Accounting and
Auditing Profession
- Accounting and Auditing
Profession in the Kingdom of Saudi Arabia (1399H/1979G up to date)
- Accounting & Auditing
Association for Islamic Institutions Organization (Formerly Financial
Accounting Standards Islamic Banks and Institutions Association):
(1407H/1987G – 1415H/1995G).
- Accounting and Auditing
Profession in the Gulf Cooperation Council “GCCs”
Accounting and Auditing Profession
in the Kingdom of Saudi Arabia (1399H/1979G up to date) (Dial Up , DSL)
The
profession development products in the Kingdom were updated in several
documents such as :
The
ministry of Commerce in the KSA published in the second document ( page 135)
and the third document (page 75) above a brief description concerning the
profession development , we quote the following:
In
mid 1399H (1979G) talks were held with HE The Deputy Minister of Commerce, Mr.
Yousif Al-Hamdan, at that time, and Mr. Abdulaziz Al-Rashed (Founder of this
firm). The subject was accounting environment, auditing profession and aspects
of its development in the kingdom of Saudi Arabia. At that time, the situation
seemed critical and certain deficiencies in the profession were having a more
serious impact on the economic and financial activities in the country than was
actually recognized. The discussion concluded with an agreement on the
necessity of taking practical measures to remedy such deficiencies and to
develop the profession in a manner that would enable accountants and auditors
to cope with the fundamental changes occurring in this field. Three months
later, the profession concept was crystallized. Further discussions on this
subject were held with HE The Minister of Commerce, Dr. Sulaiman Al-Saleem, and
it was determined that the profession in Saudi Arabia was not keeping abreast
with the changes taking place in the country. However, deficiencies were not
clearly identified to allow designing effective solutions. A brief summary of
deficiencies which have a general impact on the financial, commercial and
economic activities, and also on the level of development of the profession
itself being one of the fundamental activities of society is provided in this
preface page (7, 8).
To
assist the Ministry in taking decision for developing the profession, Al-Rashed
firm, through its professional activity, formed a team from the firm, with the
participation of Dr. Abdullah Al-Faisal from the Department of Accountancy at
King Saud University, to conduct a preliminary survey in order to define the deficiencies.
The survey was summarized in a memorandum which specifies deficiencies in the
major areas of the profession.
The
finding of the study was reviewed by the Ministry and was accepted as a
suitable start for the development of the profession.
Al-Rashed
firm was requested to prepare a study regarding a scope for development of the
profession .This will serve the beneficiaries of its activities, taking into
consideration requirements of the Kingdom’s environment.
The
result was a comprehensive plan illustrating methods to be followed to develop
the profession. This plan comprises the preparation of accounting and auditing
standards and an internal organization of the profession which provides bases
for its continuous development. The plan was discussed with concerned
authorities at the Ministry and it was decided to develop the profession in
three phases which are:
Phase I :
Conduct
a comparative study of the profession in three different countries. The purpose
of the study was to obtain information about the development of the profession
in these countries to benefit from their expertise for development of the
profession in the Kingdom of Saudi Arabia. The Ministry of Commerce
commissioned Al-Rashed firm to start Phase I of the project after profound
study of the proposed preliminary plan. Three countries were selected for this
comparative study. To make the selection, nine different countries were
identified and classified into three groups based on the extent of development
of their profession, their economic environments and the ability to benefit
from their experiences in developing the profession in the kingdom. The three
groups were as follows:
The
First Group : U.S.A, England and Canada
The
Second Group: France, West Germany and Sweden
The
Third Group: Tunisia, Venezuela and Brazil
Countries
studied were U.S.A., West Germany and Tunisia.
This
comparative study consisted of:
- A- Review of laws,
regulations and professional bulletins which relate t
- Accounting
standards and financial reporting requirements;
- Auditing
standards and other auditing requirements;
- Code
of ethics and professional conduct;
- Internal
organization of the profession.
- B- Interviews with
officials representing the profession from the three countries and also
seeking the expertise of professionals from these countries, who speak
their languages .
