CMA approves changes to auditor registration rules

Logo of Capital Market Authority’s (CMA)

The Capital Market Authority’s (CMA) board approved amendments to the rules governing the registration of auditors of entities subject to its supervision, with the new rules taking effect from the date of their publication today, Sept. 29.

According to a CMA statement, the new amendments introduce additional requirements for registered accounting firms aimed at raising the level of professional qualifications among their staff.

One of the key requirements is that registered accounting firms have a sufficient number of audit managers who hold membership in the Saudi Organization for Chartered and Professional Accountants, or equivalent professional qualifications accepted by the authority. The number of qualified audit managers must be appropriate to the nature, size and diversity of the activities conducted by each registered accounting firm.

The amendments also require registered accounting firms to have an appropriate quality-management system covering audit and review engagements involving financial statements.

Under the new requirements, registered accounting firms must comply with professional standards when conducting reviews of interim financial statements and audits of annual financial statements of entities subject to the authority’s supervision.

The requirements are intended to enhance the quality of audit work and increase investor confidence in the capital market.

The new framework also requires registered accounting firms to comply with detailed instructions when the authority conducts inspections of their operations.

As part of the inspection process, accounting firms must cooperate with the CMA by providing the information, data and documents requested by the regulator.

Where the outcome of an authority inspection requires corrective action, the registered accounting firm must prepare a corrective-action plan and submit it to the authority for approval. The firm must then comply with and implement the approved plan.

The amendments further require registered accounting firms to share the authority’s final inspection findings concerning the audit file of a listed company with the audit committee of that company.

The requirement is intended to enable audit committees to carry out their responsibilities in overseeing the work of the company’s external auditor.

The amendments also expand the information required in registered accounting firms’ transparency reports.

The disclosures will include information relating to the firm’s profile, ownership structure, governance and leadership.

Registered accounting firms will also be required to disclose a description of the quality-management system applied by the firm, including the names of the individuals assigned responsibility for overseeing the quality-management system.

In addition, firms must disclose the results of the annual assessment of their quality-management system.

The disclosures are intended to enable interested parties to assess the quality of audit work performed by accounting firms registered with the authority.

The amendments aim to provide a regulatory environment aligned with international best practices and consistent with relevant laws and regulations.

They are also intended to raise the quality of audit processes for entities subject to the authority’s supervision and improve the quality of information disclosed by accounting firms registered with the CMA.

According to data available on Argaam, the CMA had invited the public last April to submit their feedback on the draft amendments to the Rules for Registered Auditors of Entities Subject to the CMA Supervision, for 30 calendar days ending May 8.

View the amended rules