Saudi Arabia

Member Organizations

Member Organization Associate Other PAOs

  Saudi Organization for Certified Public Accountants

Legal and Regulatory Environment

  • Overview of Statuatory Framework for Accounting and Auditing

    The Companies Act No. M/6 of 1965 (as amended in 2015) defines the accounting, auditing, and financial reporting requirements for corporate entities in the Kingdom of Saudi Arabia. It requires all companies to prepare financial statements and to appoint an auditor.

    The Saudi Arabia Monetary Agency (SAMA), in accordance with the authority granted in the SAMA Charter No. M/23 of 1957, requires banks and insurance companies to prepare financial statements in accordance with the latest IFRS. All other legal entities are required to use accounting standards issued by the Saudi Organization for Certified Public Accountants (SOCPA) as per the Certified Public Accountants (CPA) Regulation No. M12 of 1991. SOCPA requires the application of IFRS as endorsed for application in Saudi Arabia effective 2017 for all listed entities, and effective 2018 for all other publicly accountable entities. SOCPA has added disclosures to meet the needs of local stakeholders. As of 2017, the 2017 version of IFRS has been endorsed for application in the preparation of financial statements of listed entities. Additionally, SOCPA has encouraged early adoption of new standards such as IFRS 9, 15 and 16. For non-public interest entities, SOCPA has endorsed the IFRS for SMEs (2015 version) which will be effective on January 1, 2018 with a few extra disclosures.

    All joint stock companies, limited liability companies, and brokerages are required to have mandatory annual audits of their financial statements, and auditors of listed companies are subject to a mandatory five-year audit firm rotation. The CPA Regulation No. M12 of 1991 designates SOCPA as the auditing standard setter in the jurisdiction, under the supervision of the Ministry of Commerce & Industry. In 2012, SOCPA formally announced its intention to adopt ISA through endorsement, and presented its plan in 2013. As of January 2017, SOCPA reports that it requires the application of ISA as endorsed for application in Saudi Arabia effective January 2017 with the following additional requirements (i) audit documentation (ISA 230) can be retained for at least 10 years; and (ii) footnotes are required in audit reports. As of 2017, the 2016–2017 version of ISA has been endorsed for application in the jurisdiction.

  • Regulation of Accountancy Profession

    In Saudi Arabia, the Certified Public Accountants (CPA) Regulation No. M12 of 1991 governs the activities of the accountancy profession. The law outlines the roles and responsibilities of those charged with supervising the profession, as well as qualification requirements, the criteria and procedures for registration in professional registries, and other general rules. Specifically, it requires the Saudi Organization for Certified Public Accountants (SOCPA) to regulate the profession under the supervision of the Ministry of Commerce.

    The CPA Regulation, along with SOCPA’s internal regulations, specify initial and continuing professional development requirements, and outline the areas of responsibility of the bodies that are involved in the process.

    The Ministry of Higher Education has the authority to determine requirements to be met for earning an accounting degree, which is required for entry into the profession. Subject to oversight by the Ministry of Commerce & Industry, SOCPA is responsible for: (i) accounting and auditing standard setting; (ii) defining ethical standards; (iii) administering professional examinations and delivering continuous professional development programs; (iv) approving CPA offices that can offer training to candidates wishing to fulfill the requirements for certification; and (iv) designing and operating a quality assurance review system.

    The CPA designation is protected under the law. In order to obtain the CPA designation, individuals are required to be Saudi nationals; have at least Bachelor’s degrees in accounting or equivalent; fulfill practical experience requirements; and become members of SOCPA. CPAs are obliged to enroll in the Register of CPAs that is kept by the Ministry of Commerce & Industry; upon enrollment, CPAs are granted licenses to practice the profession for a period of five years.

    Investigation and discipline of members of the profession is the responsibility of a committee that was established by the Ministry of Commerce and includes a SOCPA representative.

