Kuwait

The financial reporting framework in the State of Kuwait is established through a combination of ministerial resolutions, commercial legislation, and sector-specific laws. Ministerial Resolution No. 18 of 1990 (as amended) sets out the requirements for the preparation of financial statements, including the applicable accounting standards. Under this framework, the Ministry of Commerce and Industry (MCI) is responsible for accounting standard-setting in the jurisdiction, in consultation with the Kuwaiti Association of Accountants and Auditors (KAAA). International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB) are required for the preparation of financial statements by companies governed by the Commercial Companies Law No. 1 of 2016.

The auditing framework is primarily governed by Decree Law No. 5 of 1981 on the Practice of the Auditing Profession, which delegates authority for audit standard-setting to the Ministry of Commerce and Industry. The law requires the application of International Standards on Auditing (ISA) as issued by the International Auditing and Assurance Standards Board (IAASB) for audits of all companies. As of the date of this assessment, ISA for Less Complex Entities has not been adopted.

Additional requirements apply to regulated sectors. The Central Bank of Kuwait Law No. 32 of 1968 (as amended) establishes financial reporting and auditing requirements for banking institutions under the supervision of the Central Bank of Kuwait. Furthermore, the Capital Markets Law No. 7 of 2010 establishes the Capital Markets Authority (CMA) and sets out financial reporting and auditing requirements for entities under its supervision, including listed companies and other public interest entities.

Overall, the statutory framework in Kuwait reflects a centralized model in which the Ministry of Commerce and Industry serves as the primary standard-setting authority, while sector regulators such as the Central Bank of Kuwait and the Capital Markets Authority impose additional requirements for entities within their respective jurisdictions.

In Kuwait, the accountancy profession is regulated through a shared model involving both government authorities and a professional accountancy organization. The primary legal framework is established by Decree Law No. 5 of 1981 on the Practice of the Auditing Profession, which governs Chartered Accountants and auditors in the jurisdiction. Auditors of public interest entities (PIEs), defined as listed companies and financial institutions, are subject to additional oversight by the Capital Markets Authority (CMA) under the Capital Markets Law No. 7 of 2010.

Decree Law No. 5 of 1981 defines audit activities, specifies the entities subject to mandatory audit, and establishes the Kuwaiti Association of Accountants and Auditors (KAAA) as the national professional accountancy organization. The law also sets out requirements for entry into the audit profession, including licensing conditions, and outlines the rights, responsibilities, and liabilities of auditors.

Membership in the Kuwaiti Association of Accountants and Auditors is mandatory for individuals practicing in the profession. The Association maintains two categories of membership. Category A members are graduates of Kuwaiti universities, or equivalent foreign institutions, and are not required to complete practical experience requirements. Category B members are licensed auditors and Chartered Accountants who have successfully passed professional examinations administered by an examination committee comprising representatives from the Kuwaiti Association of Accountants and Auditors and the Ministry of Commerce and Industry (MCI), and who have obtained a professional license from the Ministry.

To obtain an audit license, applicants are required to demonstrate Kuwaiti citizenship, hold a bachelor’s degree in accounting, complete a minimum of five years of practical experience in auditing or accounting, maintain a clean criminal record, and hold membership in the Kuwaiti Association of Accountants and Auditors. Ongoing membership is contingent upon maintaining a clean criminal record, paying annual membership fees, and fulfilling continuing professional development (CPD) requirements in line with International Education Standard (IES) 7 issued by the International Accounting Education Standards Board.

Under the legal framework, responsibilities for regulating the profession are distributed across institutions. The Kuwaiti Association of Accountants and Auditors is responsible for delivering initial professional development and continuing professional development under the supervision of the Ministry of Commerce and Industry, administering professional examinations, and maintaining a register of its members. The Ministry of Commerce and Industry retains primary responsibility for audit and accounting standard-setting, establishing and operating a quality assurance review system for audits of non-public interest entities, administering investigative and disciplinary procedures for non-PIE auditors, establishing ethical requirements, and maintaining a registry of licensed practitioners.

For auditors of public interest entities, the Capital Markets Authority has regulatory responsibility under the Capital Markets Law No. 7 of 2010. The Authority conducts quality assurance reviews of PIE audits, issues audit licenses for PIE engagements to auditors registered with the Ministry of Commerce and Industry, maintains a registry of approved auditors, establishes and monitors ethical requirements, and conducts investigative and disciplinary procedures.

Auditors registered with the Ministry of Commerce and Industry who seek to audit entities under the supervision of the Capital Markets Authority must meet additional requirements, including demonstrating inclusion in the Ministry’s registry, completing at least five years of relevant practical experience, and holding a recognized university degree in accounting. To maintain registration with the Capital Markets Authority, auditors are required to complete annual continuing professional development, comply with the International Code of Ethics for Professional Accountants (including International Independence Standards) issued by the International Ethics Standards Board for Accountants, be subject to the Authority’s quality assurance review system, and pay applicable annual fees.

