Yemen

The accounting and auditing financial reporting framework in Yemen are established under the Council of Ministers Resolution No. 51 of 2019.

Accounting Framework

The Council of Ministers Resolution No. 51 of 2019 requires IFRS as issued by IASB for application by all public interest entities beginning January 1, 2020 which include: (i) banks and financial institutions who are obliged to submit their reports and financial statements to the Central Bank of Yemen; and (ii) entities required to submit their reports and financial statements to the Ministry of Industry and Trade (MIT) and the Tax Authority. The Resolution also adopts IFRS for small- and medium-sized entities (SMEs)

Auditing Framework

The Council of Ministers Resolution No. 51 of 2019 requires the application of ISA and related pronouncements as issued by IAASB in all mandatory audits, beginning January 1, 2020. The 2022 Handbook of International Quality Control, Auditing, Review, Other Assurance, and Related Services Pronouncements is in use.

Certified Public Accountants (CPAs) are legally regulated at the state level by the Higher Council of Accounting and Auditing (HCAA) in accordance with the Audit and Review of Accounts Law No. 26 of 1999 (as amended 2004). However, since the entity was not established or operationalized, the Council of Ministers approved Council of Ministers Resolution No. 51 of 2019, which enables the Ministry of Industry and Trade (MIT) and the Yemeni Association of Certified Public Accountants (YACPA) to jointly regulate the profession.

Under Council of Ministers Resolution No. 51 of 2019, MIT is responsible for overseeing a quality assurance (QA) review system for all audits; (ii) adopting international accounting, auditing, and ethical standards as issued by the international standard setting boards; and (iii) establishing and operationalizing an investigation & disciplinary (I&D) system.

The Law provides YACPA with the authority to (i) participate in drafting resolutions related to the profession; (ii) ensure members’ compliance with ethical, accounting, and auditing standards and cooperate with MIT to support I&D processes; (iii) organize and monitor professional education and training; (iv) deliver continuing professional development; (v) administer CPA examinations; (vi) maintain the Certified Public Accountant (CPA) registry; and (vii) operate the QA review system under the MIT’s supervision.

YACPA confers the CPA qualification, and the MIT awards licenses to CPAs that are members of YACPA to practice audit.

To obtain the CPA qualification, Yemeni nationals must fulfill the following requirements as stated in the Audit and Review of Accounts Law No. 26 of 1999 (as amended 2004) and the Council of Ministers Resolution No. 51 of 2019: (i) twenty-six years of age or older; (ii) possess a bachelor’s degree, or higher, in accounting; (iii) complete practical experience in the field of accounting or auditing for four years after a bachelor’s degree, or two years after a master’s degree, or one year after a PhD degree; (iv) pass YACPA’s CPA examination (unless the candidate possesses a PhD) which consists of four parts (financial accounting; advanced managerial accounting; auditing; and business law and regulations); and (v) provide evidence of not having any convictions of criminal offense.

Candidates who fulfill the requirements described above must then apply for membership at YACPA as CPAs to practice accounting, and then may apply for an audit license from MIT to practice auditing. Audit and assurance services must be conducted by CPAs that are YACPA members and hold the requisite practicing license from MIT. Foreigners with qualifications deemed appropriate by the MIT may enter a partnership with a Yemeni CPA (individual or company) to practice in-country.

There is no independent audit oversight body in Yemen. As outlined in the Regulation section, the Ministry of Industry and Trade (MIT) and the Yemeni Association of Certified Public Accountants (YACPA) jointly regulate auditors in the jurisdiction.

Yemeni Association of Certified Public Accountants (YACPA)

YACPA is legally recognized as a mandatory membership professional association for Certified Public Accountants (CPAs) under Audit and Review of Accounts Law No. 26 of 1999, with the authority to (i) participate in drafting resolutions related to the profession; (ii) ensure members’ compliance with ethical, accounting, and auditing standards and cooperate with MIT to support investigation & disciplinary (I&D) processes; (iii) organize and monitor professional education and training; (iv) deliver continuing professional development (CPD); (v) administer Certified Public Accountant (CPA) examinations; (vi) maintain the CPA registry; and (vii) operate the QA review system under the Ministry of Industry and Trade’s (MIT) supervision.

YACPA’s membership comprises (i) accountants that are working in business, industry, and the public sector; (ii) auditors that hold audit licenses from the Ministry of Industry and Trade; and (iii) partners in audit firms. YACPA has plans to include students in its membership base as Associate-level members.

In addition to being an Associate member of IFAC, YACPA is a member of the Arab Federation of Accountants and Auditors (AFAA).

The Council of Ministers Resolution No. 51 of 2019 introduced mandatory quality assurance (QA) reviews of all statutory audits. In accordance with this resolution, the Yemeni Association of Certified Public Accountants (YACPA) is responsible for establishing and operationalizing an audit QA review system under oversight of the Ministry of Industry and Trade (MIT).

While YACPA is working to establish a framework in line with SMO 1 requirements, the QA review system is not yet operational as of the date of this assessment. Nevertheless, YACPA reports that it plans to first begin implementation of the QA review system with two volunteer audit entities as it raises awareness of the system.

Relevant standards—e.g., ISQM 1 and ISQM 2 and ISA 220 (revised)—are adopted in Yemen.

Current Status: Partially Adopted

The Council of Ministers Resolution No. 51 of 2019 and Audit and Review of Accounts Law No. 26 of 1999 (as amended 2004) outline some general entry and educational requirements for Certified Public Accountants (CPAs) and auditors and the Yemeni Association of Certified Public Accountants (YACPA) is empowered by the Ministry of Industry and Trade (MIT) under Law No. 31 of 1992 to set more specific initial and continuing professional development requirements for professional accountants.

