BUSINESS

SOCPA completes transition system to international standards by endorsing International Code of Ethics

April 17, 2021

RIYADH — The Board of Directors of SOCPA approved the document of endorsement of the International Ethics Standards Board for Accountants’ (IESBA) International Code of Ethics for Professional Accountants (including International Independence Standards) (the International Code) taking in consideration the legal environment in Saudi Arabia.

The SOCPA Secretary General Dr. Ahmed Al-Meghames indicated the importance of this transition, which constitutes a qualitative leap in the direction of enhancing the quality of the practices of the accounting and auditing profession in the Kingdom and its consistency with international practices.

Dr. Al-Meghames has also indicated that the endorsement of the document of adoption of the International Code of Ethics for Professional Accountants completes the transition system to the set of international standards, which included accounting and auditing standards, quality control and professional code of conduct and ethics.

Through this, SOCPA seeks to enhance the confidence of users of financial statements and achieve international engagement in a way that contributes to the achievement of the Kingdom's Vision 2030 programs and supports the foundations for attracting foreign investments and enhancing the transparency and reliability of financial dealings.

This endorsement comes in conjunction with the Council of Ministers’ resolution to endorse the accounting and auditing profession law and organizing of SOCPA.

Dr. Al-Meghames stated that the scope of adoption of this Code includes all professional accountants in public practice (including auditors) and professional accountants in business.

Dr. Al-Meghames also indicated that this transition will add to the Arabic library a translated version of the International Code that can be used by all practitioners in the Arabic world and establish a basis for communication and contact with IESBA and those interested in Ethics worldwide.

With regard to the timeframe for the adoption of the International Code, Dr. Al-Meghames stated that the deadline for the adoption of this Code is the middle of the next year (2022) with early adoption permitted.

In this regard, he also indicated that SOCPA will present publications and introductory lectures about the components of the International Code to facilitate understanding and consistent application of the Code.

The handbook for quality control will also be updated. In addition, any amendments approved by IESBA will be considered for the purposes of adoption in the Kingdom and issuance of approved updates.

Regarding the steps of transition to the International Code, Ahmed Al-Shangiti, a member of Professional Code of Conduct and Ethics Committee and the leader of the team, indicated that, under the supervision of Professional Code of Conduct and Ethics Committee, many important steps were taken to conclude the document of endorsement.

A team was formed from the members of Professional Code of Conduct and Ethics Committee, and specialized advisors in the audit, Shariah and legal field were engaged. The experiences of some countries, including the G20 countries, in terms of applying the International Code have been considered, and the team were also deeply engaged with the IESBA during various workshops and at last year’s Saudi Accountant’s Forum (SAF).

For this engagement especially, SOCPA would like to thank IESBA for their tremendous support. The team also supervised the translation of the latest version of the International Code (2018 edition), considering the similar terminologies used in other relevant technical standards.

The team analyzed and identified issues of Ethics that have importance to the local environment and discussed them with specialists. Al-Shangiti indicated that after drafting the document of endorsement through the results of the work, it was presented with the translated International Code to the public via the website of SOCPA.

The team solicited public input, considered the views raised through discussion sessions, and updated the document accordingly. Thereafter, the draft of the document was presented to the Board of Directors of SOCPA and it has now been approved.

“I congratulate the SOCPA and its leadership for their determination to adopt the International Code of Ethics for Professional Accountants (including International Independence Standards),” said Dr. Stavros Thomadakis, chairman of the IESBA.

“The IESBA Code is one of the most comprehensive and broadly accepted professional codes in the world. Many G-20 jurisdictions have adopted it, including its many recent enhancements. I look forward to the Code’s effective implementation within the Kingdom and to future stronger ties of cooperation between IESBA and SOCPA.”

With regard to the most important components of the International Code and changes from the current applied code, Dr. Yasser Fallatah, advisor to the team, explained that the international framework is based on a comprehensive and robust conceptual framework to help deal with the various circumstances that might impact the behavior of the professional accountant and pose threats to the five fundamental principles of ethics for professional accountants: Integrity; Objectivity; Professional Competence and Due Care; Confidentiality; and Professional Behavior.

Dr. Yasser also stated that the new Code includes dedicated parts for accountants in public practice (including auditors) and accountants in business (including the public sector), and two additional parts for the independence standards in accordance with the international conceptual framework of ethics.

It also contains indicative details and determinants of the cases likely to be faced by the professional accountant that might create threats to the fundamental principles of ethics or to independence.

These include cases the professional accountant may encounter regarding non-compliance with laws and regulations with respect to which the International Code grants the accountant a right in the public interest to set aside the professional duty of confidentiality to disclose the non-compliance to a public authority.

The new Code further specifies requirements regarding contingent fees as well as factors relevant to evaluating the level of threats created by such fees and actions to address those threats. The Code also prescribes specific additional independence requirements for audits of public interest entities, including setting timeframes for the rotation of the audit partner and the audit team.

Dr. Fallatah also pointed out the importance of the reference framework, contained in the document, for the ethics in the Kingdom of Saudi Arabia, which is based on the tolerant Islamic Sharia, as well as the important amendments to the International Code according to what is deemed necessary by SOCPA.

These amendments are mainly related to the prohibition of providing non-assurance services to the audit client, and allowing the auditor to provide other assurance services to the audit client according to an approved list of permissible services (white list) to be prepared and periodically updated by SOCPA in order to enhance the independence of the auditor and take into account the various regulations applied in the Kingdom. — SG


April 17, 2021
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