The audit of financial statements is mandatory for all companies in the State of Kuwait under Companies Law No. 1 of 2016 and Executive Regulations thereof, as amended.
What are the types of companies in the State of Kuwait? Are all companies in Kuwait obliged to prepare annual financial statements?
Article (4) of Companies Law No. 1 of 2016, as amended, determines the types of companies as follows:
- Limited Partnership
- Partnership Limited by Shares
- Joint Venture
- Shareholding Company
- Company With Limited Liability
- One-Person Company
Furthermore, all companies are required to prepare financial statements audited and approved by an independent auditor in accordance with the provisions of Companies Law No. 1 of 2016, as amended.
Why do business entities record financial information and prepare financial statements?
The overall purpose of the financial statements is to provide various stakeholders with the information they need about the business results, financial position, and financial performance of the entity.
This information is used by the stakeholders to analyze the financial performance of an entity and accordingly make informed decisions.
Why do business entities audit financial statements by independent auditor?
A financial statements audit is conducted by the independent auditor to provide an opinion whether the financial statements are stated fairly in accordance with the financial reporting framework, which is normally the International Financial Reporting Standards (IFRS). In forming an opinion whether financial statements are fairly stated in accordance with IFRS, the auditor gathers sufficient and appropriate evidence to determine whether the financial statements are free of material errors or other misstatements.
Are all companies required to prepare audited annual financial statements and unaudited interim financial information?
The listed and licensed companies are required to prepare unaudited interim financial information on quarterly basis in addition to the audited annual financial statements. Other types of companies are only obliged to prepare and file audited annual financial statements.
What are the mandatory standards to be adopted by companies in preparing the financial statements?
Further, such organizational and regulatory bodies require the business entities to apply the International Financial Reporting Standards (IFRSs) in preparing the financial statements. In addition, they require the independent auditors including the certified accounting or audit firms in the State of Kuwait to follow the International Standards on Auditing (ISA) when auditing or reviewing the financial statements of business entities.
What are the official bodies to which companies should submit the financial statements?
The organizational and regulatory authorities, including Ministry of Commerce & Industry, Capital Markets Authority and Central Bank of Kuwait, require all business entities to provide them with audited annual financial statements.
What is the timeframe for submission of financial statements to the organizational and regulatory authorities?
The unaudited interim financial information should be submitted within 45 days from the end of quarter whole the audited annual financial statements should be submitted within 3 months from the end of the company’s financial year.
What are the legislations adopted in preparing the financial statements?
The preparation and audit of financial statements should be conducted in accordance with the legislative requirements and regulatory rules of the Ministry of Commerce & Industry including but not limited to Companies Law No. (1) of 2016 and its Executive Regulations, and the resolutions and instructions issued by the regulators in the State of Kuwait, i.e. Ministry of Commerce & Industry, Capital Markets Authority and Central Bank of Kuwait.
What is the professional entity concerned with the accountancy and audit profession in Kuwait?
In the State of Kuwait, there is a public benefit society representing the accounting and audit profession, i.e. Kuwait Accountants and Auditors Association, which aims at organizing its members’ affairs including auditors and accountants and developing the profession according to the best international practices.
What are the criteria that companies consider in selecting the auditor?
Companies should select an auditor who is licensed by Ministry of Commerce & Industry. Further, the listed and licensed companies should select an auditor from among those holding additional license issued by Capital Markets Authority.
Is Baker Tilly licensed by Capital Markets Authority?
Baker Tilly in the State of Kuwait is licensed by Capital Markets Authority. Baker Tilly has two licensed chartered auditors who are accredited with the regulators, namely:
Dr. Saud Al-Humaidi, Auditor License No. 51, Class A
Mohamed Hamed Al-Sultan, Auditor License No. 100, Class A
What is the added value to business entities from Audit of Financial Statements?
- Ensure soundness and integrity of financial statements and information promoting the entity’s reputation and avoiding associated risks; and
- Promote confidence in the financial statements and financial or non-financial information, which helps shareholders and stakeholders (investors, regulatory authorities such as Central Bank of Kuwait, Capital Markets Authority or Ministry of Commerce & Industry and other parties such as banks, credit rating agencies, finance companies, customers, etc.) make informed decisions as appropriate.
What are the services offered by Baker Tilly?
Audit of annual and interim financial statements and issuance of the independent auditor’s report