- C- Analysis of data
gathered from the two previous steps.
- D- The preparation of a
comparative report to be written in Arabic, setting forth the profession’s
status quo in the three countries, specifically:
- A
comparison of the internal organization of the profession; the standards
of accounting and auditing; code of ethics and professional conduct in
the three countries.
- Tentative
conclusion as to the implications of the study to the development of the
profession in the kingdom.
A
detailed comparative study report on phase I results was submitted to the
Ministry of Commerce. The report was discussed with Al-Rashed firm in a meeting
attended by HE The Minister of Commerce, The Deputy Minister and other high
ranking officials of the Ministry. In a subsequent discussion with the
Ministry’s officials to determine the most suitable method of the
implementation of phases II and III of the project, two options were considered
which were:
Option
One:
Combine
phases two and three into one comprehensive study to develop the profession in
the kingdom of Saudi Arabia to cope with the developments in other areas within
the kingdom and accommodate the best available practices of other developed
countries. However, it was decided that combining the two phases would require
a substantial amount of time including a field survey in order to specify the
major beneficiaries from financial statements in the kingdom, the information
required by them to make their decisions and the extent of the profession’s
capability to provide such information.
Option
Two
Implement
phase two for the time being, especially the most immediate requirements for
developing the profession, specifically, limit this phase to developing
auditing standards, the internal organization of the profession, the code of
professional ethics, the financial accounting conceptual framework, the general
presentation and disclosure standard because the professional status in the
kingdom requires immediate formation of the organization. The Ministry of
Commerce chose option two and entrusted Al-Rashed firm to implement it. The
contract was signed on 11/10/1402H.
Phase II :
This
phase of the plan concentrated on the following aspects of the profession:
- 1- Selected subjects from
the financial accounting which cover the following:
- A-
Determination of the objectives of financial accounting.
- B-
Selection and definition of the most important concepts of financial
accounting.
- C-
Preparation of standard of general presentation and disclosure.
- 2- Auditing standards.
- 3- Internal organization
of the profession.
A-
Method of Implementation:
Extensive
research was conducted and a variety of methods were explored to determine the
best approach for the implementation of this phase in order to arrive at
recommendations suitable for dealing with the existing environment in the
kingdom within a reasonable time frame and also to establish a basis for
continuous development of the profession with the assistance of the
professionals in the kingdom who are capable of following up such
recommendations after being approved and developed. Due care and attention was
taken to involve technical experts from the selected countries who had mastered
the Arabic language, hereinafter called “the experts”, and highly qualified
citizens professors and advisors who have great knowledge about Saudi Arabia,
hereinafter called “the consultants”, were also invited to take part in the
preparation and review of the recommendations of the experts.
Al-Rashed
firm’s officials particularly Abdulaziz Al-Rashed and Yousif Al-Mobarak,
hereinafter called “the in-charges” have extended all possible efforts and
expertise to organize the work of both the experts and consultants and gave it
top priority over all other work in Al-Rashed firm. Experts from other Arab
countries, hereinafter called “the Arab experts”, were also asked to assist with
one or more aspects of the project including Arabiciazation. It is worth noting
that translation of all parts of the project from English into Arabic and vice
versa was carried out by the experts themselves. The services of highly
specialized accountants to help with the translation were sought but no avail
from the viewpoint of time and quality. This was due to the special
characteristics of the project’s components which required a through
understanding of each statement within the context of the whole project, and
not individually whether in any one paragraph or within other paragraphs. This
had its impact on the cost and timing of the project.
The
proper organization and coordination of work among the participants (experts,
consultants, in-charges and Arab experts), has largely contributed to the
achievement of the stated objectives of the project as regards quality, speed,
comprehensiveness, suitability to the Kingdom’s circumstances and refraining
from depending, without adequate study, on the experience of an individual
country.
The
project was divided into three major parts, each assigned to a team of experts
and an advisor who also participated extensively in the project parts.
