Palestine

Member Organizations

Member Organization Associate Other PAOs

  Palestinian Association of Certified Public Accountants

Legal and Regulatory Environment

  • Overview of Statuatory Framework for Accounting and Auditing

    Accounting Framework

    In accordance with the Securities Law No. 12 of 2004 and its amendments, entities subject to the regulations of the Palestinian Monetary Authority (PMA) and Palestinian Capital Markets Authority are required to follow IFRS and make their financial statements available to the public. These entities include banks and other financial institutions, insurance companies, and listed companies.

    For all other private companies, the Companies Law No. 12 of 1964 stipulates that financial statements be prepared in accordance with “internationally accepted standards.” Although the law does not specifically identify IFRS as the applicable standards for these entities, “internationally accepted standards” are generally interpreted to refer to IFRS.

    However, to introduce legal and mandatory application of the IFRS by all private companies, the PMA drafted amendments to the Companies Law clearly specifying the use of IFRS. The draft amendments are pending approval and adoption by the legislature as of the date of the assessment. In the meantime, the Palestinian Association of Certified Public Accountants (PACPA) permits its members to use IFRS and IFRS for Small- and Medium-Sized Entities.

    Auditing Framework

    The Companies Law No. 12 of 1964 outlines mandatory audit requirements for entities in Palestine, but does not specify applicable auditing standards. Similarly, the Palestinian Capital Market Authority, Palestinian Stock Exchange, and the Palestinian Monetary Authority stipulate in their respective regulations that the audits of the financial statements of entities within their purview should be performed using international auditing standards, but the standards are also not specified.

    In lieu of an official auditing standard-setter, PACPA has assumed the role of de facto auditing standard-setter and adopts ISA issued by the IAASB via its bylaws for use it by its members.

  • Regulation of Accountancy Profession

    Certified Public Accountants (CPAs) are the only regulated segment of the accountancy profession in Palestine. CPAs are regulated by two bodies: the Board of Professional Auditing (BPA) and the Palestinian Association of Certified Public Accountants (PACPA). Other segments of the profession, such as bookkeepers, can join PACPA voluntarily and be subject to its regulations.

    Only CPAs can practice as auditors. In order for an individual to offer auditing services in the jurisdiction, they must (i) obtain a university degree in accounting or related discipline; (ii) complete at least five years of practical experience in auditing (however, the number of years of practical experience required may vary depending on the level of education achieved); (iii) pass the CPA examination set by the BPA to receive the CPA qualification; (iv) obtain a license to practice as an auditor from the BPA; and (v) become a member of PACPA.

    The BPA, which was established in accordance with Auditing Profession Law No. 9 of 2004, has the following regulatory responsibilities: (i) award licenses for the practice of auditing in the jurisdiction; (ii) draft regulations for the implementation of the law; (iii) verify fulfillment of initial professional development requirements and conduct the CPA examinations that must be passed to receive the CPA qualification and be granted an audit license; (iv) keep a record of licensed practicing and non-practicing auditors; (v) levy disciplinary penalties on auditors who violate regulations; and (vi) may set continuing professional development requirements.

    As mentioned above, auditors must be members of the national professional accountancy organization—PACPA—and therefore, must adhere to its rules and regulations. In accordance with Article 25 of the Auditing Profession Law No. 9 of 2004, PACPA has the authority to: (i) maintain an audit license registry; (ii) investigate and discipline members for non-compliance with applicable rules, regulations, the code of ethics, practicing without a license, and breaches of professional conduct subject to the final approval by the BPA if the sanction is suspension or expulsion; and (ii) establish and operate a quality assurance review system. Additionally, PACPA has assumed the role of as de facto standard-setter and has set auditing, ethical, and continuing professional development requirements for its members.

    Auditors of regulated entities, which include financial institutions, insurance companies, and listed companies, are subject to additional regulation. The Palestinian Capital Market Authority (PCMA), the Palestinian Monetary Authority (PMA), and the Palestinian Stock Exchange regulations include stipulations on possible enforcement actions as well as the approval, appointment, and dismissal of auditors, who must be CPAs registered with PACPA. In addition, the PMA and PCMA Codes of Corporate Governance specify audit partner (or staff) rotation every five years for the audit of banks, listed companies, and insurance companies.

  • Audit Oversight Arrangements

    There are no independent audit oversight arrangements in Palestine. Auditors are regulated by two bodies: the Board of Professional Auditing (BPA) and the Palestinian Association of Certified Public Accountants (PACPA). In order to practice auditing in the jurisdiction, individuals must be qualified as a Certified Public Accountant (CPA), obtain a license from the BPA, and then become a member of PACPA.

