Kuwait

Accounting Framework

Ministerial Resolution No.18 of 1990 (as amended) stipulates the requirements for the preparation of financial statements, including applicable accounting standards. In accordance with the law, the Ministry of Commerce and Industry (MCI), in consultation with the Kuwait Association of Accountants and Auditors (KAAA), is the accounting standard setter for all companies. IFRS as issued by the IASB are mandatory for the preparation of financial statements by all companies that fall under the purview of the Kuwait Commercial Companies Law of 2016. Companies are defined by the legislation as entities that include two or more persons.

Auditing Framework

Decree Law No. 5 of 1981 on the Practice of the Auditing Profession delegates audit standard-setting authority to the MCI which requires adoption of ISA as issued by the IAASB for audits of all companies.

The Central Bank Law No. 130, 1977 and the Capital Markets Law (No. 7 of 2010) also outline accounting and auditing requirements for institutions that fall within their purview.

In Kuwait, the accountancy profession is regulated at the state and professional level. All Chartered Accountants and Auditors are regulated by Decree Law No. 5 of 1981 on the Practice of the Auditing Profession. Auditors of public interest entities (PIEs), which are defined as listed and financial institutions, are further subject to regulation by the Capital Markets Authority (CMA) under the Capital Markets Law (No. 7 of 2010).

Decree Law No. 5 of 1981 on the Practice of the Auditing Profession defines audit and audit activities, specifies the scope of the entities subject to mandatory audit requirements, establishes the Kuwaiti Association of Accountants and Auditors (KAAA) as the national professional accountancy organization, establishes requirements to become an auditor, and outlines the rights, responsibilities, and liability of the auditor.

Membership in KAAA is mandatory for all accountancy professionals. There are two membership categories: Category A members are graduates of Kuwaiti Universities (or foreign equivalent) that are not required to complete practical experience requirements and Category B members are Auditors and Chartered Accountants who passed the examinations administered by the Exam Committee—comprising representatives from KAAA and the Ministry of Commerce and Industry (MCI)—and obtained their licenses from the MCI. Applicants for the audit license are required to provide the MCI with evidence of: (i) Kuwaiti citizenship; (ii) Bachelor’s degree in accounting; (iii) having completed at least five (5) years of practical experience in auditing/accounting; (iv) having a clear criminal record; and (v) membership in KAAA. To maintain membership in KAAA, individuals must continue to have a clear criminal record, pay annual membership fees, and fulfill CPD requirements in line with IES 7.

Under the law, KAAA is responsible for (i) delivering initial and continuing professional development (IPD and CPD respectively) under the supervision of the Ministry of Commerce and Industry (MCI) for members; (ii) managing and conducting professional examinations with the exam committee for the certification of accountants as well as auditors; and (iii) maintaining a registry of its members. The MCI is primarily responsible for (i) audit and accounting standard-setting; (ii) establishing and implementing a quality assurance review system for non-PIE audits; (iii) establishing and implementing an investigations & disciplinary (I&D) system for non-PIE auditors; (iv) establishing and monitoring compliance with a Code of Ethics; and (v) maintaining a registry for licensed practitioners.

Under the Capital Markets Law (No. 7 of 2010), the CMA is responsible for (i) conducting quality assurance reviews of PIE audits; (ii) issuing PIE audit practicing licenses to auditors registered with the MCI; (iii) maintaining a general registry for PIE auditors; (iv) establishing and monitoring the Code of Ethics for auditors of PIEs; and (v) conducting investigations and disciplinary procedures for auditors of PIEs.

All auditors listed in the MCI’s registry that are seeking to become auditors of companies under the purview of the CMA are required to meet the following requirements (i) provide proof of being included in the MCI registry; (ii) complete at least five (5) years of practical experience; and (iii) hold a university degree in accounting from a Kuwaiti University or equivalent foreign institute. To remain in the registry, they must (i) complete at least 30 years of CPD annually; (ii) adhere to the IESBA Code of Ethics as issued by the IESBA; (iii) be subject to the CMA’s QA review system; and (iv) pay annual fees set by the CMA.

There is no independent audit oversight in the jurisdiction.

Under the Decree Law No. 5 of 1981 on the Practice of the Auditing Profession, the Kuwaiti Association of Accountants and Auditors (KAAA), the Ministry of Commerce and Industry (MCI), and the Capital Markets Authority (CMA) are responsible for regulations related to auditors. More information is detailed in the

The Kuwaiti Association of Accountants and Auditors (KAAA)

KAAA, which is a mandatory membership organization for accountancy professionals, was founded in 1973 by the Decree Law No. 5 of 1981 on the Practice of the Auditing Profession. KAAA is directly responsible for (i) delivering initial and continuing professional development under the supervision of the MCI for members which includes Chartered Accountants and Auditors; (ii) managing and conducting professional examinations with the exam committee for the certification of accountants as well as auditors; and (iii) maintaining a registry of its members.

In addition to being a member of IFAC, KAAA is also a member of the Accounting and Auditing Organization for Islamic Financial Institutions (AAAOFI).

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

As of the date of the assessment, the CMA’s QA review system is the only operational QA system in the jurisdiction. The Kuwaiti Association of Accountants and Auditors (KAAA) reports that the system is partially in line with SMO 1 requirements—gaps reported can be found in

Previously, KAAA reported that MCI’s mandatory QA review system for non-PIE audits was expected to be completed by 2019 (pending parliament approval). However, due to the global COVID-19 pandemic, plans have been delayed and KAAA cannot confirm when the system will be established and operational. As of the date of this assessment, the extent of KAAA’s role remains unclear, and if the envisioned system will be in line with SMO 1 requirements. In the meantime, KAAA reports to use a QA review questionnaire for its members which covers auditors of non-PIEs.