Following is an overview of the method of implementation of the project which
will help in interpreting the final results.
- A number of meetings were
held among team members and certain advisors to prepare a background paper
setting forth for the different teams the status quo of the profession and
the law and regulations which govern the profession in the kingdom.
Several meetings were held inside the kingdom and abroad and ended with
the compiling of the most important aspects of the profession and the
basic study trends in one volume which included the laws and basic background
that might affect the profession in the Kingdom, and the bases that might
affect the preparation of the project parts. This document was prepared in
both Arabic and English and distributed to the team members who were
requested to take the stated information into consideration while
preparing the initial drafts for each part of the project.
- Individual working visits
to the kingdom were arranged for the team members at various stages of the
project and they conducted actual case studies and participated in the
discussion of certain problems revealed by the audit of certain clients of
the Al-Rashed firm. All of them were in continuous contact whether they
were experts, consultants or in-charges.
- Upon deliberate and
in-depth study of all aspects of the project and visits to a number of
professional institutes in this field and considering the expertise and
knowledge of the team members, it was decided that the most suitable
approach to implement this project was to divide it into the following
sections:
Section
One: Selected subjects in financial accounting including:
- Objectives of financial
accounting
- Basic concepts in
financial accounting
- Preparation of General
presentation and Disclosure standard.
These
were handled by the following experts: Dr. Sabri Heakal, Dr. Mohammed Eid
Mustafa and Dr. Abdul Rah man Al-Humaid as a consultant.
Section
Two: Auditing standards, which cover: Planning auditing, control, recording,
evidence, reporting standards and relevant executive procedures. These were
handled by Mr. David Hatherly, Mr. Peter Skuze and Dr. Abdullah Al-Faisal as a
consultant.
Section
Three: Internal organization of the profession. This was handled by the
following team members: Mr. Ivan Bull, Mr. Wallace Olson and Dr. Abdullah Al-Moneef
as a consultant.
- Each team prepared the
preliminary drafts of the section for which they were responsible. The
draft was reviewed and then returned to them with fundamental comments so
that they could prepare their study and proposals to be sent to the
members of the other teams for study and comment.
- The drafts of all the
sections were distributed among the teams in charge of the other sections
and they were requested to send their comments in writing to the
in-charges to be studied and sent to the other teams.
- The notes made by the team
members together with the comments of the consultants were sent to each
team in order to review them and get acquainted with the efforts exerted
by other teams and their mutual impact. Many contacts took place between
the team members, the consultants and the in-charges during the
preparation of the final draft which would be distributed to the team
members, the consultants and the in-charges. There were several
alternatives regarding the location of the meeting. The Scottish Institute
generously offered to host the meeting and to provide for all of the
necessary facilities. After studying the best alternatives it was decided
to hold the meeting in Riyadh.
- During the period from
6/1/1403 to 12/1/1403H a meeting was held in Kasr Al-Riyadh Hotel attended
by all six experts, the three consultants and Al-Rashed firm’s in-charges.
Continuous morning and evening sessions were held in a private conference
room. The members were provided with all shorthand and recording facilities.
The meetings continued for several days during which the proposals
forwarded by each team were studied and specific recommendations were
made. Important issues were revealed which necessitated that the Ministry
of Commerce and other relevant bodies` reaction towards them be sounded
out. It was noted that such a meeting would greatly affect our judgments
on realizing trends of discussion and the suitability of agreed proposals.
- In a meeting hosted by the
Institute of Public Administration, an overview presentation of draft
recommendations was made to HE The Minister of Commerce, The Deputy
Minister and other concerned high ranking officials from the Ministry. HE
The Minister of Finance and the Deputy Ministers as well as HE The
Governor and Deputy Governor of SAMA attended the meeting. The Institute
of Public Administration generously arranged for the meeting and the
recording of its proceedings. The significance of this meeting was
manifested in clarifying the relevant trends and in giving more confidence
that the concerned authorities are giving due care and attention to the
profession. It was useful in clarifying the importance of the issues which
were the subject of elaborate study by the team members themselves. It
also gave impetus to the team members, the consultants and the in-charges,
thus confirming their interest in the project and that their efforts would
be taken care of by those responsible for the project’s approval and
follow-up of its implementation.
