Saudi Arabia

The Companies Act No. M/6 of 1965 (as amended in 2015 and 2022) defines the accounting, auditing, and financial reporting requirements in the Kingdom of Saudi Arabia. Certified Public Accountants (CPA) Regulation No. M12 of 1991 and The Saudi Organization for Chartered and Professional Accountants Ordinance No. 416 of 2021 stipulates that the Saudi Organization for Chartered and Professional Accountants (SOCPA) and SOCPA is the accounting and auditing standard-setter under the supervision of the Ministry of Commerce.

Accounting Framework

Public interest entities (PIEs) in Saudi Arabia are listed entities which comprise joint stock companies, limited liability companies, and brokerages (IESBA Public Interest Entity Database, April 2023). PIEs are required to use SOCPA-endorsed IFRS, in line with the Companies Act No. M/6 of 1965 (as amended in 2015 and 2022), the SAMA Banking Control Law of1966, and SAMA’s By-Laws.

The ‘endorsed’ standards are IFRS as issued by the IASB in addition to requirements and disclosures added to some standards by SOCPA. The ‘other standards and pronouncements’ are those standards and technical releases that are endorsed by SOCPA for matters not covered by IFRS such as the subject of Zakat (religious tax/obligation).

SOCPA adopted IFRS for SMEs as of January 2018 for non-PIEs. The only modifications made by SOCPA were to add some disclosures, mainly to reflect Sharia or local law. SMEs are also permitted to use full IFRS as endorsed by SOCPA, with two conditions (i) SMEs must apply full IFRS in full, not selectively; and (ii) once an SME elects to use full IFRS, it must continue applying those standards.

Auditing Framework

In accordance with the Companies Act, PIEs are required to have mandatory annual audits of their financial statements.

SOCPA reports that it requires the application of ISA in Saudi Arabia with the following additional requirements: (i) audit documentation (ISA 230) can be retained for at least 10 years; and (ii) footnotes are required in audit reports. As of the date of this assessment, the 2020 version of ISA has been endorsed for application in the jurisdiction. SOCPA has also translated ISQM 1 & 2, ISA 220, ISA 315, ISA 600, and ISRS 4400 into Arabic in line with the IFAC translation policy.

Professional accountants are subject to regulation by the Saudi Organization for Chartered and Professional Accountants (SOCPA) in accordance with the Law of the Profession of Accounting and Auditing Royal Decree No. M/59 March 11, 2021 under the supervision of the Ministry of Commerce.

Subject to oversight by the Ministry of Commerce, SOCPA is responsible for: (i) setting accounting and auditing standards; (ii) establishing ethical requirements; (iii) administering professional examinations and delivering continuing professional development programs; (iv) approving CPA offices that can offer training to candidates wishing to fulfill the requirements for certification; and (v) establishing and operating a quality assurance review system. Investigation and discipline of members of the profession is the responsibility of a committee that was established by the Ministry of Commerce..

The Law of the Profession of Accounting and Auditing, along with SOCPA’s internal regulations, specify initial and continuing professional development (IPD and CPD, respectively) requirements, and outline the areas of responsibility of other entities involved in regulation which includes the Ministry of Education. While the Ministry of Education sets the accountancy degree criteria, SOCPA establishes and provides professional examinations as well as the accountancy education program that is needed.

In order to obtain the CPA designation, the law stipulates that individuals are required to be Saudi nationals; have at least a bachelor’s level degree in accounting or equivalent (as determined by the Ministry of Education); fulfill practical experience requirements; and become members of SOCPA after passing the professional examinations as well as the accountancy education program that is needed. CPAs are required to complete a CPD requirement of 120 CPD hours every three years, minimum 20 CPD hours a year. CPAs may obtain an audit license from the Ministry of Commerce, which is also the entity responsible for maintaining the audit registry.

In line with Article 3 of the Law of the Profession of Accounting and Auditing Royal Decree No. M/59 March 11, 2021, individuals with diploma level in accounting and bachelor’s level degrees in accounting or equivalent (as determined by the Ministry of Education) may apply for membership as “Associate Members”. Holders of SOCPA fellowship Certificate may apply for full member non-practitioner and after completing further experience requirements can apply for full member practitioner.