There is no independent public audit oversight authority in Kuwait.

Oversight of the audit profession is carried out through a combination of regulatory bodies under the existing legal framework. Under Decree Law No. 5 of 1981 on the Practice of the Auditing Profession, the Ministry of Commerce and Industry (MCI) is responsible for the regulation of auditors of non-public interest entities, including licensing, maintaining registries, and establishing quality assurance review and investigative and disciplinary procedures.

For auditors of public interest entities, defined as listed companies and financial institutions, regulatory oversight is exercised by the Capital Markets Authority (CMA) under the Capital Markets Law No. 7 of 2010. The CMA is responsible for conducting quality assurance reviews, maintaining a registry of approved auditors, and carrying out investigative and disciplinary procedures for auditors within its remit.

The Kuwaiti Association of Accountants and Auditors (KAAA) supports the regulatory framework through its role in professional development, examinations, and member oversight; however, it does not function as an independent audit oversight body.

The Kuwaiti Association of Accountants and Auditors (KAAA)

The Kuwaiti Association of Accountants and Auditors is the national professional accountancy organization in Kuwait and operates under the framework established by Decree Law No. 5 of 1981 on the Practice of the Auditing Profession. Membership in the Association is mandatory for individuals practicing as accountants and auditors in the jurisdiction.

The Association plays a central role in supporting the development and regulation of the profession. Its responsibilities include delivering initial and continuing professional development under the supervision of the Ministry of Commerce and Industry, administering professional examinations in coordination with the relevant authorities, and maintaining a register of its members.

The Kuwaiti Association of Accountants and Auditors is a member of the International Federation of Accountants (IFAC) and the Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI).

Under the Capital Markets Law No. 7 of 2010, the Capital Markets Authority (CMA) is responsible for conducting quality assurance (QA) reviews of audits of public interest entities (PIEs), defined as listed companies and financial institutions. Decree Law No. 5 of 1981 on the Practice of the Auditing Profession also provides for the establishment of a QA review system for audits of non-public interest entities to be operated by the Ministry of Commerce and Industry (MCI).

As of the date of the assessment, the QA review system operated by the CMA is the only system that is operational in the jurisdiction and applies to audits of PIEs. A QA review system for non-PIE audits has not yet been implemented.

The existing QA review system for PIE audits does not fully incorporate the requirements of Statement of Membership Obligation (SMO) 1, Quality Assurance. Identified gaps relate to elements of system design and implementation, including the scope of coverage, review cycle, reporting processes, and mechanisms for corrective and disciplinary actions, as well as the absence of independent public oversight and regular system evaluation.

Although the establishment of a QA review system for non-PIE audits has been provided for under the legal framework, its implementation has been delayed, and no confirmed timeline for operationalization has been established. In the interim, the Kuwaiti Association of Accountants and Auditors applies limited monitoring procedures for its members; however, these do not constitute a QA review system in line with SMO 1 requirements.

As of the date of this assessment, the International Standards on Quality Management (ISQM 1 and ISQM 2) have not been adopted in the jurisdiction.

Current Status: Partially Adopted

Initial and continuing professional development (IPD and CPD) requirements for accountancy professionals in Kuwait are established in national legislation, including Decree Law No. 5 of 1981 on the Practice of the Auditing Profession and the Capital Markets Law No. 7 of 2010. These requirements are implemented through a shared regulatory framework involving the Kuwaiti Association of Accountants and Auditors (KAAA), the Ministry of Commerce and Industry (MCI), and the Capital Markets Authority (CMA).

Membership in the Kuwaiti Association of Accountants and Auditors is mandatory for individuals practicing in the profession. The legal framework establishes entry requirements for auditors, including a university degree in accounting, a minimum of five years of practical experience, successful completion of professional examinations administered jointly by the Kuwaiti Association of Accountants and Auditors and the Ministry of Commerce and Industry, and licensing by the Ministry.

Continuing professional development is required by law, and members of the Kuwaiti Association of Accountants and Auditors are required to comply with CPD requirements aligned with International Education Standard (IES) 7. Additional requirements apply to auditors of public interest entities, who are subject to licensing and oversight by the Capital Markets Authority, including mandatory annual CPD.

While elements of the International Education Standards (IES) issued by the International Accounting Education Standards Board are incorporated into national requirements, the standards have not been formally adopted in their entirety for all professional accountants. In particular, further information is needed to assess alignment with requirements related to university education and entry pathways (IES 1–4), practical experience (IES 5), and professional competence assessment (IES 6).

