Institute of Certified Public Accountants in Israel

ICPAI is not responsible for quality assurance (QA) reviews, with the responsibility for inspections held by the Israeli Oversight Board (IOB). Reviews are mandatory for all Certified Public Accountant (CPA) firms that audit the financial statements of public and reporting companies. Other firms may voluntarily opt into the QA system for review.

As an auditing standard-setter, ICPAI is responsible for adopting relevant standards related to the QA review process. It has adopted the Israeli Auditing Statement #67 "Guidelines in Respect of Quality Review in Certified Public Accounting Firms" and adopted ISQC 1. As of 2023, ICPAI reports that ISQM 1, ISQM 2, and ISA 220 (revised) are in the process of being adopted within the next five (5) years.

ICPAI on an annual basis holds a quarterly meeting with the Board of Directors of the IOB to receive a detailed and thorough report on the quality assurance reviews and publishes a summary of the report on the institute’s website.

Recognizing that ICPAI is not directly responsible for QA reviews, the institute is strongly encouraged to work with IOB to ensure the procedures at a jurisdictional level align with SMO 1 best practices.

Furthermore, quality management standards that are in the process of being adopted in Israel will require significant change management for regulators and firms. To support auditors in the jurisdiction for the implementation of the standards, ICPAI is encouraged to translate and share implementation support materials, raise awareness of its members about the forthcoming change, and update its educational programming to ensure that its members are sufficiently prepared for the application of the standards once they become effective.

Current Status: Review & Improve

As outlined by Auditors’ Law 5715-1955, the Auditors' Council under the Ministry of Justice is responsible for the establishing and administering the initial professional development requirements for auditors. Generally, candidates who wish to practice auditing must hold a bachelor’s degree, pass examinations organized by the Auditors’ Council, and complete a two-year apprenticeship in an auditing firm. While these requirements incorporate some requirements of the IES, they are not fully aligned. Further, there are no requirements for continuing professional development (CPD). ICPAI reports that it uses its best endeavors to promote to the regulator to pass laws and regulations in accordance with the IES.

Accountancy education programs are administered by the universities which are under the academic supervision of the Israeli Council for Higher Education (CHEI) and the professional supervision of the Auditors' Council. The ICPAI maintains members on the Auditors’ Council and reports that they are actively involved working to support the incorporation of IESs in university accountancy education.

A key area of deviation from the IESs exists in the lack of requirements for CPD attainment in Israel for CPA license holders. ICPAI indicates that it supported proposed legislation that would require continuing professional education for all licensed CPAs. While the proposed legislation is still pending as of the date of this assessment, in 2023, ICPAI established a mentoring agreement with the Institute of Certified Public Accountants of Cyprus (ICPAC) to support with the development of a CPD system. As of the date of this assessment, ICPAI is in the process of establishing a mandatory CPD program for its members (that join voluntarily) in line with the IES. As part of the program, ICPAI records, monitors, and verifies its member participation in the CPD program annually.

Between 2022-2024, ICPAI joined several IFAC/IPAE-led workshops to collaborate with other stakeholders in various regions in raising awareness of the requirements of IES as well as bringing national education requirements in line with IES.

The IES Checklist and the Accountancy Education E-Tool developed by IFAC may be used to conduct an assessment and to consider available implementation support materials. Subsequent steps should include ongoing review of ICPAI’s continuing professional development program to ensure that it is in line with 2019 IES and working with IPD stakeholders (Auditor’s Council, universities, employers) to ensure that their education, exams, & practical experience requirements are also in line with IES, among other activities. Lastly, ICPAI is encouraged to provide a status update on its efforts to promote legislation requiring CPD attainment for CPA licensure in Israel and any new or revised timetables for expected passage.

Current Status: Execute

Auditors Regulations (ways of the Auditor's Practice) 5715-1973 grant authority to the Institute of Certified Public Accountants in Israel (ICPAI) to set auditing standards to be used in all audits. In 2022, ICPAI reported that it does not adopt standards as issued by the IAASB and instead follows a rigorous process of assessing each new and revised standard before adopting.

ICPAI maintains an Israel Auditing Standards Committee, responsible for a variety of standard setting activities, including the ongoing review and recommendation for adoption of IAASB pronouncements, modifications to ISA to ensure applicability to the Israeli context, and review and examination of translations into Hebrew.

As of February 2024, the Committee has issued 12 standards that are based on the Clarified ISAs (ISAs 560, 230, 200, 320, 450, 580, 250, 220, ISQC1, 260, 265 and 701), with other Clarified ISAs in the process of being adopted or revised. ICPAI reports that it adopted ISA 620 to come into effect this year, and has also adopted ISA 700, 705, 706 and 710.

Most other standards are based on previous versions of ISAs and some standards are independently developed where no ISA is available to deal with a specific issue (e.g., consent letters, joint audits, SOX-related standards).

ICPAI supports implementation of Israeli Auditing Standards through its Institute for Continuing Professional Education and Certificate Programs, which has conducted several seminars about implementing auditing standards. ICPAI plans to provide ongoing seminars about future new standards and updates and improve its offerings on a continual basis.

Additionally, ICPAI disseminates information about national and international standards through its website, newsletter, and other communication means. In 2022, ICPAI provided comment on the Proposed International Standard on Auditing for Audits of Financial Statements of Less Complex Entities (ISA for LCE) Exposure Draft.

