Kuwait

Member Organizations

Member Organization Associate Other PAOs

  Kuwait Association of Accountants and Auditors

Legal and Regulatory Environment

  • Overview of Statuatory Framework for Accounting and Auditing

    Accounting Framework

    Ministerial Resolution No.18 of 1990 (as amended) stipulates the requirements for the preparation of financial statements, including applicable accounting standards. In accordance with the law, the Ministry of Commerce and Industry (MCI), in consultation with the Kuwait Association of Accountants and Auditors (KAAA), is the accounting standard setter for all companies. As of 2019, IFRS as issued by the IASB are mandatory for the preparation of financial statements by all companies that fall under the purview of the Kuwait Commercial Companies Law of 2016. Companies are defined by the legislation as entities that include two or more persons.

    Auditing Framework

    Decree Law No. 5 of 1981 on the Practice of the Auditing Profession delegates audit standard-setting authority to the MCI which requires adoption of ISA as issued by the IAASB for audits of all types of companies. Auditors use the English version of ISA so that all revisions to standards are adopted on an ongoing basis and become effective when issued by the IAASB in order to avoid a lag due to translations.

    The Central Bank Law No. 130, 1977 and the Capital Markets Law (No. 7 of 2010) also outline accounting and auditing requirements for institutions that fall within their purview.

  • Regulation of Accountancy Profession

    In Kuwait, the accountancy profession is regulated at the state and professional level. All Chartered Accountants and Auditors are regulated by Decree Law No. 5 of 1981 on the Practice of the Auditing Profession, and auditors of public interest entities (PIEs), which are defined as listed and financial institutions, are further subject to regulation by the Capital Markets Authority (CMA) under the Capital Markets Law (No. 7 of 2010).

    Decree Law No. 5 of 1981 on the Practice of the Auditing Profession defines audit and audit activities, specifies the scope of the entities subject to mandatory audit requirements, establishes the Kuwaiti Association of Accountants and Auditors (KAAA) as the national professional accountancy organization, establishes requirements to become an auditor, and outlines the rights, responsibilities, and liability of the auditor.

    Membership in KAAA is mandatory for all accountancy professionals which offers two membership categories. Category A members are graduates of Kuwaiti Universities (or foreign equivalent) that are not required to complete practical experience requirements. Category B members are Auditors and Chartered Accountants who passed the examinations administered by the Exam Committee—comprising representatives from KAAA and the Ministry of Commerce and Industry (MCI)—and obtained their licenses from the MCI. Applicants for the audit license are required to provide the MCI with evidence of: (i) Kuwaiti citizenship; (ii) Bachelor’s degree in accounting; (iii) having completed at least five (5) years of practical experience in auditing/accounting; (iv) having a clear criminal record; and (v) membership in KAAA. To maintain membership in KAAA, individuals must continue to have a clear criminal record and pay annual membership fees. Although CPD is required by law, a program has yet to be implemented by the KAAA.

    Under the law, KAAA is responsible for (i) delivering initial and continuing professional development (IPD and CPD respectively) under the supervision of the Ministry of Commerce and Industry (MCI) for members which includes Chartered Accountants and Auditors; (ii) managing and conducting professional examinations with the exam committee for the certification of accountants as well as auditors; and (iii) maintaining a registry of its members. The MCI is primarily responsible for (i) audit and accounting standard-setting; (ii) establishing and implementing a quality assurance review system for non-PIEs; (iii) establishing and implementing an investigations & disciplinary (I&D) system for non-PIEs; (iv) establishing and monitoring compliance with a Code of Ethics; and (v) maintaining a registry for licensed practitioners.

    Under the Capital Markets Law (No. 7 of 2010), the CMA is responsible for (i) conducting quality assurance reviews of PIEs; (ii) issuing PIE audit practicing licenses to auditors registered in the MCI; (iii) maintaining a general registry for PIE auditors; (iv) establishing and monitoring the Code of Ethics for auditors of PIEs; and (v) conducting investigations and discipline for PIEs.

    All auditors listed in the MCI’s registry that are seeking to become auditors of companies under the purview of the CMA are required to meet the following requirements (i) provide proof of being included in the MCI registry; (ii) complete at least five (5) years of practical experience; and (iii) hold a university degree in accounting from a Kuwaiti University or equivalent foreign institute. To remain in the registry, they must (i) complete at least 30 years of CPD annually; (ii) adhere to the IESBA Code of Ethics as issued by the IESBA; (iii) be subject to the CMA’s QA review system; and (iv) pay annual fees set by the CMA. As of the date of the assessment, it is the only operational QA system in the jurisdiction. Nevertheless, KAAA reports that the MCI’s mandatory QA review system for auditors of other entities is expected to be completed by 2019.