    The BPA, which was established in accordance with Auditing Profession Law No. 9 of 2004, has the following regulatory responsibilities:(i) award licenses for the practice of auditing in the jurisdiction; (ii) draft regulations for the implementation of the law; (iii) verify fulfillment of initial professional development requirements and conduct the CPA examinations that must be passed before an audit license is granted; (iv) keep a record of licensed practicing and non-practicing auditors; (v) levy disciplinary penalties on auditors who violate regulations; and (vi) may set continuing professional development requirements.

    Under Article 17 of the same law, PACPA is authorized to enforce its members’ compliance with applicable rules, regulations, and professional standards that it adopted as the de facto standard-setter, including audit, ethics, and continuing professional development requirements. It also operates a quality assurance review system for its members.

  • Professional Accountancy Organizations

    Palestinian Association of Certified Public Accountants (PACPA)

    The PACPA was established in 1995 under a license (No. 5026) from the Ministry of Interior and membership is mandatory for practicing Certified Public Accountants that are licensed auditors and for audit firms that conduct audits. Other segments of the profession may choose to voluntarily join PACPA and be subject to its rules and regulation.

    In accordance with Article 25 of the Auditing Profession Law No. 9 of 2004, PACPA has the authority to: (i) maintain an audit license registry; (ii) investigate and discipline members for non-compliance with applicable rules, regulations, the code of ethics, practicing without a license, and breaches of professional conduct subject to the final approval by the Board of Professional Auditing if the sanction is suspension or expulsion; and (ii) establish and operate a quality assurance review system.

    In addition to being a Member of IFAC, PACPA is a Member of the Arab Federation of Accountants and Auditors and the Mediterranean Federation of Certified Accountants.

  • Projects or Other Information

    The quality assurance review system of the Palestinian Association of Certified Public Accountants is in the process of being operationalized and strengthened through a World Bank grant and technical expertise provided by international professional accountancy organizations.

    Separately, a draft amendment that would require the use of IFRS and IFRS for Small- to Medium-Sized Enterprise by non-regulated entities is pending approval by the legislature.

Adoption of International Standards

  • Quality Assurance

    The Palestinian Association of Certified Public Accountants (PACPA) is responsible for the implementation of a quality assurance (QA) review system in accordance with Auditing Profession Law No. 9 of 2004 and PACPA’s bylaws. PACPA reports that it developed a mandatory QA review system that fulfills SMO 1 requirements for all licensed auditors with assistance from a World Bank grant and the provision of technical support from an international expert.

    PACPA has also adopted ISA 220 and ISQC 1 for application by its members and translated a QA manual into Arabic, which has been published on its website.

    In 2017, PACPA indicates that its QA Committee plans to visit selected auditors licensed by the Board of Professional Auditing to verify compliance with ISA and ISQC 1. As of the date of the assessment, PACPA reports to have initiated audit quality inspections.

    Current Status: Adopted

  • International Education Standards

    Auditing Profession Law No. 9 of 2004 stipulates initial professional development (IPD) requirements for Certified Public Accountants (CPAs). To receive the CPA designation and offer auditing services, individuals are required to obtain a university degree in accounting or related discipline; complete at least five years of practical experience in auditing (however, the number of years of practical experience required may vary depending on the level of education achieved); and successfully pass an examination.

    The Ministry of Education and Higher Education is responsible for the accreditation and assessment of the university degree programs while the Board of Professional Auditing (BPA) is responsible for the verification of a candidates’ fulfillment of all IPD requirements. The BPA is also required to conduct the professional examinations and has developed an examination curriculum.

    While national educational requirements incorporate some of the IES requirements, the full extent of alignment remains to be clarified.

    The BPA does not appear to have adopted the IES 8 requirements—continuing professional development (CPD) requirements for auditors—but reported to be considering them since June 2016.

    The Palestinian Association of Certified Public Accountants (PACPA) has established CPD requirements for its members, which include all auditors in the jurisdiction, in its bylaws. The CPD requirements, however, are not fully aligned with IES requirements. Nevertheless, PACPA reported in its SMO Action Plan that it is considering modifying the CPD requirement to be in line with IES requirements. Other segments of the profession, such as bookkeepers, may also voluntarily join PACPA and then must comply with its CPD requirements; however, this appears to be the educational requirement for offering other accountancy services.