Current Status: Partially Adopted

Initial and continuing professional development requirements (IPD and CPD, respectively) for accountancy professionals are stipulated in national legislation—the Decree Law No. 5 of 1981 on the Practice of the Auditing & the Capital Markets Law (No. 7 of 2010)—and are implemented by the Kuwaiti Association of Accountants and Auditors (KAAA) under the supervision of the Ministry of Commerce and Industry (MCI) for accountants and auditors of non-public interest entities (non-PIEs); and the Capital Markets Authority (CMA) for auditors of PIEs, respectively.

According to the Decree Law No. 5 of 1981 on the Practice of the Auditing, membership in the Kuwaiti Association of Accountants and Auditors (KAAA) is mandatory for all accountancy professionals. Category A members are graduates of Kuwaiti Universities (or foreign equivalent) that are not required to complete practical experience requirements. Category B members are Auditors and Chartered Accountants who passed the examinations administered by the Exam Committee—comprising representatives from KAAA and the MCI—and obtained their licenses from the MCI. Applicants for the audit license are required to provide the MCI with evidence of: (i) Kuwaiti citizenship; (ii) Bachelor’s degree in accounting; (iii) having completed at least five (5) years of practical experience in auditing/accounting; (iv) having a clear criminal record; and (v) membership in KAAA. CPD is required by law, and all KAAA members are required to adhere to the requirements as stipulated by IES 7.

Under the Capital Markets Law (No. 7 of 2010), the CMA is responsible for issuing PIE audit practicing licenses to auditors registered in the MCI.

All auditors listed in the MCI’s registry that are seeking to become auditors of companies under the purview of the CMA are required to meet the following requirements (i) provide proof of being included in the MCI registry; (ii) complete at least five (5) years of practical experience; and (iii) hold a university degree in accounting from a Kuwaiti University or equivalent foreign institute. To remain in the registry, they must complete at least 30 years of CPD annually.

In 2022, KAAA completed a review of the existing requirements in the jurisdiction against those of the revised 2019 IES during a project with IFAC staff. Additional information from the multiple stakeholders involved in accountancy education is needed to further determine the extent of IES adoption particularly as it relates to university curricula/entry level education (IES 1-4); practical experience (IES 5); and exam/assessment of competencies (IES 6).

Current Status: Partially Adopted

The 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). The MCI requires adoption of ISA as issued by the IAASB for audits of all types of companies. As of the date of this assessment, the 2021 IAASB Handbook is in effect in the jurisdiction.

Current Status: Adopted

Professional accountants are subject to ethical requirements, as per the Decree Law No. 5 of 1981 on the Practice of the Auditing Profession, which are set by the Ministry of Commerce and Industry (MCI).

As of the date of this assessment, the Kuwaiti Association of Accountants and Auditors (KAAA) reports that the MCI Code of Ethics is converged with the 2018 International Code of Ethics issued by the IESBA.

Auditors of public interest entities (PIEs) are also subject to ethical requirements stipulated in the Capital Markets Law (No. 7 of 2010). The law delegates ethics standard-setting to the Capital Markets Authority (CMA) which adopts the International Code of Ethics as issued by the IESBA for auditors of PIEs.

Current Status: Partially Adopted

The Ministry of Finance is responsible for accounting standard-setting for public sector entities.

The Kuwaiti Association of Accountants and Auditors (KAAA) reports that financial reporting for public sector entities in Kuwait is based on cash-basis (national standards) reporting.

There is not yet a stated timeline or plans to adopt accrual based IPSAS.

Current Status: Not Adopted

Under the Decree Law No. 5 of 1981 on the Practice of the Auditing Profession, the Ministry of Commerce and Industry (MCI) is responsible for conducting investigations & disciplinary (I&D) proceedings for accountancy professionals. The MCI has reportedly established a Disciplinary Committee, comprising representatives from the MCI, the business community, and the Kuwaiti Association of Accountants and Auditors (KAAA). KAAA reports that it has established provisions and processes that support the existing I&D system which links directly to the MCI. The extent of fulfillment of the I&D procedures with the requirements of the SMO 6 requires further clarification.

Auditors of public interest entities (PIEs) are also subject to the Capital Markets Authority (CMA) I&D system as stipulated in the Capital Markets Law (No. 7 of 2010). More information is needed to determine the extent of fulfillment of CMA’s I&D procedures with the requirements of SMO 6.

Current Status: Partially Adopted

Ministerial Resolution No.18 of 1990 (as amended) stipulates the requirements for the preparation of financial statements, including applicable accounting standards. In accordance with the law, the Ministry of Commerce and Industry (MCI) is the accounting standard setter for all companies. IFRS Standards as issued by the IASB are mandatory for the preparation of financial statements by all companies.

Current Status: Adopted

Relevant Organizations

• Capital Markets Authority
• Central Bank of Kuwait
• International Arab Society of Certified Accountants (IASCA)
• 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 Law No. 130, 1977
• 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

• Crowe Horwath, “Country by Country Financial Reporting and Auditing Framework: Kuwait,” March 2015.
• Deloitte & Touche, IPSAS in Your Pocket, 2013.
• IFRS Foundation, IFRS Standards—Application Around the World Jurisdictional Profile: Kuwait, June 2016
• KAAA, 2018 Annual Report, December 2019.
• KAAA, SMO Action Plan, September 2022.
• KPMG, Doing Business in Kuwait, 2021.