  • Audit Oversight Arrangements

    There is no independent audit oversight arrangements in the jurisdiction.

    Under the Decree Law No. 5 of 1981 on the Practice of the Auditing Profession, the Kuwaiti Association of Accountants and Auditors (KAAA) is responsible for (i) delivering initial and continuing professional development (IPD and CPD respectively) under the supervision of the Ministry of Commerce and Industry (MCI) for members which includes Auditors; (ii) managing and conducting professional examinations with the exam committee for the certification of auditors; and (iii) maintaining a registry of its members. The MCI is primarily responsible for (i) audit standard-setting; (ii) organizing and implementing a quality assurance review system; (iii) establishing and implementing an investigations & disciplinary (I&D) system; and (iv) establishing and monitoring compliance with the Code of Ethics.

    Under the Capital Markets Law (No. 7 of 2010), the Capital Markets Authority (CMA) is responsible for (i) conducting QA of public interest entities (PIEs); (ii) issuing PIE audit practicing licenses to auditors registered in the MCI; (iii) maintaining a general registry for PIE auditors; (iv) establishing and monitoring the Code of Ethics for auditors of PIEs; and (v) conducting I&D for PIEs.

    KAAA reports that a mandatory QA review system for public interest entities is expected to be established by 2019. Adoption of ISQC 1 is also under consideration by the MCI.

  • Professional Accountancy Organizations

    The Kuwaiti Association of Accountants and Auditors (KAAA)

    KAAA, which is a mandatory membership organization for accountancy professionals, was founded in 1973 by the Decree Law No. 5 of 1981 on the Practice of the Auditing Profession. KAAA is directly responsible for (i) delivering initial and continuing professional development under the supervision of the MCI for members which includes Chartered Accountants and Auditors; (ii) managing and conducting professional examinations with the exam committee for the certification of accountants as well as auditors; and (iii) maintaining a registry of its members.

    In addition to being a member of the International Federation of Accountants, KAAA is a member of the GCC Accounting and Auditing Organization.

  • Projects or Other Information

    As of 2019, legislation that would introduce a quality assurance review system for non-public interest entities is pending review and approval by the Kuwaiti parliament. The Kuwaiti Association of Accountants and Auditors also reports that it has proposed a continuing professional development program in line with revised IES (2015) to the Ministry of Commerce and Industry which is pending approval.

Adoption of International Standards

  • Quality Assurance

    Under the Capital Markets Law (No. 7 of 2010), the Capital Markets Authority (CMA) is responsible for conducting QA of public interest entities (PIEs), which are defined as listed and financial institutions. Decree Law No. 5 of 1981 on the Practice of the Auditing Profession also stipulates that a quality assurance (QA) review system for non-PIEs established and operated by the Ministry of Commerce and Industry (MCI).

    As of the date of the assessment, CMA’s QA review system is the only operational QA system in the jurisdiction. The Kuwaiti Association of Accountants and Auditors (KAAA) reports that the system is partially in line with SMO 1 requirements—gaps reported can be found in

    According to KAAA, MCI’s mandatory QA review system for non-PIEs is expected to be completed by 2019 (pending parliament approval). It is unclear if the envisioned system will be in line with SMO 1 requirements and if KAAA will have a role.

    Adoption of ISQC 1 is also under consideration by the MCI.

    Current Status: Partially Adopted

  • International Education Standards

    Initial and continuing professional development requirements (IPD and CPD, respectively) for accountancy professionals are stipulated in national legislation—the Decree Law No. 5 of 1981 on the Practice of the Auditing & the Capital Markets Law (No. 7 of 2010)—and are implemented by the Kuwaiti Association of Accountants and Auditors (KAAA) under the supervision of the Ministry of Commerce and Industry (MCI) for accountants and auditors of non-public interest entities (non-PIEs); and the Capital Markets Authority (CMA) for PIEs, respectively.

    According to the Decree Law No. 5 of 1981 on the Practice of the Auditing, membership in the Kuwaiti Association of Accountants and Auditors (KAAA) is mandatory for all accountancy professionals which offers two membership categories. Category A members are graduates of Kuwaiti Universities (or foreign equivalent) that are not required to complete practical experience requirements. Category B members are Auditors and Chartered Accountants who passed the examinations administered by the Exam Committee—comprising representatives from KAAA and the MCI—and obtained their licenses from the MCI. Applicants for the audit license are required to provide the MCI with evidence of: (i) Kuwaiti citizenship; (ii) Bachelor’s degree in accounting; (iii) having completed at least five (5) years of practical experience in auditing/accounting; (iv) having a clear criminal record; and (v) membership in KAAA. To maintain membership in KAAA, individuals must continue to have a clear criminal record and pay annual membership fees. Although CPD is required by law, a program has yet to be implemented by the KAAA.

