Saudi Arabia

Member Organizations

Member Organization Associate

  The Saudi Organization for Chartered and Professional Accountants

Legal and Regulatory Environment

  • Overview of Statuatory Framework for Accounting and Auditing

    The Companies Act No. M/6 of 1965 (as amended in 2016) defines the accounting, auditing, and financial reporting requirements in the Kingdom of Saudi Arabia. Saudi Organization for Chartered and Professional Accountants (SOCPA) Regulation issued pursuant to Cabinet Resolution No. 416 of 2021 stipulates that the Saudi Organization for Chartered and Professional Accountants (SOCPA) is the accounting and auditing standard-setter under the supervision of the Ministry of Commerce for all companies.

    Accounting Framework

    Public interest entities (PIEs) in Saudi Arabia are defined as banks and insurance companies, while all other entities are considered non-PIEs. PIEs are required to use SOCPA-endorsed standards and pronouncements, in line with the Companies Act No. M/6 of 1965 (as amended in 2016), the SAMA Banking Control Law of 2008, and SAMA’s By-Laws.

    The ‘endorsed’ standards are IFRS as issued by the IASB in addition to requirements and disclosures added to some standards by SOCPA. The ‘other standards and pronouncements’ are those standards and technical releases that are endorsed by SOCPA for matters not covered by IFRS such as the subject of Zakat (religious tax/obligation).

    SOCPA adopted IFRS for SMEs as of January 2018 for non-PIEs. The only modifications made by SOCPA were to add some disclosures, mainly to reflect Sharia or local law. SMEs are also permitted to use full IFRS as endorsed by SOCPA, with two conditions (i) SMEs must apply full IFRS in full, not selectively; and (ii) once an SME elects to use full IFRS, it must continue applying those standards.

    Auditing Framework

    In accordance with the Companies Act, all joint stock companies, limited liability companies, and brokerages are required to have mandatory annual audits of their financial statements.

    SOCPA reports that it requires the application of ISA in Saudi Arabia 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 the date of the assessment, the 2018 version of ISA has been endorsed for application in the jurisdiction. SOCPA translated the handbook in line with IFAC translation policy, available here.

  • Regulation of Accountancy Profession

    Professional accountants are subject to regulation by the Saudi Organization for Chartered and Professional Accountants (SOCPA) in accordance with the Law of the Profession of Accounting and Auditing (Royal Decree No. M59 (2021 AD)), under the supervision of the Ministry of Commerce.

    Subject to oversight by the Ministry of Commerce, SOCPA is responsible for: (i) setting accounting and auditing standards; (ii) establishing ethical requirements; (iii) administering professional examinations and delivering continuing professional development programs; (iv) approving CPA offices that can offer training to candidates wishing to fulfill the requirements for certification; and (v) establishing and operating a quality assurance review system. 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.

    The CPA Regulation, along with SOCPA’s internal regulations, specify initial and continuing professional development (IPD and CPD, respectively) requirements, and outline the areas of responsibility of other entities involved in education which includes the Ministry of Higher Education. While the Ministry of Higher Education sets the accountancy degree criteria, SOCPA establishes and provides professional examinations as well as the accountancy education program that is needed.

    To obtain the CPA designation, the law stipulates individuals are required to be Saudi nationals; have at least a bachelor’s level degree in accounting or equivalent (as determined by the Ministry of Higher Education); fulfill practical experience requirements; and become members of SOCPA. CPAs are required to complete a CPD requirement of 20 CPD units (60 hours) every year. CPAs may obtain an audit license from the Ministry of Commerce, which is also the entity responsible for maintaining the audit registry.

    In line with Article 20 of the CPA Law, individuals with bachelor’s level degrees in accounting or equivalent (as determined by the Ministry of Higher Education) may apply for membership as CPA trainees and are referred to as “Associate Members.” Associate Members can practice bookkeeping. Associate Members are subject to SOCPA’s rules and regulations, including CPD requirements.

