luxembourg ISA 710, the IRE adopted ISA 710 effective for periods beginning on or after December 15, 2004.

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

    According to the 2006 self-assessment, as of September 2005 , the IRE adopted ISA 720, which has been effective for audits in Luxembourg.

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

    According to the text of Luxembourg ISA 800, the IRE adopted ISA 800 effective for periods beginning on or after December 31, 2006.

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    Sources of Assessment

    Institute of Registered Auditors, "Assessment of the Regulatory and Standard- Setting Framework," Self-assessment prepared as part of the International Federation of Accountants' (IFAC) Member Body Compliance Program, January 2005. Available from International Federation of Accountants website. Accessed on February 20, 2008. (IRE 2005)

    Institute of Registered Auditors, "Response to the IFAC Part 2, SMO Self-Assessment Questionnaire," Self-assessment prepared as a part of the International Federation of Accountants' (IFAC) Member Body Compliance Program, July 2006. Available from International Federation of Accountants website. Accessed on February 20, 2008. (IRE 2006)

    Relevant Organizations

    Central Bank of Luxembourg -- Banque Centrale du Luxembourg (BCL)

    Commission for the Supervision of the Financial Sector -- Commission de Surveillance du Secteur Financier (CSSF)

    Committee of European Securities Regulators (CESR)

    Institute of Registered Auditors -- Institut des Reviseurs d'Entreprises (IRE)

    Insurance Commission -- Commissariat aux Assurances (CAA) (in French only)

    Luxembourg Stock Exchange -- Bourse de Luxembourg (LSEX)

    Ministry of Justice -- Ministère de la Justice (MdJ)

    Ministry of Finance -- Ministère des Finances (MoF) (in French only)



    Relevant Legislation/Regulation

    Law on Commercial Companies, 1915 (last amended March 2007) -- Loi sur les Sociétés Commerciales, 1915

    Law on the Organization of Profession of Registered Auditors, 1984

    Law Concerning the Supervision of the Markets of Financial Assets as amended, 1998 -- Loi Relative à la Surveillance des Marchés d'Actifs Financiers telle que Modifiée, 1998 (in French only)

    ISAs as adopted in Luxembourg (in French only)

    Law Regarding Undertakings for the Collective Investment for Transferable Securities, 1988

    Law Regarding Pension-Funds, 1999 -- Fonds et Regimes Complementaires de Pension, 1999 (in French only)

    Rules and Regulations of the Luxembourg Stock Exchange, 2007

    EU Auditing-Related Directives



    Supplementary Sources

    International Federation of Accountants website. Accessed on February 20, 2008. (IFAC website)
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