Egypt

Member Organizations

Member Organization Associate Other PAOs

  Egyptian Society of Accountants & Auditors

Legal and Regulatory Environment

  • Overview of Statuatory Framework for Accounting and Auditing

    The financial reporting framework in Egypt is established under the Companies Law No. 159 of 1981, which requires companies to present annual audited financial statements. All companies registered under the Companies Law 1981 and the Capital Market Authority Law No. 95 of 1992 must prepare annual financial statements in accordance with the financial reporting requirements specified by a decree of the Minister of Economy.

    The Minister of Investment (MoI) is responsible for setting accounting standards. In 2006, the MoI issued Decision No. 243/2006 adopting Egyptian Accounting Standards (EAS) based on the 2005 version of the IFRS. The Egyptian Society of Accountants and Auditors (ESAA) Standards’ Committee monitors IFRS and any revisions issued by the IASB and then communicates any changes to the MoI in order to incorporate the changes to the existing EAS. Accordingly, in July 2015, the MoI issued Decision No.110/205 which aligned the EAS with the 2014 version of the IFRS and adopted the EAS for SMEs, proposed by the ESAA’s Standards’ Committee and based on IFRS for SMEs. Any company that publishes financial statements for general purposes for external users and does not have public accountability may use the EAS for SMEs.

    According to the Companies Law 1981, all companies, with the exception of partnership companies and limited partnership companies, must present annual audited financial statements that are audited by a Certified Accountant. The MoI is also the auditing standard-setter and in 2008, issued Decision No. 166/2008 adopting the Egyptian Standards on Auditing Review and Other Assurance Services (ESAROAS) which are aligned with 2005 version of ISA issued by the IAASB. The ESAA’s Standards’ Committee is responsible for monitoring ISA and any revisions issued by the IAASB and communicating any changes to the MoI in order to incorporate the changes to the existing ESAROAS; however, the ESAA states that the EASROAS have not been updated.

    In addition to stipulations in the Companies Law 1981, banks must submit annual audited financial statements to the Central Bank of Egypt, and insurance companies and listed companies must submit them to the Egyptian Financial Supervisory Authority. These entities must comply with the Banking Law No. 163 of 1957, the Banking Act No. 88 of 2003, and the Capital Market Authority Law No. 95 of 1992.

  • Regulation of Accountancy Profession

    Professional accountants in Egypt are regulated by the Accounting Practice Law 133 of 1951 and its amendments, the government, and are self-regulated by membership of one of Egypt’s professional accountancy organizations.

    Law 133 of 1951 requires individuals aspiring to be Certified Accountants to be a graduate of a Faculty of Commerce of one of the Egyptian universities with a major in accounting or hold a similar degree from any other local or foreign university or institute considered by the Supreme Council of Universities as equivalent, and to register as a trainee accountant with the General Register for the Accountants and Auditors, which is maintained by the Ministry of Finance (MoF). In order to register with the MoF, individuals must maintain a membership certificate from the Syndicate of Commerce—Accountants and Auditing (SAE). Registration rules stipulate that after three years of professional work in a practicing accountant’s office, individuals may apply to be taken off the registry as a trainee accountant and classified as an auditor. Under this designation, individuals are authorized to practice as auditors of sole proprietorships and partnership enterprises. After an additional five years of employment experience, accountants may apply for a final registration certificate as a “full auditor” permitting them to act as an auditor of joint stock companies. Candidates can also register directly through membership in the Egyptian Society of Accountants and Auditors (ESAA), which then qualifies them for a license to audit joint stock companies. The law does not require passing a final examination, audit experience, or continuing professional development (CPD) in order to begin and continue practicing.

    There are two government bodies involved in the regulation of the accountancy profession: the MoF and the Egyptian Financial Supervisory Authority (EFSA). In accordance with Law 133 of 1951, the MoF is responsible for maintaining the General Register for Accountants and Auditors and developing rules and regulations regarding accounting and auditing. The EFSA was established by Law No. 10 of 2009 to regulate public interest entities (PIEs) which in Egypt are defined as listed companies, public subscription companies, securities companies, and investment funds established by banks and insurance companies. The EFSA also oversees auditors who are licensed to audit PIEs and banks and it is responsible for (i) maintaining a register of auditors who are licensed to audit PIEs and banks; (ii) establishing a quality assurance review system and an investigative and discipline system for EFSA-registered auditors; (iii) setting CPD requirements for registered auditors; and (iv) establishing ethical requirements for EFSA-registered auditors.

