Financial Statements Audit

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?

Article (4) of Companies Law No. 1 of 2016, as amended, defines the types of companies as follows:

1. Partnership
2. Limited Partnership
3. Partnership Limited by Shares
4. Joint Venture
5. Shareholding Company
6. Company With Limited Liability
7. One-Person Company

Are all companies required to prepare annual financial statements?

All companies shall prepare financial statements audited and approved by an independent auditor in accordance with the provisions of Companies Law No. 1 of 2016 and Executive Regulations thereof, as amended.

What is the purpose of financial statements and financial information?

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 in connection therewith.

Who can perform financial statement audit for entities?

A financial statements audit shall be conducted by the independent auditor to provide an opinion on 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, 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 and file unaudited interim financial information on a quarterly basis in addition to the audited annual financial statements. Other types of companies are only required to prepare and file audited annual financial statements.

What are the mandatory standards to be adopted by companies in preparing financial statements?

The administrative and regulatory bodies require business entities to apply the International Financial Reporting Standards (IFRS) in preparing financial statements. In addition, they require independent auditors including 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 with which companies should file their financial statements?

The administrative and regulatory bodies, including the Ministry of Commerce & Industry, Capital Markets Authority, Central Bank of Kuwait, and  Insurance Regulatory Unit, require all business entities to provide them with audited annual financial statements.

What is the timeframe for filing financial statements to the administrative and regulatory authorities?

The unaudited interim financial information should be filed within 45 days from the end of the quarter while the audited annual financial statements should be filed 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 Executive Regulations thereof, as amended, and the resolutions and instructions issued by the regulators in the State of Kuwait, i.e. Ministry of Commerce & Industry, Capital Markets Authority, Central Bank of Kuwait and Insurance Regulatory Unit.

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 the Ministry of Commerce & Industry. Further, the listed and licensed companies should select an auditor from among those registered with the Capital Markets Authority. Also, insurance companies should select independent auditors from the list approved by Insurance Regulatory Unit.

Is Baker Tilly registered with Capital Markets Authority?

Yes, Baker Tilly in the State of Kuwait is registered with Capital Markets Authority in the names of the following auditors:

• Mohammed Hamed Al-Sultan, Auditor License No. 100, Class A.
• Ali Mohammed Al-Hamad, Auditor License No. 111, Class A.

Is Baker Tilly registered with Insurance Regulatory Unit?

Yes, Baker Tilly in the State of Kuwait is registered with Insurance Regulatory Unit in the names of the following auditors:

• Mohammed Hamed Al-Sultan, Auditor License No. 100, Class A.
• Ali Mohammed Al-Hamad, Auditor License No. 111, Class A.

What is the added value to business entities from the Audit of Financial Statements?

1. Ensure soundness and integrity of financial statements and information promoting the entity’s reputation and avoiding associated risks; and
2. 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, Ministry of Commerce and Industry and Insurance Regulatory Unit, in addition to 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 Kuwait?

Audit of annual and interim financial statements and issuance of independent auditor’s report