Financial statements audit is a systematic process of examining and evaluating a business entity’s financial statements to ensure their accuracy, reliability, and compliance with International Financial Reporting Standards and the legal and regulatory requirements. This audit is conducted by independent auditor, and involves review of accounting records, financial transactions and control measures to ensure true and fair presentation of the financial statements.
What are the types of financial statements?
Financial statements are categorized into two types; the first is the annual financial statements, which are issued at the end of the financial year, accompanied by an independent auditor’s opinion on the fairness of such financial statements and that they present, in all material respects, the financial position of the entity and its financial performance and cash flows in accordance with the International Financial Reporting Standards (IFRSs).
The second type is interim condensed financial information, which is issued on a quarterly basis, accompanied by an independent auditor’s conclusion about the preparation of the financial information as per the applicable accounting framework.
What is the legislation mandating the preparation of financial statements in the State of Kuwait?
All companies shall prepare financial statements and have them audited and approved by an independent auditor in accordance with the provisions of Companies Law No. 1 of 2016 and the Executive Regulations thereof, as amended.
Are all companies required to prepare annual financial statements?
Yes, all companies are required to prepare annual financial statements. These include the following types of companies as per Article 4 of the Companies Law No. 1 of 2016:
- Partnership Company
- Limited Partnership Company
- Partnership Limited by Shares
- Joint Venture
- Shareholding Company
- Company With Limited Liability
- Single-Person Company
What are the administrative and regulatory authorities that oversee financial statements?
Financial statements should be prepared and audited in compliance with the legislative requirements, regulatory frameworks, resolutions and instructions issued by the following administrative and regulatory authorities:
- Ministry of Commerce and Industry (MOCI)
- Capital Markets Authority (CMA)
- Central Bank of Kuwait (CBK)
- Insurance Regulatory Unit (IRU)
What is the timeframe for filing financial statements to the administrative and regulatory authorities?
The audited annual financial statements should be filed within 3 months from the end of the entity’s financial year, while the unaudited interim financial information should be filed within 45 days from the end of the quarter.
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.
Who is responsible for preparing financial statements?
The responsibility for preparing financial statements lies with the management of the business entity. This includes collecting, analyzing, and presenting financial data in a fair, transparent, and accurate manner that reflects the true financial position of the entity and ensures that they are free from material misstatements.
What are the mandatory standards that business entities should adopt in preparing financial statements?
The administrative and regulatory authorities mandate business entities to apply the International Financial Reporting Standards (IFRS) in preparing financial statements.
What is the responsibility of the independent auditor in auditing financial statements?
The independent auditor is responsible for auditing the financial statements by examining and evaluating them to provide an objective opinion about their fair presentation and whether they are free from material misstatements based on the audit evidence obtained through the audit procedures.
What are the mandatory standards that independent auditors should adopt in auditing financial statements?
The administrative and regulatory authorities mandate independent auditors in Kuwait to adopt the International Standards on Auditing (ISA) in auditing or reviewing the financial statements of business entities.
What types of reports are issued by the independent auditor?
The independent auditor issues one of the following types of reports:
- Unqualified Opinion (Clean Report)
- Qualified Opinion (Qualified Audit Report)
- Adverse Opinion (Adverse Audit Report)
- Disclaimer of Opinion (Disclaimer Report)
Who are the beneficiary users of audited financial statements?
The beneficiary users of audited financial statements include:
- Owners or Shareholders: To assess the business results of the financial year.
- Investors: To evaluate the financial position of the business entity and make informed investment decisions.
- Financing providers: Such as banks and financial institutions, to assess creditworthiness and make decisions related to loans and credit facilities.
What is the added value to business entities from the Audit of Financial Statements?
- Ensuring soundness and integrity of financial statements and information promoting the entity’s reputation and avoiding associated risks; and
- Enhancing 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, clients, etc.) make informed decisions as appropriate.
What are the services offered by Baker Tilly Kuwait?
- Auditing annual financial statements, reviewing interim condensed financial information, and issuing the independent auditor’s report.
- Auditing the financial position of business entities as at a specific date.
Why Baker Tilly?
- Baker Tilly in Kuwait is a member of Baker Tilly International network based in the UK, ranked amongst the top 10 global accounting networks.
- Auditors in Baker Tilly Kuwait are licensed by Ministry of Commerce and Industry and are registered with the regulatory authorities, e.g., Central Bank of Kuwait, Capital Markets Authority and Insurance Regulatory Unit.
- Extensive experience in auditing financial statements for companies operating across various business sectors in the State of Kuwait.
- Highly experienced bilingual team with specialized academic qualifications and professional certifications.
- Utilization of audit software to ensure accuracy and completeness of audits within short timeframes.
- Commitment to performing audit engagements according to predefined timelines, with no delays and responsiveness to client requirements.