The Capital Market Authority (CMA) was established under the Capital Market Law (CML) pursuant to Royal Decree No. (M/30) dated 31/7/2003, as the independent regulator of the capital market in Saudi Arabia. CMA performs Independent oversight for the audits of the listed companies. CMA is a member of the International Forum of Independent Audit Regulators.

Further, in line with the Law of the Profession of Accounting and Auditing Royal Decree No. M/59 March 11, 2021, auditors are regulated by the Saudi Organization for Chartered and Professional Accountants (SOCPA) under the supervision of the Ministry of Commerce. Its responsibilities are described in the Regulation section. CPAs may obtain an audit license from the Ministry of Commerce, which is the entity responsible for maintaining the audit registry.

Saudi Organization for Chartered and Professional Accountants (SOCPA)

SOCPA was established in 1992 as a mandatory membership organization for Certified Public Accountants (CPAs) in accordance with the CPA Regulation No. M12 of 1991 and carry out its work in accordance with the Saudi Organization for Chartered and Professional Accountants Ordinance which was issued pursuant to the Council of Ministers resolution No. 416 of 2021.

Subject to oversight by the Ministry of Commerce, SOCPA is responsible for: (i) setting accounting and auditing standards; (ii) establishing ethical requirements; (iii) administering professional examinations and delivering continuing professional development programs; (iv) approving CPA offices that can offer training to candidates wishing to fulfill the requirements for certification; and (v) establishing and operating a quality assurance review system. Investigation and discipline of members of the profession is the responsibility of a committee that was established by the Ministry of Commerce.

In addition to being a Member of the International Federation of Accountants, SOCPA is a member of the Asian-Oceanian Standard-Setters Group.

The Law of the Profession of Accounting and Auditing Royal Decree No. M/59 March 11, 2021 requires the establishment of a mandatory quality assurance (QA) review system for all audits in Saudi Arabia.

The Saudi Organization for Chartered and Professional Accountants (SOCPA) is responsible for establishing and operating a QA review system, under the supervision of the Ministry of Commerce. SOCPA uses a cycle-based approach where QA reviews take place every three years for public interest entities (PIEs), and every five years for non-PIEs. PIEs in Saudi Arabia are listed entities which comprise joint stock companies, limited liability companies, and brokerages (IESBA Public Interest Entity Database, April 2023).

SOCPA adopted the relevant standards of ISQM 1, 2, and ISA 220 (revised) and reports that the QA review system is in line with the requirements of SMO 1.

Current Status: Adopted

The Law of the Profession of Accounting and Auditing Royal Decree No. M/59 March 11, 2021 Regulation, along with SOCPA’s internal regulations, specify initial and continuing professional development (IPD and CPD, respectively) requirements, and outline the areas of responsibility of other entities involved in regulation which includes the Ministry of Education. While the Ministry of Education sets the accountancy degree criteria, the Saudi Organization for Chartered and Professional Accountants (SOCPA) establishes and provides professional examinations as well as the accountancy education program that is needed.

To obtain the CPA designation, the law stipulates that individuals are required to be Saudi nationals; have at least a bachelor’s level degree in accounting or equivalent (as determined by the Ministry of Education); fulfill practical experience requirements; and become members of SOCPA after passing the professional examinations and accountancy education program. CPAs are required to complete a CPD requirement of 120 CPD hours every three years, minimum 20 CPD hours a year.

As per the Saudi Organization for Chartered and Professional Accountants Ordinance Article 4, individuals with diploma level in accounting and bachelor’s level degrees in accounting or equivalent (as determined by the Ministry of Education) may apply for membership as “Associate Members.” Holders of SOCPA fellowship Certificate may apply for full member non-practitioner and after completing further experience requirements can apply for full member practitioner.

In 2022, with input from IFAC, SOCPA launched a model accountancy education curriculum for universities in Saudi Arabia in line with 2019 IES.

Furthermore, SOCPA completed a comprehensive review of the existing educational requirements for professional accountants in the jurisdiction against those of the revised 2019 IES and confirms alignment.

Current Status: Adopted

The Certified Public Accountants (CPA) Regulation No. M12 of 1991 and The Saudi Organization for Chartered and Professional Accountants Ordinance No. 416 of 2021 designates the Saudi Organization for Chartered and Professional Accountants (SOCPA) as the audit standard-setter in the jurisdiction, under the supervision of the Ministry of Commerce.

