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    Country by Country Financial Reporting and Auditing Framework

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    Latvia – Crowe Horwath Latvia (prepared December 2014)

    Preparation and Filing of Statutory Financial Statements

    Corporations, Private and Public Limited Companies, Limited Liability Companies (SIA, AS) registered in Latvia are required to prepare annual financial statements and file their derivatives at the State Revenue Service (SRS).


    A company shall submit the annual report, the management report, the auditor's report and the copy of minutes of the meeting on which the annual report was approved by the shareholders, to the tax authority not later than a month after approval of the annual report, and not later than four months after the end of the reporting year.


    The time period between the submission of the above-mentioned documents, and the end of the reporting period for consolidated annual reports (if they exceed two of the criteria 1- total assets: 1 400 000 EUR, 2 - net turnover: 3 400 000 EUR, 3 - average number of employees in the reporting year: 250) shall not exceed seven months and applies both to the parent company of the group and to other companies in the group.


    All corporations and LLPs are required to prepare full financial statements including a balance sheet, an income statement, cash flow statement, changes in equity and notes to the financial statements, management report on the development of the company during the reporting year. Certain small and medium sized companies/LLCs have an option to file abbreviated financial statements.


    If, on the balance sheet date, the company does not exceed two of the criteria mentioned below, they are allowed to omit the management report, cash flow statement and statement of changes in equity. It also is not necessary to calculate and show deferred tax assets and include notes to financial statements. The criteria are:

    • Total assets: 400 000 EUR;
    • Net turnover: 800 000 EUR;
    • Average number of employees in the reporting year: 25.

    In addition to previous paragraph, if the company on the balance sheet date does not exceed two of the criteria mentioned 1) total assets - 50 000 EUR, 2) net turnover - 100 000 EUR, 3) average number of employees in the reporting year - 5, they can make a shortened version of the balance sheet.


    Consolidated reporting is regulated by the law "On Consolidated Accounts." The parent company has to prepare annual accounts of a group in the event if a group for two years exceeds any two of the criteria below:

    • Total assets: 1 400 000 EUR;
    • Net turnover: 3 400 000 EUR;
    • Average number of employees in the reporting year: 250.

    The preparation of the annual report of a group of companies requires the application of the same accounting principles in all companies of the group in order to reflect their business transactions in the same manner. If the accounting principles, which are applied in a subsidiary, differ from those applied by a parent company, corrections must be made to the subsidiary's records when making the consolidated annual account.


    Financial Reporting Framework

    All corporations, companies/LLPs in Latvia are required to prepare their financial statements in accordance with requirements of the Law on Annual Reports or International Financial Reporting Standards (IFRS).  IFRS is that adopted by the EU.

    For filing purposes, a corporation/LLC may also prepare additional IFRS financial statements.


    Insurance companies, private pension funds, investment firms, credit institutions and listed companies prepare their financial statements (consolidated financial statements) according to the International Accounting Standards, International Financial Reporting Standards and International Financial Reporting Standards Interpretations issued by IASB and approved by the European Commission.


    The consolidated financial statements are prepared according to the law "On Consolidated Accounts" ("Konsolidēto gada pārskatu likums"). It is also possible to prepare consolidated financial statements under the International Financial Reporting Standards (IFRS).

    • On the basis of the European Parliament and of the Council of 19 July 2002 Regulation (EC) No. 1606/2002, Article 5, the parent companies may prepare consolidated annual accounts in accordance with international accounting standards.

    Audit Requirements for Companies Registered in Latvia

    In the event that the company exceeds two of the criteria listed below, the annual reports shall be audited by a certified auditor: 

    • Total assets: 400000 EUR;
    • Net turnover: 800000 EUR
    • Average number of employees in the reporting year: 25.

    The criteria currently is under discussion and might change in 2015.

    A certified auditor shall submit a report on the audit results in writing. The auditor's report shall specify in particular, the following:

    • Whether the annual report and the management report of the company or a group of companies have been prepared according the law;
    • Whether the annual report gives a true and fair view of the assets, liabilities and financial results of the respective company at the end of the reporting year, as well as of the profits and losses during the reporting year;
    • Whether the legal representatives of the company have given all the required information and explanations to the auditor.

    The auditor's report is issued in accordance with International Auditing Standards (ISA 700 and all others applicable for modified auditor's opinions).

    Audit Exemption

    Subject to the above, small private corporations/LLPs may not need an audit of their annual accounts. The members, who represent not less than one twentieth of the share capital may request an internal audit carried out if there is an important reason (if the auditor has been called upon by the members themselves, expense for internal audit will be covered by members themselves). Alternatively, there may be a requirement specified by other third parties for an audit (i.e. in a bank loan/overdraft agreement).


    Audit Appointment, Rotation and Joint Audits

    Audit appointments in Latvia are not normally for a fixed period.  An auditor can normally be appointed/removed at any time. In Latvia does not currently have any rules relating to mandatory rotation of audit firms.


    Listed companies and financial institutions must rotate their auditors every seven years in line with the ethical standard.

    Whilst not prohibited, joint audits are very rare in Latvia.


    Auditing Standards

    All audit firms in Latvia are required to carry out their audits and express an opinion on the (group) financial statements in accordance with International Auditing Standards including all Clarity ISA issued by the IAASB. Those standards require us to comply with the Code of Ethics for Professional Accountants issued by IESBA.


    Ethical Framework

    All Latvian audit firms are bound by the IFAC Code of Ethics promulgated by the IESBA.


    Audit Regulation
    Audit firms in Latvia are subject to the following external and internal monitoring processes with regard to their audit practice:

    External Monitoring
    The audit practices of all Latvian member firms are subject to periodic external peer reviews. The peer reviews have to be completed every 5 years. Member firms that also perform audits for public interest entities are required to have their peer reviews successfully completed every 3 years.

    In addition to the external monitoring through obligatory peer reviews, Crowe Horwath International member firm is additionally subject to regular inspections performed by peer reviewers from Crowe Horwath Group at least every three years. These inspections particularly focus on audit quality matters.

    Internal Monitoring
    Latvian member firm has established an annual firm wide monitoring process known as internal inspections. The internal inspections are led by the Quality Assurance Partner from Willems Donoway OU. The internal inspections are conducted following procedures defined by the Donoway Assurance Group Quality Control Manual and cover all certified auditors of a firm who perform statutory audit engagements. The results of the annual internal inspections are used to develop and further enhance the quality of the audit processes within the Latvian member firms.

    Transparency Report
    Audit firms that perform audits for public interest entities are required to prepare an annual transparency report that is available on their websites of the audit company and Association of Latvian Certified Auditors and covers information about the respective audit firm's governance and ownership structure, its quality control and monitoring system, its independence policies and measures, its continuing professional education processes and its remuneration principles for senior personnel.


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