  • Audit Oversight Arrangements

    An independent audit Public Oversight Authority does not exist in Saudi Arabia. The Saudi Organization for Certified Public Accountants (SOCPA), the professional accountancy organization in the Kingdom, however, does carry out several audit regulatory and oversight functions based on the Certified Public Accountants (CPA) Regulation No. M12 of 1991, under the supervision of the Ministry of Commerce & Industry. It develops auditing and ethical standards, for example, and manages the quality assurance review system. SOCPA participates in the Investigation and Disciplinary Committee, which was established by the Ministry of Commerce & Industry to enforce compliance with the laws and regulations that govern the profession. The Ministry licenses and registers CPAs in the jurisdiction.

    In October 2017, the Capital Market Authority decided to establish a new Division and a Committee to supervise the audits of listed companies and capital market institutions. A detailed framework of this process is under development.

  • Professional Accountancy Organizations

    The Saudi Organization for Certified Public Accountants (SOCPA), which comprises accountants, auditors, and bookkeepers, was established in 1992 in accordance with the Certified Public Accountants (CPA) Regulation No. M12 of 1991. Only Certified Public Accountants are required to be members of SOCPA according to the Regulation. It also requires SOCPA to regulate the profession under the supervision of the Ministry of Commerce. Its key functions include (i) accounting and auditing standard setting; (ii) defining ethical standards; (iii) administering professional examinations and delivering continuous professional development programs; (iv) approving CPA offices that can offer training to candidates wishing to fulfill the requirements for certification; and (iv) designing and operating a quality assurance review system.

    SOCPA is a member of the Asian-Oceanian Standard-Setters Group and the Gulf Cooperation Council Accounting & Auditing Organization. A SOCPA representative is also serving as a Trustee on the IFRS Foundation for a second three-year term.

  • Projects or Other Information

    A new Companies Law came into effect in 2016 which was published by the Ministry of Commerce and Industry on November 9, 2015. The new law is expected to be subject to scrutiny as advisers seek to understand and optimize the opportunities it affords and how it sits with the existing Foreign Investment Law. This new law may prompt some businesses to undertake an audit of their existing portfolios.

Adoption of International Standards

  • Quality Assurance

    The Saudi Organization for Certified Public Accountants (SOCPA) is required under the Certified Public Accountants Regulation No. M12 of 1991 to establish and administer a mandatory quality assurance (QA) review system in Saudi Arabia, which, according to SOCPA, fulfills SMO 1 requirements. Mandatory QA reviews are required for all audits of financial statements.

    SOCPA uses a cycle-based approach where quality control reviews take place every five years and every three years for audits of public interest entities.

    The International Standard on Quality Control (ISQC 1) has been adopted by the SOCPA Board without any modifications in March 2016 and became effective January 2017.

    Current Status: Adopted

  • International Education Standards

    The Certified Public Accountants (CPA) Regulation No. M12 of 1991 and the Saudi Organization for Certified Public Accountants’ (SOCPA) internal regulations specify initial and continuing professional development (IPD and CPD, respectively) requirements, and outline the areas of responsibility of the bodies that are involved.

    SOCPA is in charge of professional examinations, CPD, and approves CPA offices that can offer training to candidates wishing to fulfill the requirements for certification. The Ministry of Higher Education has the authority to determine requirements to be met for earning an accounting degree, which is required for entry into the profession.

    The CPA designation is protected under the law. In order to obtain the CPA designation, individuals are required to be Saudi nationals; have at least Bachelor’s degrees in accounting or equivalent; fulfill practical experience requirements; and become members of SOCPA. CPAs are obliged to enroll in the Register of CPAs that is kept by the Ministry of Commerce & Industry; upon enrollment, CPAs are granted licenses to practice the profession for a period of five years.

    IPD and CPD requirements are not fully in compliance with the revised IES; however, SOCPA reports to be in the process of executing plans to be fully compliant with IES by the end of 2017.

    Current Status: Partially Adopted

  • International Standards on Auditing

    The CPA Regulation No. M12 of 1991 designates the Saudi Organization for Certified Public Accountants (SOCPA) as the auditing standard setter in the jurisdiction, under the supervision of the Ministry of Commerce & Industry.