    Current Status: Partially Adopted

  • International Standards on Auditing

    The Companies Law No. 12 of 1964 outlines mandatory audit requirements for entities in Palestine, but does not specify applicable auditing standards.

    Similarly, the Palestinian Capital Market Authority, Palestinian Stock Exchange, and the Palestinian Monetary Authority stipulate in their respective regulations that the audits of the financial statements of entities within their purview should be performed using international auditing standards, but the standards are not specified.

    In the absence of specified auditing standards, the Palestinian Association of Certified Public Accountants (PACPA) has assumed the role of de facto auditing standard-setter and, since 2008, it has adopted ISA through its bylaws, for all statutory audits conducted by its members, which are the only individuals permitted to conduct audits in the jurisdiction. PACPA adopts new and revised pronouncements annually at its regular meeting.

    PACPA coordinates with the International Arab Society of Certified Accountants (IASCA) to make translated ISA available to its members. The last version that was adopted and issued was that of 2015. The IASCA is in progress of translating the 2016–2017 Handbook of International Quality Control, Auditing, Review, Other Assurance, and Related Services Pronouncements in Arabic. PACPA reported that it plans to adopt this translation for use by its members once completed.

    Current Status: Partially Adopted

  • Code of Ethics for Professional Accountants

    The Palestinian Association of Certified Public Accountants (PACPA), as the de facto ethics standard-setter, has adopted the IESBA Code of Ethics for Professional Accountants without modifications via its bylaws for its members. The association’s membership is mandatory for all auditors in the jurisdiction and also includes other segments of the profession, such as bookkeepers, that voluntarily decide to join.

    The association states that new IESBA pronouncements are adopted without modification when issued. PACPA uses the Arabic translation produced by the International Arab Society of Certified Accountants (IASCA) and updated translations are acquired annually as they are made available. PACPA states that the 2014 translation is the current version being used although the IASCA has translated the 2015 IESBA Code of Ethics and is in the process of translating the 2016 version.

    Current Status: Partially Adopted

  • International Public Sector Accounting Standards

    The Palestinian Ministry of Finance is responsible for issuing public sector accounting policies, which are implemented by the Palestinian National Authority.

    IPSAS have not been adopted, and there are currently no known plans for adoption. In the past, government financial statements were prepared in a manner similar to cash-basis IPSAS but with some differences.

    Current Status: Not Adopted

  • Investigation and Discipline

    The Palestinian Association of Certified Public Accountants (PACPA) has the authority to operate an investigative and disciplinary (I&D) system to ensure its members’ compliance with applicable rules, regulations, the code of ethics, and standards of professional conduct, in accordance with Auditing Profession Law No. 9 of 2004. PACPA reports that it operates a complaints-based system that incorporates most of the requirements of SMO 6. The composition of the Disciplinary Committing lacking non-accountants is the element that ICAM reports to be missing.

    PACPA is authorized to levy sanctions on members for non-compliance. The institute is not allowed to expel or suspend members for non-compliance but may make recommendations to do so to the Board of Professional Auditing (BPA), which licenses individuals to practice auditing.

    The Auditing Profession Law No. 9 of 2004 grants authority to the BPA to discipline members of the profession for violations, which PACPA confirmed is operational and in line with SMO 6 requirements.

    The Palestinian Capital Market Authority, Palestinian Stock Exchange, and the Palestinian Monetary Authority also have some authority over the conduct of auditors of regulated entities under their respective supervision; however, more information is needed on the scope of the enforcement activities carried out by the regulators and if they have established any I&D procedures.

    Current Status: Partially Adopted

  • International Financial Reporting Standards

    In accordance with the Securities Law No. 12 of 2004 and its amendments, entities subject to the Palestinian Monetary Authority (PMA) and Palestinian Capital Markets Authority regulations are required to follow IFRS and make their financial statements available to the public. These entities include banks and other financial institutions, insurance companies, and listed companies.

    For all other private companies, the Companies Law No. 12 of 1964 stipulates that financial statements be prepared in accordance with “internationally accepted standards.” Although the law does not specifically identify IFRS as the applicable standards for these entities, “internationally accepted standards” are generally interpreted to refer to IFRS.

    However, to introduce legal and mandatory application of the IFRS by all private companies, the PMA drafted amendments to the Companies Law clearly specifying the use of IFRS. The draft amendments are pending approval and adoption by the legislature as of the date of the assessment. In the meantime, the Palestinian Association of Certified Public Accountants permits its members to use IFRS and IFRS for Small- and Medium-Sized Entities.

    Current Status: Partially 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: 09/2017
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