  • Audit Oversight Arrangements

    In line with the Saudi Organization for Chartered and Professional Accountants (SOCPA) Regulation issued pursuant to Cabinet Resolution No. 416 of 2021, auditors are regulated by the Saudi Organization for Chartered and Professional Accountants (SOCPA) under the supervision of the Ministry of Commerce.

    CPAs may obtain an audit license from the Ministry of Commerce, which is also the entity responsible for maintaining the audit registry.

    Subject to oversight by the Ministry of Commerce, SOCPA is responsible for: (i) setting auditing standards; (ii) establishing ethical requirements; (iii) administering professional examinations and delivering continuing professional development programs; (iv) approving CPA offices that can offer training to candidates wishing to fulfill the requirements for certification; and (v) establishing and operating a quality assurance review system. 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.

  • Professional Accountancy Organizations

    Saudi Organization for Chartered and Professional Accountants (SOCPA)

    SOCPA was established in 1992 as a mandatory membership organization for Certified Public Accountants (CPAs) in accordance with the CPA Regulation No. M12 of 1991 to regulate professional accountants.

    Subject to oversight by the Ministry of Commerce, SOCPA is responsible for: (i) setting accounting and auditing standards; (ii) establishing ethical requirements; (iii) administering professional examinations and delivering continuing professional development programs; (iv) approving CPA offices that can offer training to candidates wishing to fulfill the requirements for certification; and (v) establishing and operating a quality assurance review system. 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.

    In addition to being a Member of the International Federation of Accountants, SOCPA is a member of the Asian-Oceanian Standard-Setters Group and the Gulf Cooperation Council Accounting & Auditing Organization.

  • Projects or Other Information

Adoption of International Standards

  • Quality Assurance

    The Saudi Organization for Chartered and Professional Accountants (SOCPA) Regulation issued pursuant to Cabinet Resolution No. 416 of 2021 requires the establishment of a mandatory quality assurance (QA) review system for all audits in Saudi Arabia.

    The Saudi Organization for Chartered and Professional Accountants (SOCPA) is responsible for establishing and operating a QA review system, under the supervision of the Ministry of Commerce. SOCPA uses a cycle-based approach where quality control reviews take place every three years for public interest entities (PIEs), and every five years for non-PIEs. PIEs are defined as banks and insurance companies, and all other entities are considered non-PIEs. Further, SOCPA has the right to inspect firms with poor results annually or even more than once per year and to check the follow-up on Action Plans for these firms. SOCPA can also inspect the firms any time during the year (or several times per year), on request from any government body or upon receiving any legitimate complaint / whistleblowing through the SOCPA portal, which is accessible for everyone.

    SOCPA adopted ISQC 1 without any modifications in March 2016, which came into effect in January 2017.

    SOCPA reports that the QA review system is in line with the requirements of SMO 1.

    Current Status: Adopted

  • International Education Standards

    The CPA Regulation, along with SOCPA’s internal regulations, specify initial and continuing professional development (IPD and CPD, respectively) requirements, and outline the areas of responsibility of other entities involved in education which includes the Ministry of Higher Education. While the Ministry of Higher Education sets the accountancy degree criteria, the Saudi Organization for Chartered and Professional Accountants (SOCPA) establishes and provides professional examinations as well as the accountancy education program that is needed.

    To obtain the CPA designation, the law stipulates individuals are required to be Saudi nationals; have at least a bachelor’s level degree in accounting or equivalent (as determined by the Ministry of Higher Education); fulfill practical experience requirements; and become members of SOCPA. CPAs are required to complete a CPD requirement of 20 CPD units (60 hours) every year. CPAs may obtain an audit license from the Ministry of Commerce, which is also the entity responsible for maintaining the audit registry.

    In line with Article 20 of the CPA Law, individuals with bachelor’s level degrees in accounting or equivalent (as determined by the Ministry of Higher Education) may apply for membership as CPA trainees and are referred to as “Associate Members.” Associate Members can practice bookkeeping. Associate Members are subject to SOCPA’s rules and regulations, including CPD requirements.

