Zawya Business Pulse - Raising the Bar of Audit (6Dec15)
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Raising the bar of audit
By Pashma Manglani
06 December 2015
The lack of transparency in financial reporting has been one of the biggest challenges in the
region's business landscape. While the GCC is increasingly becoming an attractive option for
investors, there is still no uniformity in terms of monitoring financial information.
According to the latest World Economic Forum Global Competitiveness report, the region still
has a way to go when it comes to the strength of its auditing and reporting standards. Qatar
ranks one of the highest at 10 out of the 144 countries investigated, but Kuwait falls to number
72 and the UAE is currently at the 26th spot.
The KPMG's 2014 GCC countries Audit Committee Survey also found that a majority of audit
committee members expressed reasonable, but not high levels of confidence in their oversight
of a company's financial reporting and in the accuracy, independence and objectivity of audit
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4. quality (both external and internal).
As one of the steps to counter this, the UAE has introduced a new law that sets higher
standards for the auditing industry. Federal Law No. 12 of 2014 sets out guidelines for the
licensing of auditing firms and professionals, stipulating that auditors hold at least a bachelor's
degree in accounting (or an equivalent qualification) as the requirements for becoming an
auditor were not clearly defined previously.
Education and training reform
On the sidelines of this, the UAE's governing body - the Accountants & Auditors Association
(AAA) - has announced a local chartered accountancy qualification for finance and audit
professionals that meet minimum standards. The UAE Chartered Accountant Qualification
(UAECA) has been rolled out in partnership with ACCA.
"This is a great initiative by the AAA and ACCA and will enhance the finance sector in the
UAE by helping develop globally and locally relevant knowledge and skills," said Baqir
Hussain Khawaja, senior associate at KPMG Lower Gulf Limited.
"Minimum qualifications are necessary to ensure the standard and quality of service being
offered to clients. Moreover, it is very important to be up-to-date with the latest developments
in the accounting and finance field such as updated International Standards on Auditing and
International Financial Reporting Standards. For example, we [at KPMG] ensure that all
professional staff meet annual and triennial continuing professional educational requirements
in the form of regular trainings and workshops."
However, it's not just educational requirements that are being reformed. In 2014, the Abu
Dhabi Accountability Authority (ADAA) issued a rule that requires mandatory auditor rotation
every four years - an issue that has been a matter of debate for some time now.
Results from the KPMG survey showed that the majority of respondents said they thought
mandatory audit firm rotation or mandatory re-tendering of the audit work was a way to
improve audit quality.
"Mandatory audit firm rotations and audit tendering at specified intervals are a couple of
measures regulators globally are looking at with the intention of improving the independence,
objectivity and professional skepticism of auditors," Khawaja noted.
Enhancing audit quality
Audit quality is being taken seriously on a regional level as well. The Institute of Chartered
Accountants in England and Wales (ICAEW) signed an agreement with the GCC Accounting
and Auditing Organization to help create an Audit Quality Monitoring Program across the GCC
in 2013.
Improving the quality of audit reports is a matter of global debate at the moment and plans are
in place to overhaul the way these are carried out. The International Auditing and Assurance
Standards Board (IAASB) has recently issued a decision that audit opinions must now
communicate Key Audit Matters as a way to enhance transparency.
In a report explaining the changes, Linda de Beer, IAASB Consultative Advisory Group (CAG)
chair, said: "The introduction of Key Audit Matters for listed entities is a significant
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