- Team members, the
consultants group and Al-Rashed firm in-charges held further meetings in
Kasr Al-Riyadh Hotel to discuss the results of their presentation to the
Ministers` meeting and final conclusions from the previous days meetings
and discussions were drawn. Members of each team were requested to amend
their draft recommendations as necessary and send them to the in-charges
in Riyadh. One of the experts was commissioned to read the amended draft
recommendations in their final form as prepared by the team members.
- The final draft recommendations
were sent to the in-charges and reviewed by the consultants. A meeting was
then held at Al-Rashed firm, attended by the in-charges, the consultants
to discuss the final copy of the draft recommendations.
- Another meeting was at the
Riyadh Hyatt Regency Hotel for several days to discuss the final copy of
the draft recommendations. This meeting was attended by Al-Rashed firm’s
in-charges, the consultants and Dr. Sabri in order to discuss the results
of the teams revisions of the draft recommendations. The proceedings of
this meeting were fully recorded.
- Team members were then
called in for further discussions with the consultants and Al-Rashed
in-charges in Riyadh. This discussion resulted in further amendments of
the final product. On 9/6/1403H a meeting was held in Riyadh attended by
the consultants, Dr. Sabri and in-charges. All outstanding issues of the
project and the amendments resulting from the previous meeting were
discussed. Each consultant was assigned a certain section of the project in
order to finally ensure its adaptability to the circumstances of the
kingdom in general and the present conditions of the profession in
particular, and to ensure its accuracy from the technical point of view,
clarity of style and general consistency and to what extent it is feasible
in the kingdom.
- During the whole period
and at various stages all the parts and studies were translated into
Arabic. After this meeting the Arab experts were requested to review the
translation of some of the final products whether previously translated or
still under consideration. This being done, the study was delivered to the
consultants and experts for final review.
- The Ministry of Commerce
forwarded this study to the appropriate government departments and to a
selected group of certified public accountants seeking their comments and
advice.
- Replies were studied and
summarized. This was prepared on the basis of showing the comment
according to its originator, then the opinion regarding each comment and
proposal. The study was then amended in accordance with the suggestions
found acceptable by the Ministry.
- Ministerial Resolution No.
692, dated 28/2/1406H was finally issued approving this study which is
concerned with the objectives and concepts of financial accounting and the
standard of general presentation and disclosure, and is considered an
official reference and guideline to all certified public accountants who
are licensed to practice this profession in the kingdom of Saudi Arabia.
Phase III:
As
mentioned, the Royal Decree No. M/12, dated 13/5/1412H was issued after the
efforts made by the Ministry of Commerce in Kingdom of Saudi Arabia, ratified
the CPAs law. Article 19 of this Act stipulates that the Saudi Organization for
Certified Public Accountants “SOCPA” shall be established as an organization
and shall operate under the Ministry of Commerce to promote the accounting and
auditing profession and all other allied subjects pertaining to development of
this profession.
Accounting & Auditing Association for Islamic Institutions
Organization (Formerly Financial Accounting Standards Islamic Banks and
Institutions Association): (1407H/1987G – 1415H/1995G).
The
financial accounting development products for Islamic banks and financial
institutions revealed in several documents such as:
Accounting and Auditing Profession in the Gulf Cooperation Council
“GCCs”
The
products of development of the profession in the GCCs revealed in several
documents. When you browse the website of Gulf Cooperation Council Accounting and
Auditing organization “GCCAAO” you can find further details.
