The auditing field serves as one of the most important roles in our world’s capital markets as the ground of auditing is built on the fundamentals of transparency and accurate financial reporting, which is what enables the worlds’ competitive free market system to operate properly. Without having accurate auditing and financial reporting, it would be hard for investors to allocate their capital appropriately. The State of Qatar has been committed to proper auditing ever since the establishment of Law No. 30 of 2004 Regulating the Auditing Profession, which has now been replaced by the newly issued Law No. 8 of 2020 on regulating the auditing profession. This study focuses on giving the reader a comparative overview of the old and the newly issued law, and in contrast to other countries.
Prior to the establishment of Law No. 30 of 2004, the State of Qatar issue laws related to the auditing profession, such as: Law No. 7 of 1974, Doha Securities Market Law No. 14 of 1995 and Commercial Companies law No. 5 of 2002 ; all in which obliges companies to hire a qualified auditor for accurate reporting. However, as compliance issues have been on the rise calling for an increase in attention on the auditing profession and its requirements, it is crucial to both understand and analyze how Qatar has previously implemented auditing measures and how it has recently adapted to the world’s amplifications.
Law No. 8 of 2020 on regulating the auditing profession intervenes to expand the extent of application of the law, and the responsibility of key stake holders. New articles deal with responsibility of managers in signing audit reports, which must be among the natural persons registered in the auditor’s record. The auditor must be duly registered, and should he be removed, approval of the competent department must be obtained. This is particularly referred to in article 23 of the aforementioned law, which mentions that it is not permissible for any company or institution to dismiss auditor during the fiscal year in which he/she had performed their duties, unless it has been found that a breach of this provision has taken place. However, in contrast to the old Law No 30, this article did not require the approval of the competent department to reverse article 23 of Law No 8 of 2020.
Moreover, the specific duties of the auditor are mentioned in Article 21 as that of preparing financial statements reports, budgets, and periodic and secondary accounts of its clients, which was not previously mentioned in the old Law No. 30.
As for the activities prohibited, these are stipulated in Article 26 of the new law whereby the auditor is prohibited from several things such as engaging in trade, practicing the profession in a manner that contradicts the applicable laws, and performing any activities that are linked to the client who he audits and reviews his/her accounts. Also, dealing or buying or selling the securities of the customer who he audits his/her accounts with fees for the serviced rendered to the auditor. Finally, the auditor shall be prohibited of being a partner or an accountant in any other accounting firm or office. Whereby in the old law No.8 in which the prohibitions are stated under article 27, it stated that a chartered accountant shall be prohibited from engaging in any of the following: Practicing trade; initiating any work that contradicts professional conductor prejudices professional dignity; obtaining any work relevant to his/her profession through advertising or other means deemed prejudicial to professional dignity; auditing the accounts of a company in which he/she served as an employee unless at least two (2) years have elapsed since he/she left such employment. The previous prohibition to advertise has thus been removed in the new law, as well as the prohibition in Article 28 of Law No 30 of 2004 such as in the cases where he/she purchases or sells the shares of the company that they are auditing during the audit period; where he/she is a creditor or debtor of the company.
In the event of a violation of the prohibited activities, article 48 of Law No. 8 on regulating the auditing profession stipulates that the auditor shall be sentenced for a period that does not exceed one year and a fine not exceeding a million Riyals (QR 1,000,000) or both if: The auditor has been practicing the profession without being registered in the registry or has been practicing after their name has been struck off from the registry, or by giving incorrect data and certificates, or by false advertising. The court may order closure of the office, removal of signs, as well as striking off the chartered accountant's name from the register in addition to publish the judgement in one or two daily newspapers at the expense of the violator. Similar penalties were imposed under the old law under article 54 except that any person convicted of the following offences was set to be sentenced to imprisonment for a period not exceeding two years or to a fine not exceeding fifty thousand Riyals (QR 50,000).
In reference to other countries, Qatar has always adapted a similar approach to measures taken by other neighborhood countries as well as International standards. Kuwait for instance, does not greatly differ in its laws from those issued by the State of Qatar. Provisions regarding the regulation of the auditing profession state that a natural or legal person who is registered in one of the records and who has a license is capable of practicing the profession. In order to practice the profession, it should be conditional upon his being registered in the register of auditors practicing the profession. He/she must also be holding the Kuwaiti citizenship or a citizen of one of the GCC countries, and must be holding a degree in accounting and does not hold an offence against honor and honesty. The auditor may not be a partner in more than one office or company. The auditor should also hold a minimum of 5 years of experience in the field. The competent department shall inspect the auditors to verify the quality of professional performance and ensure that they fulfill their professional obligations in accordance with international auditing standards. The superintendence of accounts is punished by one of the disciplinary penalties as a first warning. The second warning will consist of a penalty of 5000 Dinar, third warning is the suspension of practicing for a period of three years and fourthly, strike off from the registry.
In reference to a western country, the United Kingdom is a country in which measures regarding the regulation of the auditing profession demonstrate some comparable elements. The auditing profession is not subject to a specific law but it rather follows certain auditing standards issued by the International Standards by auditing UK (ISA). Albeit the audit in the UK may act as a deterrent when dealing with financials, the auditor is essentially not responsible for preventing fraud. He/she shall rather focus on finding errors and non-compliance in financial reports and reporting them to management. Unless proven for non-compliance, the auditor is not required to conduct any operations until he/she has made sure of the fraud. This limits the powers of the auditor in dealing with non-compliance. In the English system, one of the main tasks of the auditor is to provide a statement to the shareholder’s expressing his/her opinion after reviewing all financial reports.
When practicing the auditing profession, the auditor’s liability for negligence is subject to the contract or Tort since the auditor’s duties are under a contractual relationship with the company.
As the auditing profession is an area in which its importance and status is intensifying by the day, developing proper measures to tackle deception whether in the public or private field, only conveys how serious governments are towards tackling avoidance, evasion and non-compliance issues.