    SOCPA indicates in its SMO Action Plan that in June 2021, it revised and updated CPD rules and policies in line with the revised 2019 IES. Furthermore, it plans to complete the update of accounting curricula for local universities to be fully compliant with revised 2019 IES requirements by May 2022.

    Current Status: Partially Adopted

  • International Standards on Auditing

    The Saudi Organization for Chartered and Professional Accountants (SOCPA) Regulation issued pursuant to Cabinet Resolution No. 416 of 2021 designates the Saudi Organization for Certified Public Accountants (SOCPA) as the audit standard-setter in the jurisdiction, under the supervision of the Ministry of Commerce.

    SOCPA reports that it requires the application of ISA as endorsed 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 2021, the 2018 version of ISA has been endorsed for application in the jurisdiction. SOCPA translated the handbook in line with IFAC translation policy, available here.

    Current Status: Adopted

  • Code of Ethics for Professional Accountants

    The Saudi Organization for Chartered and Professional Accountants (SOCPA) Regulation issued pursuant to Cabinet Resolution No. 416 of 2021 delegates authority to the Saudi Organization for Chartered and Professional Accountants (SOCPA) to set ethical requirements for professional accountants, under the supervision of the Ministry of Commerce.

    As of the date of the assessment, SOCPA reports that it adopted the 2020 Handbook of the International Code of Ethics for Professional Accountants, including international independence standards, which is the latest version of the Code. SOCPA also noted that some parts of the Code have been modified (e.g., Section 600 was modified to state that the only permissible non-assurance services are indicated in a permissible services list).

    Current Status: 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.

    The Saudi Organization for Chartered and Professional Accountants (SOCPA) reports that as of the date of the assessment, IPSAS have been adopted as issued by the IPSASB without any amendments. It also indicates that implementation of IPSAS has been fully completed as of the date of this assessment.

    Current Status: Adopted

  • Investigation and Discipline

    In accordance with the Law of the Profession of Accounting and Auditing (Royal Decree No. M59 (2021 AD)), the Ministry of Commerce is responsible for establishing and operating an investigative and disciplinary (I&D) system for professional accountants.

    The Ministry’s committee includes a representative from the Saudi Organization for Chartered and Professional Accountants (SOCPA) Board, Deputy Minister of Commerce, and a legal advisor.

    SOCPA completed an assessment of the I&D system and reports that the I&D system is in line with the requirements of SMO 6.

    Current Status: Adopted

  • International Financial Reporting Standards

    Saudi Organization for Chartered and Professional Accountants (SOCPA) Regulation issued pursuant to Cabinet Resolution No. 416 of 2021 stipulates that the Saudi Organization for Chartered and Professional Accountants (SOCPA) is the accounting standard-setter under the supervision of the Ministry of Commerce for all companies.

    Public interest entities (PIEs) in Saudi Arabia are defined as banks and insurance companies, while all other entities are considered non-PIEs. PIEs are required to use SOCPA-endorsed standards, in line with the Companies Act No. M/6 of 1965 (as amended in 2016), the SAMA Banking Control Law of 2008, and SAMA’s By-Laws.

    The ‘endorsed’ standards are IFRS as issued by the IASB in addition to requirements and disclosures added to some standards by SOCPA. The ‘other standards and pronouncements’ are those standards and technical releases that are endorsed by SOCPA for matters not covered by IFRS such as the subject of Zakat (religious tax/obligation).

    SOCPA adopted IFRS for SMEs as of January 2018 for non-PIEs. The only modifications made by SOCPA were to add some disclosures, mainly to reflect Sharia or local law. SMEs are also permitted to use full IFRS as endorsed by SOCPA, with two conditions (i) SMEs must apply full IFRS in full, not selectively; and (ii) once an SME elects to use full IFRS, it must continue applying those standards.

    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: 09/2021
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