Accordingly, the jurisdiction is assessed as Partially Adopted, as education and professional development requirements incorporate aspects of the IES but do not demonstrably meet all requirements in effect at the time of the assessment.

Current Status: Partially Adopted

Decree Law No. 5 of 1981 on the Practice of the Auditing Profession delegates audit standard-setting authority to the Ministry of Commerce and Industry (MCI), which requires the application of International Standards on Auditing (ISA) as issued by the International Auditing and Assurance Standards Board (IAASB) for all statutory audits.

ISA are adopted in their entirety and are applicable to audits of all companies in the jurisdiction.

Current Status: Adopted

Professional accountants in Kuwait are subject to ethical requirements established under Decree Law No. 5 of 1981 on the Practice of the Auditing Profession, with the Ministry of Commerce and Industry (MCI) responsible for setting the applicable Code of Ethics.

As of the date of the assessment, the ethical framework issued by the Ministry of Commerce and Industry is reported to be converged with the 2018 International Code of Ethics for Professional Accountants (including International Independence Standards) issued by the International Ethics Standards Board for Accountants.

Auditors of public interest entities (PIEs), defined as listed companies and financial institutions, are subject to additional ethical requirements under the Capital Markets Law No. 7 of 2010. The law delegates responsibility for ethical requirements to the Capital Markets Authority (CMA), which applies the International Code of Ethics for Professional Accountants (including International Independence Standards) for auditors within its remit.

While elements of the International Code of Ethics are incorporated into national requirements, the version applied by the Ministry of Commerce and Industry is not the version in effect at the time of the assessment, and application of the Code is not uniform across all professional accountants. Accordingly, the jurisdiction is assessed as Partially Adopted.

Current Status: Partially Adopted

The Ministry of Finance is responsible for establishing public sector accounting standards in Kuwait. Public sector financial reporting in the jurisdiction is based on national standards and follows a cash-basis of accounting. International Public Sector Accounting Standards (IPSAS) have not been adopted.

There is no publicly available indication of a formal plan or timeline to transition to accrual-based IPSAS. Accordingly, the jurisdiction is assessed as Not Adopted.

Current Status: Not Adopted

Under Decree Law No. 5 of 1981 on the Practice of the Auditing Profession, the Ministry of Commerce and Industry (MCI) is responsible for conducting investigative and disciplinary (I&D) procedures for accountancy professionals.

The Ministry has established a disciplinary framework, including a Disciplinary Committee comprising representatives from the Ministry, the business community, and the Kuwaiti Association of Accountants and Auditors. The Association supports the framework through processes that link to the Ministry’s system.

Auditors of public interest entities (PIEs), defined as listed companies and financial institutions, are also subject to a separate investigative and disciplinary system operated by the Capital Markets Authority (CMA) under the Capital Markets Law No. 7 of 2010.

While investigative and disciplinary mechanisms are established and operational for segments of the profession, the extent to which these systems fully incorporate the requirements of Statement of Membership Obligation (SMO) 6, Investigation and Discipline, cannot be demonstrated. In particular, further information is required to assess key elements such as the scope of coverage, independence of processes, linkage with quality assurance findings, and the availability of appeal mechanisms.

Accordingly, the jurisdiction is assessed as Partially Adopted.

Current Status: Partially Adopted

Ministerial Resolution No. 18 of 1990 (as amended) establishes the requirements for the preparation of financial statements in Kuwait, including the applicable accounting standards. Under this framework, the Ministry of Commerce and Industry (MCI) is responsible for accounting standard-setting in the jurisdiction.

International Financial Reporting Standards (IFRS Accounting Standards) as issued by the International Accounting Standards Board (IASB) are required for the preparation of financial statements by companies in Kuwait.

IFRS Accounting Standards are adopted and applicable to publicly accountable entities in the jurisdiction. Accordingly, the jurisdiction is assessed as Adopted.

There is no indication that IFRS for SMEs has been adopted or applied in the jurisdiction.

Current Status: Adopted

Relevant Organizations

• Capital Markets Authority
• Central Bank of Kuwait
• Kuwaiti Association of Accountants and Auditors (KAAA)
• Kuwait Ministry of Finance
• Ministry of Commerce and Industry

Relevant Legislation

• Capital Markets Law No. 7, 2010
• Central Bank of Kuwait Law No. 32 of 1968 (as amended)
• Decree Law No. 5 of 1981 on the Practice of the Auditing Profession
• Kuwait Commercial Companies Law of 2016
• Ministerial Resolution No.18 of 1990 (as amended)

Relevant Publications

• IFRS Foundation, IFRS Standards—Application Around the World Jurisdictional Profile: Kuwait, June 2016
• KAAA, SMO Action Plan, August 2022.