    Under the Capital Markets Law (No. 7 of 2010), CMA is responsible for issuing PIE audit practicing licenses to auditors registered in the MCI.

    All auditors listed in the MCI’s registry that are seeking to become auditors of companies under the purview of the CMA are required to meet the following requirements (i) provide proof of being included in the MCI registry; (ii) complete at least five (5) years of practical experience; and (iii) hold a university degree in accounting from a Kuwaiti University or equivalent foreign institute. To remain in the registry, they must complete at least 30 years of CPD annually.

    Although some of the requirements of the revised IES (2015) appear to have been incorporated into the national requirements, the full extent of adoption of the IES requirements is unclear.

    Current Status: Partially Adopted

  • International Standards on Auditing

    The Decree Law No. 5 of 1981 on the Practice of the Auditing Profession delegates audit standard-setting authority to the Ministry of Commerce and Industry (MCI) which consults with the Kuwaiti Association of Accountants and Auditors (KAAA). The MCI requires adoption of ISA as issued by the IAASB for audits of all types of companies.

    Auditors use the English version of ISA so that all revisions to standards are adopted on an ongoing basis and become effective when issued by the IAASB in order to avoid a lag due to translations.

    Other IAASB pronouncements have not been adopted, and there is no available timeline for adoption.

    Current Status: Partially Adopted

  • Code of Ethics for Professional Accountants

    Professional accountants are subject to ethical requirements, as per the Decree Law No. 5 of 1981 on the Practice of the Auditing Profession, which are set by the Ministry of Commerce and Industry (MCI).

    As of the date of the assessment, the Kuwaiti Association of Accountants and Auditors (KAAA) reports that the MCI Code of Ethics is converged with the English version of the 2011 IESBA Code of Ethics. The institute reports to be working closely with the standard-setter to ensure that the most recent version of the Handbook (2018) is adopted.

    Auditors of public interest entities (PIEs) are subject to ethical requirements stipulated in the Capital Markets Law (No. 7 of 2010). The law delegates ethics standard-setting to the Capital Markets Authority (CMA) which adopted the IESBA Code of Ethics as issued by the IESBA for auditors of PIEs.

    Current Status: Partially Adopted

  • International Public Sector Accounting Standards

    The Ministry of Finance is responsible for accounting standard-setting for public sector entities.

    The Kuwaiti Association of Accountants and Auditors (KAAA) reports that financial reporting for public sector entities in Kuwait is based on cash-basis reporting.

    It remains unclear if there is a timeline for adoption of accrual-basis IPSAS.

    Current Status: Partially Adopted

  • Investigation and Discipline

    Under the Decree Law No. 5 of 1981 on the Practice of the Auditing Profession, the Ministry of Commerce and Industry (MCI) is responsible for conducting investigations & disciplinary (I&D) proceedings for accountancy professionals. The MCI has reportedly established a Disciplinary Committee, comprising representatives from the MCI, the business community, and the Kuwaiti Association of Accountants and Auditors (KAAA). KAAA reports that it has established provisions and processes that support the existing I&D system. No update has been provided since 2015 and the extent of fulfillment of the I&D procedures with the requirements of the SMO 6 requires further clarification.

    Auditors of public interest entities (PIEs) are also subject to the Capital Markets Authority (CMA) I&D system as stipulated in the Capital Markets Law (No. 7 of 2010). More information is needed to determine the extent of fulfillment of CMA’s I&D procedures with the requirements of SMO 6.

    Current Status: Partially Adopted

  • International Financial Reporting Standards

    Ministerial Resolution No.18 of 1990 (as amended) stipulates the requirements for the preparation of financial statements, including applicable accounting standards. In accordance with the law, the Ministry of Commerce and Industry (MCI) is the accounting standard setter for all companies, and it consults with the Kuwait Association of Accountants and Auditors (KAAA), which is the national professional accountancy body. As of 2019, IFRS as issued by the IASB are mandatory for the preparation of financial statements by all companies that fall under the purview of the Kuwait Commercial Companies Law.

    IFRS Foundation reports to coordinate the publication of an annual bound volume of IFRS in Arabic.

    Current Status: Adopted

Disclaimer

IFAC bears no responsibility for the information provided in the SMO Action Plans prepared by IFAC member organizations. Please see our full Disclaimer for additional information.

Methodology

Methodology
Last updated: 05/2019
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