These documents encompassed a summary dated 11/6/1424H (9/8/2003G) about the
incorporation of the organization which states as follows:
Starting
with accounting and auditing profession was a result of mutual effort among the
GCC member countries, and the Higher Council. They approved in 1982G to open
enrollment and license for professional firms such as accounting and auditing
profession and give permission to practice the profession provided that they
obtain the necessary registration and licensing requirements from citizens of
the host country. This was followed by studies to develop the profession such
as:
- Ministry of Commerce in
the Kingdom of Saudi Arabia submitted findings as a result of efforts made
to develop the profession which encompassed: objectives and concepts of
financial accounting, general presentation and disclosure standard, auditing
standards, internal organization of the profession, to the Commercial
Cooperation Committee during its third meeting held in July 1984G. A
committee consisting of specialists from GCC was formed to study those
products.
- Requested a technical
committee to study the accounting and auditing standard projects prepared
by the Ministry of Commerce in K.S.A. in accordance with the commercial
cooperation committee’s decision issued following its sixth meeting held
in September 1986. The committee proposed that dealing with the
development of the profession shall be on the basis of objectives set-up
methodology, definition of concepts, study of accounting standards, study
of auditing standards, and setting up unified rules for internal
organization of the profession. When it was revealed to the Secretary
General of the GCCs that this program is impracticable through this
committee, they believed that this step must be conducted by the
accountants and auditors (Those who practice the profession and
Academics).
- Ratification of the
unified Act(law) for registration and license submitted by the Secretarial
after study and survey of the CPAs registration and license Act(s) and
bylaws in the member countries during the ninth meeting of the commercial
cooperation committee held at Riyadh in July 1987G provided that the
Act(Law) will be a guidance.
- Forming a committee of the
Council countries to study what has been decided by the commercial
cooperation committee in its tenth meeting held in December 1987G,
approving the proposal of the committee, commissioned to study the
accounting and auditing standards in such a way that they handle
development of the profession in accordance with the following
methodology:
(1)
Determination of objectives, (2) Definition of concepts, (3) study of
accounting standards, (4) study of auditing standards, (5) set-up unified rules
for internal organization of the accounting and auditing profession for the
GCC.
- Forming constituent
committee consisting of professionals who practice the profession and
academics of GCC citizens, as encouraged by the Secretary General of the
Cooperation Council to work jointly to propose for enhancement of the
profession. The members met in March 1990 under the constituent committee.
The committee met several times with representatives of the GCC Ministries
of Commerce. Due to the importance of the profession objectives, it was
agreed to incorporate a technical professional organization under the
supervision of commercial cooperation committee “Ministers of Commerce” in
the member countries, and an Articles of Association was prepared for the
GCC Accounting and Auditing Organization.
- Approval of the commercial
cooperation committee on 15 September 1998G of the Organization’s Articles
of Association. The project was referred to the Higher Council of the GCC,
and leaders decision in their nineteenth conference meeting held in Abu
Dhabi in December 1998 was issued. The Articles of Association of the GCC
Accounting and Auditing Organization was issued. It states that this
organization is a juristic (corporate body), and has an independent budget
and privileges as being adopted in the GCC. The Act stipulates its
objectives and tasks and states the membership that it consists of General
Meeting, Board of Directors and Executive Staff. They also state the
technical committees derived from the Board and also the financial
resources of the organization.
- The organization started
its operation when the Secretary General called in May 2001 for the first
meeting of the General Assembly in Riyadh as per the Higher Council’s
decision. The General Meeting has decided that the headquarter of the
organization shall be in Riyadh. Board of Directors was elected for the
first term (4 years), consisting of General Meeting members being representatives
of the countries as per the categories defined by the organization
internal structure. Each country was represented by three members together
with GCC Secretary General Representative. The total members are nineteen.
- The Board of Directors met
for the first time directly after the General Assembly meeting in May
2001. They elected Mr. Abdulaziz Rashed Ibn Ibrahim Al-Rashed of K.S.A. as
Chairman of the Board. Dr. Jassem Mohammed Al-Madaf of Kuwait was elected
as Vice Chairman. The Board appointed Mr. Akel Munawir Al-Dmuari of
Secretary General of the Corporate Council, as coordinator and secretary
of the Board.