Egyptian Society of Accountants & Auditors
Member | Established: 1946 | Member since 1980
The Egyptian Society of Accountants and Auditors (ESAA) is a voluntary professional organization for public accountants established by a Royal Decree in 1946. The institute is committed to raising the technical and practical competence of the members of the profession and ensuring the profession operates in accordance with international best practices.
Statements of Membership Obligation (SMO)
The Statements of Membership Obligations form the basis of the IFAC Member Compliance Program. They serve as a framework for credible and high-quality professional accountancy organizations focused on serving the public interest by adopting, or otherwise incorporating, and supporting implementation of international standards and maintaining adequate enforcement mechanisms to ensure the professional behavior of their individual members.
- SMO 1: Quality Assurance
The ESAA does not have responsibility for the adoption and implementation of a quality assurance (QA) review system in Egypt; nevertheless, ESAA has been reporting that it will promote the requirements of the SMO 1 to the Egyptian Financial Supervisory Authority’s (EFSA) Auditors Oversight Board—the entity responsible for conducting QA reviews for audits performed by auditors of PIEs and banks—to ensure that the existing QA system in place is in line with the international best practices. As of October 2016, the ESAA indicates that EFSA’s QA system’s fulfillment with SMO 1 requirements is still under review.
Additionally, the ESAA reports that it will continue to promote the new draft law on the Accounting and Auditing Practice, developed in coordination with the Ministry of Finance, which would establish the Supreme Council of Accounting and Auditing as the authority that regulates, develops, and oversees the accounting and auditing profession. Under the new law, the Supreme Council would be responsible for overseeing and delegating the responsibility for operating a mandatory QA review system for all audits.
While the new law is still under consideration, ESAA indicates that it will continue to promote the need to develop and adopt a QA system for all audits to the Syndicate of Commerce—Accountants and Auditing (SAE)—the other professional accountancy organization in Egypt responsible for the regulation of auditors listed with the Ministry of Finance. However, the successful passage of the new draft law would address this need given that the proposed Supreme Council would legally require a delegated entity to carry out QA reviews of all audits.
ESAA supports its members that are subject to the EFSA’s QA reviews by providing technical support such as control checklists and trainings, developing seminars, including QA in its continuing professional development activities, and disseminating information on quality control and QA through printed and online sources. The ESAA also reports that it is working on the implementation of a voluntary quality control assessment program for firms that are not listed on the EFSA register system but has not yet performed any assessments. Additionally, it is considering a mandatory QA review system for its members who perform audits of financial statements for non-PIE entities; however, the ESAA would need to modify its by-laws to enforce a mandatory system. As mentioned above, the new draft law would mandate means to address these issues and accordingly, the ESAA’s initiatives remain in the consideration stage.
Based on the ESAA’s statement that the review of EFSA’s QA system against the SMO 1 requirements is still pending, the ESAA is encouraged to share the SMO 1 requirements with the EFSA and promote their incorporation into the existing QA review system. The ESAA should also indicate if it intends to continue pursuing its voluntary QA program as well as its proposal regarding the need for a quality control system to the SAE in light of the proposals of the draft law. If so, the ESAA should indicate clear intended completion dates in its Action Plan. Additionally, in its next Action Plan update cycle, the ESAA should provide an update on the status of the proposed legislation.
- SMO 2: International Education Standards
Initial professional development (IPD) requirements are established by law in Egypt and the ESAA is only permitted to set additional IPD and continuing professional development (CPD) requirements for its members as a self-regulatory requirement. ESAA states that its IPD and CPD requirements are in line with the IES and are being reviewed on an ongoing basis. Its Curriculum Development Committee translates the IES when it is necessary to update and develop the curriculum.
The institute now works to promote the incorporation of the IES requirements to the government and universities. In April 2016, ESAA reports that it held a meeting with representatives of Cairo’s universities to encourage the universities to update their accountancy syllabi to comply with the requirements of the IES. ESAA indicates that it has not followed-up with the universities to ensure they have updated their syllabi; however, it does note that several of its members are professors and instructors at Egyptian universities and promote the implementation of the IES.
In October 2015, the ESAA launched an accountancy academy to provide professional training and has been delivering training courses for its members since then. Over the 2016–2017 period, it has plans to deliver training courses on the Egyptian Standards on Auditing Review and Other Assurance Services, the recently adopted Egyptian Accounting Standards, cost accounting & managerial accounting, corporate governance & risk management, finance, taxation, quality assurance, and quality control. Although not required by law, the ESAA has developed mandatory CPD for it is members and established a process to monitor compliance with CPD requirements. In September 2016, the ESAA and the Association for Chartered Certified Accountants (ACCA) signed a strategic partnership agreement to strengthen ESAA’s CPD programming and knowledge sharing by offering local qualification developments, such as papers in IFRS. In line with this, the ESAA plans to organize courses on the IFRS in January 2017 to prepare its members to take the IFRS Dip. Exam.