    As mentioned above, individuals wishing to become registered by the MoF must have a membership certificate of the (SAE. The SAE was established by Law No. 4 of 1972 and generally provides a membership certificate to those who completed the university accounting education program. Its responsibilities include: (i) implementing initial professional development and setting CPD development requirements for its members; (ii) issuing a code of professional conduct and ethics for professional accountants in Egypt; and (iii) establishing an investigative and discipline system for all auditors registered with the MoF.

    Professional accountants may also voluntarily join the ESAA. Individuals who join the ESAA are required to have met its respective membership requirements and become subject to its investigative and disciplinary system.

    The ESAA is a professional society for public accountants established by a Royal Decree in 1946 and given further statutory recognition by the Ministerial Order No. 2280. Resolution 554 of 2007 mandates the ESAA to raise the technical and practical awareness of the members of the profession and ensure the profession operates in accordance with international best practice. Its responsibilities include: (i) implementing initial professional development and setting CPD requirements for its members; (ii) promulgating the EFSA’s Code of Ethics for its members registered with the EFSA (there are no other ethical requirements established by the ESAA for other members); (iii) establishing an investigative and discipline system for its members; and (iv) proposing revisions to the Egyptian Accounting Standards and EASROAS to the Ministry of Investment.

    Candidates for ESAA membership must satisfy one of the following conditions: (a) hold membership in the Institute of Chartered Accountants in England and Wales, or another acceptable foreign professional body (provided they pass the ESAA’s examinations on Egyptian tax law and Egyptian company law); (b) hold a doctoral degree in accounting with three years of experience in practice; or (c) have at least three years of full-time work experience in the office of a practicing ESAA member, and successfully complete of the ESAA’s two-part examination. ESAA has three categories of members: professional accountants, auditors, and students.

    In addition, the Central Bank of Egypt (CBE) maintains its own registry of auditors. To enroll on the CBE’s auditors’ registry, there are specific criteria individuals need to meet:

    Registration in MoF register;

    Registration in the Central Audit Organization; and

    Practicing audit for fifteen years outside the government sector, or practicing for ten years for PhD holders in accounting/auditing, or being a member of the “Egyptian Society for Accountants and Auditors” or an equivalent peer entity.

  • Audit Oversight Arrangements

    The Egyptian Financial Supervisory Authority (EFSA) is responsible for the regulation and supervision of public interest entities (PIEs) which in Egypt are defined as listed companies, public subscription companies, securities companies, and investment funds established by banks and insurance companies in accordance with Law 10 of 2009.

    The EFSA oversees auditors who are licensed to audit PIEs as well as banks and is responsible for (i) maintaining a register of auditors who are licensed to audit PIEs and banks; (ii) establishing a quality assurance review system and an investigative and discipline system for EFSA-registered auditors; and (iii) establishing ethical requirements for EFSA-registered auditors.

    The Auditors Oversight Board (AOB) is the unit within the EFSA that is responsible for verifying registered auditors’ compliance with applicable professional quality standards, decisions, and systems, as well as their compliance with the applied auditing standards and Code of Ethics. The European Union-funded project that is being implemented in Egypt aims at extending the oversight of auditors to include all of the Certified Accountants who provide audit services.

    The AOB functions principally include the registration, inspection, and sanctioning registered auditors of PIEs and banks, as well as performing continuing professional development needs assessment. The AOB cooperates with professional organizations to suggest standards for auditing, ethics, and independence.

    The EFSA is a member of the International Forum of Independent Audit Regulators.

    Additionally, in accordance with Law No. 4 of 1972, auditors of non-PIE entities that are listed in the General Registrar maintained by the Ministry of Finance are subject to the code of professional conduct and ethics and the investigation and discipline system established by the Syndicate of Commerce—Accountants and Auditing.

  • Professional Accountancy Organizations

    There are two professional accountancy organizations in Egypt, listed alphabetically:

    Egyptian Society of Accountants and Auditors (ESAA)

    The ESAA is a professional society for public accountants established by a Royal Decree in 1946 and given further statutory recognition by the Ministerial Order No. 2280. Resolution 554 of 2007 mandates the ESAA to raise the technical and practical awareness of the members of the profession and ensure the profession operates in accordance with international best practice. Its responsibilities include: (i) implementing initial professional development and setting continuing professional development requirements for its members; (ii) enforcing the Egyptian Financial Supervisory Authority’s (EFSA) Code of Ethics for its members registered with the EFSA; (iii) establishing an investigative and discipline system for its members; and (iv) proposing revisions to the EAS and EASROAS to the Ministry of Investment.

