Institute of Certified Public Accountants in Israel
Member | Established: 1931 | Member since 1977
ICPAI is the nation’s professional accountancy organization 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 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.
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.
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 has been considering the adoption of ISQC 1; however, it is not clear whether the standard has been finally adopted.
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.
Since 2012, ICPAI planned to review the revised requirements of SMO 1 and take actions, where applicable and to the extent needed, to support the IOB in administering the QA review system in line with the revised requirements. However, as of the time of the assessment there is no indication that the review has been undertaken.
ICPAI is encouraged to update the SMO 1 section of its Action Plan and to conduct a self-assessment of the existing system against the requirements of SMO 1. If gaps exist, plans need to be developed to bring the system fully in line with SMO 1. Recognizing that ICPAI is not directly responsible for QA reviews, the institute is strongly encouraged to work with IOB to promote incorporation of the revised SMO 1 requirements at the jurisdiction level. ICPAI as the auditing standard-setter should consider adopting ISQC 1. ICPAI is also encouraged to consider whether there may be merit in requiring ICPAI members (who do not audit reporting entities) to participate in the IOB’s QA program in an effort to further meet the obligations laid out by SMO 1.
- 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); however, no specific activities have been indicated.
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 the time of the writing of this report, the extent of alignment of university accountancy education with 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. However, it is not clear whether this legislation has been passed.
There is no requirement for ICPAI members to undertake CPD either. 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.
ICPAI is encouraged to update the SMO 2 section of its Action Plan. ICPAI should establish plans to collaborate with other stakeholders involved in the education of professional accountants in the jurisdiction to conduct a review of the national requirements against those of the revised IES, raise 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. Subsequent steps should include updating ICPAI’s own training programs to ensure they are in line with IES and working with education providers and universities to ensure that their programs are in line with IES, among other activities. Additionally, as CPD is not mandatory for all CPAs, ICPAI should consider mandating its members to undertake CPD. Also, ICPAI should 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.
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.
The Committee acts in accordance with a work plan for the years 2016–2018, by the end of which ICPAI plans to issue a full set of auditing standards based either on the clarified or pre-clarified ISAs. ICPAI also plans to adopt new ISA on auditor’s report by 2018.
ICPAI supports implementation of Israeli Auditing Standards through its Institute for Continuing Professional Education and Certificate Programs, which has conducted several seminars with regard to implementing auditing standards. ICPAI plans to provide ongoing seminars with regard to 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.
ICPAI is encouraged to provide additional information regarding the rationale and modifications made to ISA in order to adapt to the Israeli context and whether there are plans to fully align auditing requirements with the currently effective ISA. As there have been delays in the program of developing a full set of auditing standards within Israel it would be helpful to understand the reasons for delays as well as revised timetables for achievement of a full set of auditing standards. Finally, ICPAI is encouraged to consider participating in the international standard setting process to ensure that the voice of the Israeli profession is taken into consideration when developing ISA.
- 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). There is no indication that both sets of requirements incorporate those of the 2016 IESBA Code.
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.
Although ICPAI reports that it promotes the convergence with the IESBA Code of Ethics within the Ministry of Justice and the other regulatory authorities, no specific actions or concrete plans have been indicated. Similarly, an update is needed on ICPAI’s plans to review the Rules of the ICPAI and undertake gap analysis against the IESBA Code of Ethics. ICPAI has noted this as ongoing effort since 2011.
ICPAI is encouraged to consider refining the SMO 4 section in its Acton Plan based on IFAC staff’s comments. Previous Action Plans have made mention of the review and analysis of ethical requirements in Israel with those outlined by the IESBA Code of Ethics; however it appears that there have been some delays in these efforts. ICPAI is encouraged to review the most recent 2016 IESBA Code of Ethics, which includes the new NOCLAR standard, and establish plans to work toward aligning national and ICPAI requirements with the latest Code of Ethics for professional accountants. The NOCLAR standard is a significant, new framework and will require collaboration with other stakeholders in order to achieve proper implementation. Finally, ICPAI is encouraged to showcase activities aimed at supporting members with the implementation of the ethical requirements.
- 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 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 the SMO 5 section of its Action Plan to demonstrate its current activities and involvement to support public sector accountants with the implementation of IPSAS. Additionally, ICPAI is requested to inform IFAC regarding the status of IPSAS adoption in country – previous efforts at adoption have included the adoption of 22 of the IPSAS standards. Further, ICPAI is requested to provide additional information regarding the scope of applicability of IPSAS in the public sector (e.g., are these required at the federal level, municipal level, etc.,).
- 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 is encouraged to update the SMO 6 section of its Action Plan following the guidance provided by IFAC staff to demonstrate its current activities in this area. The ICPAI should complete a comparison of the existing system against SMO 6 requirements using the table provided in the Appendix and within the SMO Action Plan. If gaps exist, plans to address those gaps need to be developed and indicated in the Action Plan.
- 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.
ICPAI is encouraged to update the SMO 7 section of its Action Plan to demonstrate its current activities in this area. 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.