Finally, the ESAA uses printed materials, its website, and its magazine to inform members of the available CPD courses as well as publications and developments to the IES issued by the IAESB.
ESAA is encouraged to review the revised IES (effective as of July 2016) to ensure that its educational requirements remain aligned with the standards. The ESAA should continue to share the IES with the relevant authorities in Egypt and promote the need to incorporate the international requirements. Additionally, in its Action Plan, it should more clearly describe it efforts to engage and support universities’ understanding and incorporation of the revised IES into the syllabi and, in particular, the concept of assessing ‘competence’ as opposed to outputs.
- SMO 3: International Standards on Auditing
ESAA is not responsible for adopting auditing standards but it does play an important role in the development of auditing standards by monitoring standards and pronouncements issued by the IAASB to propose revisions to the Egyptian Standards on Auditing Review and Other Assurance Services (ESAROAS) which are adopted by the Ministry of Investment (MoI). In this way, ESAA works to identify differences in the standards and bring the ESAROAS in line with the ISA. ESAA indicates that it encourages the MoI to modify the EASROAS, which are based on the 2005 ISA, to comply with new and revised ISA and held several meetings with the MoI in 2014 and 2015 on the subject; nonetheless, the standards have not been updated. The ESAA has outlined plans in 2016–2017 to develop and submit a new version of the ESAROAS, which would be in line with the 2014 version of the ISA, to the Ministry of Investment.
Additionally, ESAA has been reporting since 2014 that it is working on a training seminar specifically for university professors in order to assist them in teaching the theory and practical application of ISA to students; however, the development of the seminar has been delayed.
To support its members, ESAA provides trainings on the ESAROAS on an ongoing basis through its accountancy academy, publishes articles in its magazine on any changes to the ISA, and disseminates new Exposure Drafts issued by the IAASB to receive any comments back from members. Subsequently, it will submit comments to Exposure Drafts issued by the IAASB.
ESAA is encouraged to continue promoting the need to bring the ESAROAS in line with the ISA to the MoI. In addition, the ESAA is encouraged to review the new auditor reporting standards, effective as of December 2016, in order to promote the incorporation of the standards. ESAA should also consider including the new standards into its continuing professional development and training programs with a view to support members’ awareness and implementation.
- SMO 4: Code of Ethics for Professional Accountants
ESAA does not have direct responsibility to adopt the requirements of the IESBA Code of Ethics at the national level and it has not established ethical requirements for its members to adhere to on a voluntary basis; however, some of its members are subject to the Egyptian Financial Supervisory Authority’s (EFSA) Code of Ethics, known as the Egyptian Code of Ethics (ECE), as EFSA-registered accountants and auditors. Yet, the ESAA indicates that the ECE is based on the 2006 IESBA Code of Ethics and the EFSA has not updated it to reflect newer versions.
In light of this, the ESAA has been reporting since 2012 that it plans to establish an Ethics Group within its Standards Committee to monitor developments to the IESBA Code, compare the ECE with the revisions to the IESBA Code of Ethics, publish the differences in its magazine, and subsequently, encourage the EFSA to incorporate amendments to the existing Code. However, it is unclear whether this initiative has progressed as planned as the EFSA’s Code is still based on the 2006 IESBA Code. Nevertheless, the institute states that in Q3 and Q4 of 2016, its Standards Committee will be developing a revised Code of Ethics that is in line with the 2014 IESBA Code of Ethics and in 2017, intends to submit to the Minister of Finance (MoF) for approval.
In the interim, the ESAA also states it is encouraging the MoF to adopt the ECE for all auditors who are listed at the General Register and, in the event this objective is reached, it would encourage the Syndicate of Commerce—Accountants and Auditing to ensure that listed auditors adhere to the ECE. Throughout 2014 and 2015, the ESAA reports it held meetings with EFSA and MoF consultants to discuss these respective topics.
To support its members that are registered with the EFSA, the ESAA maintains the ECE on its website as an online resource. ESAA also informs its new members about the possible sanctions in a case of a breach of professional standards, including ethical requirements. In addition, ESAA disseminates information to its members on the IESBA Code of Ethics through its website and magazine and encourages its members to provide comments on Exposure Drafts issued by the IESBA.
ESAA is encouraged to adopt the latest version of the IESBA Code of Ethics as a self-regulatory requirement for its members, and continue promoting the need to adopt best practices at the national level to the relevant authorities. This should include encouraging the MoF to adopt the ECE for all professional accountants in Egypt, not only auditors. The ESAA should also make relevant authorities aware of the new NOCLAR standard, an international ethics standard for auditors and other professional accountants, which will become effective as of July 2017, in order to incorporate the new standard. The ESAA should also plan to support its implementation amongst members and raise their awareness.