    In addition to being a member of IFAC, ESAA is a member of the Federation of Mediterranean Certified Accountants.

    Syndicate of Commerce—Accountants and Auditing (SAE)

    The SAE was established by Law No. 4 of 1972 and generally provides a membership certificate to those who completed the university accounting education program. Its responsibilities include: (i) implementing initial professional development and setting continuing professional development requirements for its members; (ii) issuing a code of professional conduct and ethics for professional accountants in Egypt; and (iii) establishing an investigative and discipline system for all auditors registered with the MoF.

    The SAE is not a member of IFAC.

  • Projects or Other Information

    A draft of a new Accounting Law has been under discussion for the past several years with little indication of a timeline for its progression. The new law was originally drafted under the sponsorship of the Ministry of Finance, the Syndicate of Accountants, and the Egyptian Society for Accountants and Auditors (ESAA) in the late 1990s. Important features of the draft law include introducing (i) a qualifying examination to obtain an auditing license and establishing continuous education schemes, (ii) recognizing audit firms and individual auditors as providers of statutory audit services, (iii) amending the public oversight architecture over the professional performance, and (iv) strengthening the operational capacity of the professional bodies and emphasizing coordination through the creation of a Supreme Council for Accounting and Auditing.

    In May 2015, the Ministry of Finance and the European Union launched a Twinning Project funded by the Support to the European Union-Egypt Association Agreement Programme and Ministry of International Cooperation–Egypt to enhance the accounting and auditing profession in Egypt. The objectives of the Twinning Project are to review and update the legal framework on accountancy and auditing through passage of the amendments to the Accounting Law 133 of 1951, enhance the public oversight structure, and assess and suggest how to better use modern communication technology to promote registration, certification, and knowledge sharing for the accounting and audit profession.

    Under the new Twinning Project, the Ministry of Finance and its counterpart in the Spanish Ministry of Finance and Economy will work together to help Egyptian and Spanish PAOs exchange experiences and best practices in supervising the accounting and auditing profession and ensuring the delivery of high quality services. The project will include study trips to Europe to interact with European counterparts and the ESAA indicates that it will be an active participant in the Twinning Project.

    Additionally, in September 2016, the ESAA and the Association for Chartered Certified Accountants (ACCA) signed a strategic partnership agreement to strengthen the accountancy and finance profession in Egypt. The areas of focus will include: information and knowledge sharing, continuous professional development for ESAA members, and offering local qualification developments, such as papers in International Financial Reporting Standards.

Adoption of International Standards

  • Quality Assurance

    Law 10 of 2009 empowers the Egyptian Financial Supervisory Authority (EFSA) to establish a quality assurance (QA) review system for auditors that are licensed to conduct audits of public interest entities (PIEs) and banks and must be registered with the EFSA. The EFSA created the Auditors Oversight Board (AOB) which has been carrying out QA reviews since 2008 and has adopted ISQC 1 and ISA 220.

    The AOB's Audit Inspection Department inspects auditors of PIEs and banks while the Enforcement Department implements an enforcement mechanism to ensure compliance with applicable accounting and auditing standards. According to the AOB, the AOB’s inspection process is a risk-based process where the inspection plan is divided into routine and non-routine inspections. The non-routine are based on a risk matrix that highlights those auditors with high risk assignments and therefore an inspection on the audit quality is required.

    While the EFSA’s QA system incorporates some components of the SMO 1 requirements, the Egyptian Society of Accountants and Auditors reports that a full review of the QA system is still in process. Additionally, at the time of this assessment, not all audits are subject to QA reviews. Under the proposed amendments to the new Accounting Law, the scope of QA reviews would be extended to include all audits.

    Current Status: Partially Adopted

  • International Education Standards

    The Accounting Law No. 133 of 1951 establishes initial professional development (IPD) for professional accountants.

    The main requirement for obtaining a practicing license of a Certified Accountant is a bachelor’s degree in accounting and three to five years of practical experience. A certification process, including a qualifying exam and continuing professional development (CPD) to maintain the certification, have not yet been developed. Revisions to Law No. 133 of 1951 would mandate CPD for all trainee accountants and practicing Certified accountants.

    The Supreme Council of Universities sets the accounting curricula of universities and regulates the programs. No minimum standard has been set for the content of universities accounting curricula.

    The Egyptian Financial Supervisory Authority maintains a register of auditors who are licensed to public interest entities and banks and has established additional requirements for auditors providing services to entities under its supervision.