To obtain the CPA qualification, Yemeni nationals must fulfill the following requirements as stated in the Audit and Review of Accounts Law No. 26 of 1999 (as amended 2004) and the Council of Ministers Resolution No. 51 of 2019: (i) twenty-six years of age or older; (ii) possess a bachelor’s degree, or higher, in accounting; (iii) complete practical experience in the field of accounting or auditing for four years after a bachelor’s degree, or two years after a master’s degree, or one year after a PhD degree; (iv) pass YACPA’s CPA examination (unless the candidate possesses a PhD) which consists of four parts (financial accounting; advanced managerial accounting; auditing; and business law and regulations); and (v) provide evidence of not having any convictions of criminal offense.

In 2022, YACPA participated in an IES alignment project with IFAC & the International Panel on Accountancy Education (IPAE) and confirmed gaps in alignment with 2019 revised IES at the jurisdiction level.

Current Status: Partially Adopted

The Council of Ministers Resolution No. 51 of 2019 requires the application of ISA and related pronouncements as issued by IAASB in all mandatory audits, beginning January 1, 2020.

The 2022 Handbook of International Quality Control, Auditing, Review, Other Assurance, and Related Services Pronouncements is in use.

Current Status: Adopted

The Council of Ministers Resolution No. 51 of 2019, which came into effect on January 1, 2020, requires all professional accountants in the jurisdiction to adhere to the IESBA Code of Ethics and related pronouncements as issued by IESBA.

The Yemeni Association of Certified Public Accountants (YACPA) indicates that the 2023 Handbook of the International Code of ethics for Professional Accountants including International Independence Standards is in effect.

Current Status: Adopted

The Ministry of Finance and the Central Organization of Control and Audit (COCA) are responsible for adopting public sector accounting standards. The public sector follows the Unified Accounting System. IFRS are used in preparing external financial reporting statements.

There are no known plans for adoption of IPSAS as of the date of the assessment.

Current Status: Not Adopted

The Ministry of Industry and Trade (MIT) is empowered by Audit and Review of Accounts Law No. 26 of 1999 (as amended 2004) (Articles 67-70 & 73) to establish a Disciplinary Council responsible for investigation and disciplinary processes of professional accountants. However, as the of the date of the assessment, the Council has not yet been established.

Serious crimes (e.g., fraud) are addressed through the Yemeni judiciary system and by the courts. YACPA has been granted formal recognition by the Ministry of Justice to provide technical experts to support this legal process. The Yemeni legislation outlines very specific penalties for non-compliance with various aspects of professional and ethical standards. These include monetary fines as well as imprisonment for a period of six (6) months to one (1) year. These are applicable in cases such as fraud, falsifying information, signing an audit report for a company the CPA did not audit, and practicing without a license.

In September 2020, the MIT approved YACPA’s proposal that entails a joint collaborative process for investigation and discipline (I&D) between the Ministry’s Public Accounts Permitting Committee (PAPC) and YACPA. Complaints are relayed to the joint Investigative Committee (comprising one PAPC member, one YACPA Administrative Council member; and one YACPA member from a Big 4 Firm, well-known local firm, or expert in Tax / IT). The Disciplinary Committee was established and operationalized in 2021. YACPA’s Disciplinary Council imposes sanctions on its members, with PAPC oversight, in line with Article 67 of the Audit and Review of Accounts Law No. 26 of 1999 (as amended 2004).

YACPA developed its own internal system of investigation and discipline to address professional and ethical complaints from members. Complaints are sent to the Chairman and the Administrative Council to appoint a team of YACPA members responsible for investigating the case. Decisions are brought before the Administrative Council which then implements final decisions issued against YACPA members.

YACPA reports that in April 2022 it worked with the Government to undertake a gap analysis of I&D processes at the jurisdiction level (YACPA, Disciplinary Council, and Justice Courts) with SMO 6 requirements and identified opportunities for further alignment. YACPA leadership completed a report detailing gaps pertaining to the scope of the system, initiation of proceedings, investigative process, disciplinary process, and public interest considerations in September 2022. As of April 2023, YACPA reports to be working with the Courts system and other stakeholders to address the gaps.

Current Status: Partially Adopted

The Council of Ministers Resolution No. 51 of 2019 requires IFRS as issued by IASB for application by all public interest entities beginning January 1, 2020 which include: (i) banks and financial institutions who are obliged to submit their reports and financial statements to the Central Bank of Yemen; and (ii) entities required to submit their reports and financial statements to the Ministry of Industry and Trade (MIT) and the Tax Authority. Resolution No. 51 of 2019 also adopts IFRS for small- and medium-sized entities (SMEs)

Current Status: Adopted

Relevant Organizations

Arab Federation of Accountants and Auditors

Central Organization of Control and Audit

Gulf Cooperation Council Accounting & Auditing Organisation

Higher Council of Accounting and Auditing

Ministry of Finance

Ministry of Industry and Trade

Ministry of Social Affairs & Labor

Yemeni Association of Certified Public Accountants

Relevant Legislation

Audit and Review of Accounts Law No. 26 of 1999 (as amended 2004)

Council of Ministers Resolution No. 51 of 2019

Law No. 26 of 1999 (as amended 2001) Concerning the Profession of Accounts Auditing and Examination

Relevant Publications

FocusEconomics, “Yemen Economic Outlook,” November 2020

Heritage Foundation, “2020 Index of Economic Freedom: Yemen,” December 2020

IFRS Foundation, “IFRS Application Around the World: Jurisdiction Profile—Yemen,” February 2020

World Bank, “Public Financial Management Reform in the Middle East and North Africa: An Overview of Regional Experience,” June 2010

YACPA, “Study on Adoption and Implementation of International Auditing Standards in Yemen,” August 2018

YACPA, “Audit Quality Assurance System Proposal.”