- SMO 5: International Public Sector Accounting Standards
The ESAA is not responsible for the adoption of public sector accounting standards but it states that it works to raise awareness of IPSAS and promote their adoption to the Ministry of Finance (MoF). However, given the political situation in Egypt, there are no plans to adopt the IPSAS in the immediate future.
Still, in 2014 and 2015, ESAA reports that it held meetings with MoF consultants to discuss the adoption of IPSAS. ESAA also promotes IPSAS by holding seminars, disseminating information to regulators, and translating IPSAS and best practices for publication. ESAA indicates it will provide the MoF with the latest information on IPSASB activities, pronouncements, and developments in the public sector accounting area.
Once the MoF adopts IPSAS, ESAA plans to support its members, of which more than 200 provide services to the public sector, by including IPSAS-related content in its continuing professional development courses and other training activities. In the interim, ESAA indicates it already publishes articles on IPSAS in its magazine in order to raise awareness of the IPSAS and notifies members of all Exposure Drafts issued by the IPSASB and invites them to submit comments.
ESAA is encouraged to indicate if it provides trainings on the applicable public sector accounting standards for its members that currently work in the public sector.
- SMO 6: Investigation and Discipline
The ESAA is authorized to establish an investigative and disciplinary (I&D) system for its members and has established an I&D Committee. ESAA has been reporting since 2012 that it is in the process of comparing its I&D system against the SMO 6 requirements to develop an I&D mechanism that is in line with the international best practices. In 2016, the ESAA completed the self-assessment of its existing I&D system against the revised SMO 6 requirements and found gaps in compliance with several of the SMO 6 components. The ESAA states that it would need to modify its by-laws in order to revise its I&D system to be in line with the SMO 6 requirements; accordingly, the ESAA reports that the I&D Committee is currently developing a draft of a new I&D system in accordance with ESAA by-laws that would meet the SMO 6 requirements. The ESAA indicates that the I&D Committee would submit the draft of the new I&D system to the Board of Directors for approval by the end of 2016 and in 2017 and make the necessary adjustments to enact the new procedures. It would then inform its members of the new procedures through its website and magazine.
ESAA indicates it is also working to support the Egyptian Financial Supervisory Authority (EFSA) and the Syndicate of Commerce—Accountants and Auditing (SAE) in operating effective I&D systems that incorporate the SMO 6 requirements. To this end, the ESAA reports that in 2014 and 2015 it held meetings with representatives of the SAE to promote the incorporation of SMO 6 requirements as its system does not comply with the requirements while, according to the ESAA, the EFSA’s I&D system is in line with most of the SMO 6 requirements.
Additionally, ESAA states it communicates consequences of non-compliance with ethical requirements and professional standards to its members through its website, training courses, and its magazine.
ESAA should provide an update on the progress made drafting the new I&D system in its next Action Plan submission. Additionally, the ESAA is encouraged to continue sharing the SMO 6 requirements with the EFSA and the SAE and promoting the need to incorporate the requirements into all national level I&D systems.
- SMO 7: International Financial Reporting Standards
The ESAA is not responsible for the adoption of IFRS but plays an active role in monitoring differences between the Egyptian Accounting Standards (EAS) and the IFRS and promoting the need to update the EAS to the Ministry of Investment (MoI). This is the responsibility of the ESAA’s Standards’ Committee which communicates any changes to the IFRS to the MoI in order to incorporate the changes to the existing EAS. ESAA’s process seems to have been effective as ESAA reports the MoI has adopted the 2014 version of IFRS as the EAS and the IFRS for SMEs based on the drafts submitted by the Standards’ Committee.
To support its members with the implementation of the standards, ESAA provides ongoing trainings and education on IFRS with emphasis on the new, revised standards and incorporates the standards into its examinations. To this end, its accountancy academy led six courses on EAS in 2015 and three as of mid-2016. It also delivers seminars on IFRS implementation and IASB pronouncements, provides translations of the standards into Arabic, and disseminates information on the international developments in the area and on the EAS through articles in its magazine. For the past three years, the ESAA states that it has held preparation courses for members obtaining the IFRS Diploma. Furthermore, in September 2016, the ESAA and the Association for Chartered Certified Accountants (ACCA) signed a strategic partnership agreement to strengthen ESAA’s continuing professional development programming and knowledge sharing by offering local qualification developments, such as papers in IFRS.
Additionally, ESAA notes that it holds meetings with university professors in order to introduce the practical application and theory of IFRS and new updates of the standards in the classroom setting.
Lastly, the institute also disseminates Exposure Drafts issued by the IASB and invites members to submit comments.
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