This assessment of accounting andauditing standards and practices in Lithuania was focuses onthe strengths and weaknesses of the institutionalarrangements needed to observe International AccountingStandards (IAS) and International Standards on Auditing(ISA). Financial reporting and accounting by Lithuanianenterprises are currently governed by laws and otherregulations issued in 1992 and 1993. New laws that came intoeffect in 2002 will significantly increase conformitybetween Lithuanian requirements and European Union (EU)Directives, establish a new national standard-setting body,and require greater compliance with IAS. There is a risk,therefore, that banks may be unable to fully comply with IASbecause of conflicting requirements under national bank(BOL) regulations.While the quality of many of the IASfinancial statements reviewed was good, there were a numberof possible conflicts resulting from the application of BOLregulations and other circumstances peculiar to Lithuania.There is currently no enforcement or monitoring ofcompliance with IAS or national standards. The audit offinancial statements must be carried out by qualifiedauditors and in accordance with Lithuanian standards thatare based on ISA. While many audit firms make strenuousefforts to carry out audits in accordance with ISA, thereare variations in the quality of audits. Furthermore, thequality of some audits is affected by management attitudesand misconceptions about the role of audits.Some of thepowers granted to the Ministry of Finance for thesupervision.of auditors have not yet been implemented. Theimplementation of these powers plus further changes arerequired in order to achieve conformity with EU Directivesand greater use of ISA. The report makes a number of policyrecommendations that are designed to achieve greaterconformity between Lithuanian law and European UnionDirectives, and improve compliance with IAS and ISA.
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