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Lithuania joined the European Union (EU) on May 1, 2004. The European Commission (EC) in its 2008 publication on the implementation of International Financial Reporting Standards (IFRSs) in European Union (EU) member states, explains that in line with the EC Regulation No. 1606/2002, which requires all EU-listed companies to prepare consolidated accounts following IFRSs as endorsed by the EC starting January 1, 2005, Lithuanian listed companies are required to prepare their annual and consolidated financial statements in accordance with IFRSs. Furthermore, Lithuania permits other companies to apply IFRSs in their annual and consolidated accounts, except insurance companies. Moreover, banks and financial credit institutions are required to prepare their annual and consolidated financial statements pursuant to IFRSs. According to the 2007 KPMG Doing Business Guide, companies that do not apply IFRSs prepare their financial statements subject to Lithuanian Business Accounting Standards (LBASs), which are applicable as of January 1, 2004. As stated by KPMG, LBASs are simplified translations of IFRSs and generally require less disclosure than the corresponding IFRSs. Some areas, such as accounting for derivative and hedging financial instruments, employee benefits, and accounting by retirement benefit plans, are not covered by LBASs at all. As of June 30, 2008, there were 33 LBASs in force.

According to a 2007 publication by KPMG, pursuant to the Commercial Law audits are required for both private and public limited liability companies that fulfill two of the following three criteria: (1) annual turnover exceeding LTL 10,000,000; (2) total assets exceed LTL 5,000,000; and (3) average number of employees exceeding 50. According to Article 27 of the Law on Audit, audits should be conducted in accordance with either National Auditing Standards (NASs) or International Standards on Auditing (ISAs) as promulgated by the International Federation of Accountants. The Lithuanian Chamber of Auditors (LCA), the auditing standard setter, points out in a 2006 self-assessment that there are differences between NASs and ISAs due to a time lag in adoption of international pronouncements. Some NASs are applied later than the corresponding ISAs, and the Lithuanian auditing standards framework does not provide a national equivalent to every single ISA. In its 2002 Report on the Observance of Standards and Codes on Accounting and Auditing in Lithuania, the World Bank recommended amending the Law on Audit to conform with European Union directives, and to ensure that Lithuanian auditing standards fully comply with ISAs. Being a member of the EU, Lithuania must 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, 2010. According to a compliance scoreboard provided on the EC website, Lithuania has fully transposed the above-mentioned Directive into its national legislation.