Institute of Certified Public Accountants in Israel
Member | Established: 1931 | Member since 1977
ICPAI is the nation’s professional accountancy organization (PAO) uniting and supporting the accountancy profession throughout Israel. In July 1948, the forefather to ICPAI, the Society of Certified Accountants and Auditors in Israel was recognized by the Israeli government as the sole body that would represent the accounting profession in the country. Today, ICPAI’s membership is voluntary and is comprised of Certified Public Accountants (CPAs) licensed by the Auditing Council as well as other accountancy professionals.
The Institute undertakes a variety of functions including: serving its members and developing the profession in Israel, advancing the accounting profession, developing and setting professional accounting and auditing standards, issuing and enforcing ethical rules, and strengthening the public confidence.
The ICPAI is a founding Member of IFAC as well as a member of Accountancy Europe and the Federation des Experts Comptables Mediterranees (FCM).
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
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. In its 2020 SMO Action Plan, ICPAI indicates that the system is mostly in line with SMO 1. As of the date of this assessment, ICPAI reports that the only gap that remains is that QA reviews only apply to firms that audit listed companies.
As an auditing standard-setter, ICPAI has adopted the Israeli Auditing Statement # 67 "Guidelines in Respect of Quality Review in Certified Public Accounting Firms". The Committee for Auditing Statements of ICPAI adopted ISQC 1 in 2020.
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 address the gap that was identified in alignment at the jurisdiction level.
Furthermore, the new suite of Quality Management standards that will become effective in 2022 will require significant change management for regulators and firms. To prepare auditors in the jurisdiction for the implementation of the standards, ICPAI is encouraged to closely follow the developments and publication of 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.
SMO 2: International Education Standards
The Israeli legislator is responsible for passing the relevant laws and regulations related to initial professional education of professional accountants. 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 International Education Standards (IESs).
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. However, as of 2021, the extent of alignment of university accountancy education with 2019 IES is not clear.
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, ICPAI is in the process of requiring CPD requirements in line with 2019 IES for its own members. Currently ICPAI maintains a voluntary program of CPD for its members and records, monitors, and verifies member participation. In 2015, ICPAI began a program of offering recognition for (incentivizing) participation in voluntary CPD offerings and providing certificates of achievement to members with a high degree of participation in CPD programs.
ICPAI established the Institute for Continuing Professional Education and Certificate Programs in 2003 to offer CPD programs and undertakes development of seminars, conferences, and trainings on a variety of subjects through this Institute in order to ensure offering of relevant courses / activities.
In 2022, ICPAI has 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. ICPAI also is among the PAOs that volunteered to participate in the IFAC IES Project which is expected to lead to bespoke capacity building initiatives to support alignment with 2019 IES requirements.
ICPAI is encouraged to collaborate with other stakeholders involved in the education of professional accountants in the jurisdiction as it completes its review of the national requirements against those of the 2019 IES. It is also encouraged to continue raising awareness about the requirements of IES as well as the need to bring the national educational requirements in line with IES to the relevant authorities. 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 implementation of ICPAI’s continuing professional development program to ensure that it is in line with 2019 IES and working with education providers and universities to ensure that their programs 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.
SMO 3: International Standards on Auditing
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 standard setting board due to complaints received from the public. Therefore, ICPAI follows a rigorous process of assessing each new and revised standard as issued by the standard-setting body 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 International Auditing and Assurance Standards Board (IAASB) Pronouncements, modifications to ISA to ensure applicability to the Israeli context, and review and examination of translations into Hebrew.
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 adopt 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. Therefore, ICPAI is encouraged to continue its advocacy for the adoption and application of ISA for all mandatory audits in the jurisdiction. Of note, the 2020 Handbook is now effective, which includes revised standards ISA 250 and ISA 540 effective in 2019 and ISA 315 revised effective December 2021.
SMO 4: Code of Ethics for Professional Accountants
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 2021 International Code of Ethics (expected to be completed by the end of 2024) 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' knowledge 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 said 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 essential to the public interest that professional accountants adhere to the latest ethical requirements. ICPAI is strongly encouraged to complete the gap analysis against the 2021 IESBA Code of Ethics as soon as possible and to establish plans to address deviations, if any. The 2021 Handbook is currently effective, with changes in the terms and concepts used in the IAASB's International Standard on Assurance Engagements (ISAE) 3000 (Revised), and revisions to promote the role and mindset expected of all professional accountants. In addition, ICPAI should also take note of changes in the 2021 handbook, which will be effective in December 2022, including the objectivity of an engagement quality reviewer and other appropriate reviewers, revisions to the non-assurance services, and revisions to the fee-related provisions. These changes can be accessed using the IESBA eCode and ICPAI is encouraged to raise awareness of the changes among its membership.
SMO 5: International Public Sector Accounting Standards
Although ICPAI has no direct role in IPSAS adoption, the institute reports that it supports the education and training of professionals in the area of 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.
ICPAI is encouraged to update IFAC regarding the status of IPSAS adoption in country – previous efforts at adoption have included the adoption of 22 of the IPSAS standards.
SMO 6: Investigation and Discipline
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 breaches of 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 an institution formed according to the ICPAI Articles of Association which is binding for its membership. 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 code and commitment according to the Ethical code and other professional standards, rules and requirements.
ICPAI completed a self-assessment of its I&D system and while its procedures are largely aligned with SMO 6 requirements, there are some gaps in areas of public interest considerations and initiation of proceedings. Specifically, ICPAI reports that QA reviews are not linked to the I&D system, and not all results of the investigative and disciplinary proceedings are made available to the public.
ICPAI is encouraged to report on how it aims to address the gaps that were identified in alignment with SMO 6 requirements.
SMO 7: International Financial Reporting Standards
With no responsibility for the adoption of private sector accounting standards, ICPAI reports that it supports the Israeli Accounting Standards Board (IIASB), which has partially adopted IFRS, in analyzing reporting needs of private companies. In coordination with the IIASB, ICPAI planned to conduct a study of the implementation of IFRS for SMEs worldwide. However, it is not clear whether the study has been conducted.
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.
As previous communications have noted joint ICPAI / IIASB research on the implementation of IFRS for SMEs worldwide, it is requested that ICPAI provide IFAC with status update and any related reports (if available in English) that have resulted from these efforts. Finally, if it does not already do so, ICPAI may also 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.
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.