SOCPA reports that it requires the application of ISA as issued by IAASB with the following additional requirements: (i) audit documentation (ISA 230) can be retained for at least 10 years; and (ii) footnotes are required in audit reports.

As of the date of this assessment, the 2022 Handbook is applied in the jurisdiction.

Current Status: Adopted

The Saudi Organization for Chartered and Professional Accountants Ordinance No. 416 of 2021 delegates authority to the Saudi Organization for Chartered and Professional Accountants (SOCPA) to set ethical requirements for professional accountants, under the supervision of the Ministry of Commerce.

SOCPA reports that it requires the application of IESBA Code of Ethics as issued by IESBA with some minor modifications. SOCPA noted that some parts of the Code have been modified (e.g., Section 600 was modified to state that the only permissible non-assurance services are listed in a permissible services list).

As of the date of this assessment, the 2023 Handbook is applied in the jurisdiction.

Current Status: Adopted

The Ministry of Finance and the General Auditing Bureau are responsible for defining public sector accounting standards subject to approval by the Council of Ministers.

The Saudi Organization for Chartered and Professional Accountants (SOCPA) reports that as of the date of the assessment, accrual-basis IPSAS have been adopted without any amendments. It also indicates that implementation of IPSAS has been fully completed as of the date of this assessment.

Current Status: Adopted

In accordance with the Law of the Profession of Accounting and Auditing Royal Decree No. M/59 March 11, 2021, the Ministry of Commerce is responsible for establishing and operating an investigative and disciplinary (I&D) system for professional accountants.

SOCPA reports that the I&D system is in line with the requirements of SMO 6.

Current Status: Adopted

Certified Public Accountants (CPA) Regulation No. M12 of 1991 and The Saudi Organization for Chartered and Professional Accountants Ordinance No. 416 of 2021 stipulates that the Saudi Organization for Chartered and Professional Accountants (SOCPA) is the accounting standard-setter under the supervision of the Ministry of Commerce for all companies.

Public interest entities (PIEs) in Saudi Arabia are listed entities which comprise joint stock companies, limited liability companies, and brokerages (IESBA Public Interest Entity Database, April 2023). PIEs are required to use SOCPA-endorsed IFRS, in line with the Companies Act No. M/6 of 1965 (as amended in 2015 and 2022), the SAMA Banking Control Law of 1966, and SAMA’s By-Laws.

The ‘endorsed’ standards are IFRS as issued by the IASB in addition to requirements and disclosures added to some standards by SOCPA. The ‘other standards and pronouncements’ are those standards and technical releases that are endorsed by SOCPA for matters not covered by IFRS such as the subject of Zakat (religious tax/obligation).

SOCPA adopted IFRS for SMEs as of January 2018 for non-PIEs. The only modifications made by SOCPA were to add some disclosures, mainly to reflect Sharia or local law. SMEs are also permitted to use full IFRS as endorsed by SOCPA, with two conditions (i) SMEs must apply full IFRS in full, not selectively; and (ii) once an SME elects to use full IFRS, it must continue applying those standards.

Current Status: Adopted

Relevant Organizations

• Asian-Oceanian Standard-Setters Group
• HYPERLINK "https://uia.org/s/or/en/1122277425" Gulf Cooperation Council Accounting & Auditing Organization
• Saudi Organization for Chartered and Professional Accountants (SOCPA)

Relevant Legislation

• Law of Profession of Accounting and Auditing 2021
• Companies Law 2022
• Banking Control Law 1966
• SAMA’s By-Laws
• Saudi Central Bank Law M/36 2020
• Profession of Accounting and Auditing By Laws 2021
• The Saudi Organization for Chartered and Professional Accountants Ordinance 2021

Relevant Publications

• Encylopedia Britannica, Zakat Islamic Tax, June 2019.
• EY, IFRS Adoption in Kingdom of Saudi Arabia, December 2017.
• IAS Plus, Saudi Arabia, December 2017.
• IFRS Foundation, IFRS Application Around the World, Jurisdictional Profile: Saudi Arabia, July 2022.
• SOCPA, Saudi Accounting Framework in Comparison with IFRS Framework, March 2012.
• SOCPA, SMO Action Plan, 2024.