Efforts to either adopt ISA directly or converge with the latest version of ISA are strongly encouraged as part of enhancing the quality and uniformity of global practice and strengthening public confidence in the global auditing and assurance profession. The Clarity ISA are now significantly outdated, and emphasis should be placed on adopting or converging with the latest ISA (i.e., those in effective in the 2022 Handbook – the latest Handbook as of the date of this assessment).

Current Status: Execute

In Israel, ethical standards are set by two bodies: the Ministry of Justice (through its promulgation of regulations) and the rules of Ethical Behavior as set by the ICPAI according to its Article of Association (ICPAI Rules). ICPAI reports that its Rules of Ethical Behavior are based on the 2016 IESBA Code.

ICPAI indicates that it is in the process of reviewing the 2022 International Code of Ethics (expected to be completed by the end of 2027) with a view to identify and close the gaps between its Rules and the International Code issued by the IESBA.

The ICPAI maintains an Ethics Committee, which provides explanations, guidance and opinions concerning ethical matters to ICPAI members or others. The Ethics Committee supervises the implementation of the ICPAI Rules and makes its recommendations to the Board of Directors of actions to impose said rules. Matters of significance are brought to the members' attention by ICPAI publications.

ICPAI reports that it promotes the convergence with the IESBA Code of Ethics within the Ministry of Justice and the other regulatory authorities, and reportedly meets with these authorities on a regular basis throughout the year. To support its members, ICPAI also provides them with voluntary continuing professional development (CPD) courses and training to increase understanding of the ethical requirements.

It is in the public interest that all professional accountants adhere to the latest ethical requirements issued by the IESBA. ICPAI is strongly encouraged to: (a) advocate that any licensed CPA adhere to ethical requirements set by the Ministry of Justice and that those requirements align with the latest International Code of Ethics issued by the IESBA and (b) complete the gap analysis against the 2024 IESBA Code of Ethics as soon as possible—2027 is a lengthy timeline for requirements that will be effective in 2024—and address deviations, if any. Unless legally restricted, the institute should adopt ethical requirements that meet the 2024 Handbook as a self-regulatory requirement for its membership base that joins the ICPAI voluntarily.

Current Status: Execute

The Israel Government Accounting Standards Board (IGASB), established by the Israeli government, sets public sector accounting standards. The national standards are accrual-basis with reference to IPSAS. Although ICPAI has no direct role in public sector standard-setting, the institute reports that it supports the education and training of professionals on IPSASs and public financial management through technical conferences and continuing professional development (CPD) offerings.

ICPAI also offers a technical support hotline which allows members to make inquiries on technical matters, including public sector accounting and auditing. In addition, members may request written replies from ICPAI’s technical department.

As the IGASB continues to consider adoption of IPSAS, ICPAI is encouraged to further consider how it may be able to proactively provide technical, advocacy, and other forms of support to the government to enhance public financial management in the jurisdiction. If deemed feasible, ICPAI should also consider participating in the international standard-setting process by submitting comments to IPSASB-issued exposure drafts

Current Status: Sustain

Investigation and discipline (I&D) of professional accountants in Israel is addressed by both the Auditors' Council and the ICPAI. The Auditors Council addresses all complaints concerning professional misconduct or breaches of ethical requirements as stated in the Auditors Law and Regulations.

ICPAI maintains its own Disciplinary Tribunal which has the authority to administer sanctions against members violating its Rules. The Ethics Committee recommends and issues an appeal, subject to the Board of Director's approval, to the ICPAI Disciplinary Tribunal against a member violating ICPAI Rules.

The Disciplinary Tribunal is formed according to the ICPAI Articles of Association which is binding for its membership base (those that voluntarily join). If the ICPAI internal court finds a member guilty of violating ICPAI rules, it may impose a variety of different sanctions up to and including expulsion from membership.

ICPAI raises awareness of I&D by embedding the requirements within the framework of ICPAI conferences and professional development courses, initiated, organized or sponsored by the ICPAI.

ICPAI requires each new member to sign a written declaration stipulating adherence to the ethical code and other professional standards, rules and requirements.

Previously, ICPAI reported gaps in areas of public interest considerations and initiation of proceedings. It also reported that QA reviews were not linked to the I&D system, and not all results of the investigative and disciplinary proceedings were made available to the public. However, between 2022-2024, the I&D system became fully aligned with SMO 6 requirements due to amendments to the Auditor’s Law passing which were introduced by ICPAI.

Current Status: Sustain

With no responsibility for the adoption of corporate accounting standards, ICPAI reports that it supports the Israeli Accounting Standards Board (IIASB), which has partially adopted IFRS (e.g., for all listed entities and insurance companies except for banking institutions), in analyzing reporting needs of companies.

ICPAI promotes on an ongoing basis awareness of changes in IFRSs and financial reporting requirements to ICPAI membership through ICPAI professional development courses, conferences, and professional publications.

ICPAI is encouraged to promote and advocate for the adoption of IFRS as issued by the IFRS Foundation. It may wish to consider participating in the international standard-setting process by coordinating with the IIASB to submit comments to exposure drafts issued by the IASB.

Current Status: Sustain