    The Syndicate of Commerce—Accountants and Auditing (SAE) is authorized to implement IPD requirements established by Accounting Law No. 133 of 1951. All accounting degree holders are eligible for membership of SAE. No further information on SAE’s educational and training requirements is available at the time of the assessment.

    The Egyptian Society of Accountants and Auditors (ESAA) implements IPD requirements, which incorporate those set by the Accounting Law 133 of 1951. It has also set CPD requirements for its members. The ESAA reports are its educational requirements are in line with the IES; nevertheless its membership is voluntary, and therefore, the requirements are only in place for those professional accountants choosing to become members.

    Current Status: Partially Adopted

  • International Standards on Auditing

    According to the Companies Law 1981, all companies, with the exception of partnership companies and limited partnership companies, must present annual audited financial statements.

    The Ministry of Investment (MoI) is the recognized auditing standard-setter. In 2008, the MoI issued Decision No. 166/20008 to implement the Egyptian Standards on Auditing Review and Other Assurance Services (ESAROAS).

    The ESAROAS were developed based on the translation of the 2005 edition of ISA but have not been updated on an ongoing basis to incorporate new and revised standards.

    Current Status: Partially Adopted

  • Code of Ethics for Professional Accountants

    The ethical requirements for professional accountants in Egypt are specified in the Code of Ethics developed by the Syndicate of Commerce—Accountants and Auditing. According to the World Bank (2002), the requirements only include ethics breach criteria, such as fraud, and are not based on the IESBA Code of Ethics.

    In accordance with Law No. 10 of 2009, the Egyptian Financial Supervisory Authority (EFSA) is empowered to set the ethical requirements for auditors registered with the EFSA and licensed to conduct audits of public interest entities and banks.

    The EFSA issued Decision No. 79/2007 adopting the Egyptian Code of Ethics (ECE) in line with the requirements of the 2006 version of the IESBA Code of Ethics. At the time of this assessment, the Egyptian Society of Accountants and Auditors reports that the ECE has not been updated in line with the subsequent revisions made to the IESBA Code.

    Current Status: Partially Adopted

  • International Public Sector Accounting Standards

    The Government of Egypt is responsible for adopting public sector accounting standards which are cash-basis.

    Due to the ongoing political situation, the Egyptian Society of Accountants and Auditors reports that there is no timeline or plans to adopt IPSAS in the immediate future.

    Current Status: Not Adopted

  • Investigation and Discipline

    The legal foundation for an investigative and discipline (I&D) system for professional accountants in Egypt is established under various regulations.

    Law No. 4 of 1972 stipulates that Syndicate of Commerce—Accountants and Auditing is authorized to establish and implement an I&D system for auditors registered with the Ministry of Finance. The Egyptian Society of Accountants and Auditors (ESAA) reports that some of the requirements set out in the law are not line with SMO 6 requirements.

    Additionally, in accordance with Law No. 10 of 2009 the Egyptian Financial Supervisory Authority (EFSA) is empowered to establish an I&D system for auditors of PIEs and banks. The ESAA states that the EFSA’s I&D system incorporates the majority of the revised SMO 6 requirements.

    The ESAA is also authorized to establish an I&D system for its members and has created an Investigation and Disciplinary Committee. In 2016, the ESAA conducted a self-assessment against the revised SMO 6 requirements and indicated that there are several areas that require improvements. The ESAA indicates that it would need to modify its by-laws in order to align its I&D system with the SMO 6 requirements.

    Current Status: Partially Adopted

  • International Financial Reporting Standards

    In accordance with the Companies Law 1981 and the Capital Market Authority Law No. 95 of 1992, all companies must prepare annual financial statements in accordance with the financial reporting requirements specified by a decree of the Minister of Economy.

    The Ministry of Investment (MoI) is recognized as the accounting standard-setter in Egypt. In 2006, the MoI issued Decision No. 243/2006 adopting Egyptian Accounting Standards (EAS) based on the 2005 version of the IFRS. The Egyptian Society of Accountants and Auditors (ESAA) Standards’ Committee is responsible for monitoring IFRS and any revisions issued by the IASB and communicating any changes to the MoI in order to incorporate the changes to the existing EAS.

    Accordingly, in July 2015, the MoI issued Decision No.110/205 which aligned the EAS with the 2014 version of the IFRS and adopted the EAS for SMEs, proposed by the ESAA’s Standards’ Committee and based on IFRS for SMEs. Any company that publishes financial statements for general purposes for external users and does not have public accountability may use the EAS for SMEs.

    The ESAA reports the translation follows the official IFRS Foundation translation process.

    Current Status: Adopted

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Methodology

Methodology
Last updated: 11/2016
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