    In 2012, SOCPA formally announced its intention to adopt ISA by endorsement, and presented its plan in 2013. As of January 2017, SOCPA reports that it requires the application of ISA as endorsed for application in Saudi Arabia effective January 2017 with the following additional requirements (i) audit documentation (ISA 230) can be retained for at least 10 years; and (ii) footnotes are required in audit reports.

    According to SOCPA, as of 2017, the 2016–2017 version of ISA has been endorsed for application in the jurisdiction.

    Lastly, SOCPA reports that it signed an agreement with IFAC for translation of ISA.

    Current Status: Adopted

  • Code of Ethics for Professional Accountants

    The Saudi Organization for Certified Public Accountants (SOCPA) is responsible for determining ethical standards for the accountancy profession in accordance with the Certified Public Accountants Regulation No. M12 of 1991.

    SOCPA reports that its Code of Ethics and independence requirements is being converged with that of the 2010 IESBA Code of Ethics (Arabic) for application by all professional accountants in the jurisdiction by June 2017. As of the date of the assessment, it is unclear if the convergence process was completed in June 2017.

    Current Status: Partially Adopted

  • International Public Sector Accounting Standards

    The Ministry of Finance and the General Auditing Bureau are responsible for defining public sector accounting standards subject to approval by the Council of Ministers.

    In 2010, the Council approved application of the Guidance of Governmental Accounting Standards, Objectives and Concepts. The Saudi Organization for Certified Public Accountants (SOCPA) asserts that the Guidance draws on the requirements set out in IPSAS and incorporates simplified accrual accounting.

    An implementation committee has been formed, comprising the Ministry of Finance, the General Auditing Bureau, the Institute of Public Administration, and SOCPA to pilot application of the Guidance in select public sector entities.

    Since 2010, 16 of 24 IPSAS are applicable in Saudi Arabia and a study is underway to review and adopt the remaining ones. It is unclear which version of IPSAS is being applied in the jurisdiction.

    Current Status: Partially Adopted

  • Investigation and Discipline

    The Ministry of Commerce & Industry, in accordance with Article 29 of the Certified Public Accountants (CPA) Regulation No. M12 of 1991, established an investigative and disciplinary (I&D) system overseen by the I&D Committee comprising the Deputy Minister of Commerce, a Saudi Organization for Certified Public Accountants (SOCPA) Board member, and a legal advisor.

    SOCPA completed a self-assessment of the I&D system against the SMO 6 requirements. According to the self-assessment, SOCPA’s I&D system will be in line with SMO 6 requirements once the revised CPA Regulation No. M12 of 1991 is adopted towards the end of 2017. The following requirements will be incorporated in the revised regulation to be fully in line with SMO 6 requirements: (i) establishing a separate disciplinary entity; (ii) establishing a process for the independent review of complaints on which there was no follow-up established; and (iii) publicizing the results of the investigative and disciplinary proceedings (completed).

    Current Status: Partially Adopted

  • International Financial Reporting Standards

    The Saudi Arabia Monetary Agency (SAMA), in accordance with the authority granted in the SAMA Charter No. M/23 of 1957, requires banks and insurance companies to prepare financial statements in accordance with IFRS. SAMA requires use of the latest version of IFRS for application by banks. However, during the first quarter of 2017, SAMA issued a circular to discontinue the use of IAS 12 and IFRIC 21 as these are considered to not be in line with SAMA regulations.

    All other legal entities are required to use accounting standards issued by the Saudi Organization for Certified Public Accountants (SOCPA) as per the Certified Public Accountants Regulation No. M12 of 1991. SOCPA requires the application of IFRS as endorsed for application in Saudi Arabia effective 2017 for all listed entities, and effective 2018 for all other publicly accountable entities. SOCPA added extra disclosures to meet the needs of local stakeholders. As of 2017, the 2017 version of IFRS has been endorsed for application in the preparation of financial statements of listed entities. Additionally, SOCPA has also encouraged early adoption of new standards such as IFRS 9, 15 and 16. For non-public interest entities, SOCPA has endorsed the IFRS for SMEs (2015 version) which will be effective on January 1, 2018 with a few extra disclosures.

    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: 12/2017
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