Audit Requirements in Latvia: When Is It Mandatory?

Many SIA owners believe the audit is something that only large corporations deal with. Then their company has a good year — revenue jumps past EUR 1.6 million, the team grows to 55 people — and suddenly the auditor's phone number becomes urgent. By then, the fiscal year is already closed, and engaging an audit firm under time pressure means higher fees and more stress than necessary.

The statutory audit in Latvia is governed by clear numeric thresholds, and knowing them in advance is far cheaper than discovering them after the fact.

The Three Thresholds

A statutory audit is mandatory when a company meets two of three criteria for the reporting year:

| Criterion | Threshold | |-----------|-----------| | Balance sheet total | > EUR 800,000 | | Net revenue | > EUR 1,600,000 | | Average number of employees | > 50 |

Note the "two of three" rule carefully. A company with EUR 2 million in revenue and a EUR 1 million balance sheet but only 12 employees still needs an audit (two criteria exceeded). A company with EUR 3 million in revenue but a EUR 500,000 balance sheet and 30 employees does not (only one criterion exceeded).

The assessment is based on the figures from the reporting year itself. If you exceeded the thresholds last year but fell below them this year, you may no longer need an audit — though in practice, most companies that cross the line once tend to stay above it.

Who Is Exempt?

Micro and small companies that stay below all audit thresholds are exempt. Single-member SIAs, regardless of size, are not automatically exempt — the thresholds apply equally.

Certain entities must be audited regardless of size: credit institutions, insurance companies, publicly listed companies, and political parties. For most private SIAs, though, the three thresholds above are the only test.

NGOs and associations (biedrības) are generally exempt from audit unless their activities or specific laws require it.

What an Audit Actually Involves

The auditor does not simply rubber-stamp your financial statements. A statutory audit under International Standards on Auditing (ISA) involves:

Planning and risk assessment. The auditor studies your business, identifies areas where material misstatement is most likely (revenue recognition, inventory valuation, related-party transactions), and designs procedures accordingly.

Substantive testing. This means checking samples of transactions against invoices, bank statements, and contracts. The auditor will also send confirmation letters to your bank and may contact key customers or suppliers to verify balances.

Analytical procedures. The auditor compares your current-year figures to prior years, to budgets, and to industry benchmarks. Unusual fluctuations prompt deeper investigation.

Management representations. Near the end, the auditor asks company management to sign a representation letter confirming, among other things, that all transactions have been recorded, no fraud is known, and all liabilities have been disclosed.

The output is an auditor's report — a formal opinion on whether the financial statements present a true and fair view. The four possible opinions: unqualified (clean), qualified (issues noted but limited), adverse (material misstatement), or disclaimer (insufficient evidence). Banks, investors, and business partners pay close attention to this opinion.

In our experience working with clients who go through their first audit, the biggest surprise is the volume of documentation requested. The auditor needs access to your entire accounting file, all bank statements, major contracts, board meeting minutes, and shareholder decisions. Companies that keep organized digital records (a lesson we emphasize constantly) sail through. Companies that store receipts in folders on someone's desk do not.

Timing and Cost

Engage your auditor no later than February for a calendar-year company. An audit typically takes four to eight weeks of elapsed time, with the auditor working on your file intermittently as they receive requested documents.

Audit fees for a typical medium-sized SIA in Latvia range from EUR 3,000 to EUR 15,000 depending on complexity, industry, and the audit firm. The Big Four firms charge more; smaller Latvian practices are more affordable but may have less capacity during peak season (March–June).

One practical tip: if you think you might need an audit next year, talk to an audit firm this year. Many firms offer a pre-audit engagement where they review your accounting setup and flag potential issues before the fiscal year ends. This is far cheaper than fixing problems during the audit itself.

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Audit-Ready Books Mean Lower Audit Fees

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