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PARLIAMENT will debate amendments to a key law aimed at tightening oversight of external auditors by introducing tougher penalties, stricter professional standards and establishing a new accountability body.
The urgent government-drafted legislation, amending provisions of Decree-Law No (15) of 2021 concerning external auditors, has been forwarded to Parliament by His Royal Highness Prince Salman bin Hamad Al Khalifa, Crown Prince and Prime Minister.
One of the most notable changes is the replacement of the existing ‘Disciplinary Board’ with a newly empowered Auditors’ Accountability Board, which will oversee investigations and impose sanctions on auditors found to be in breach of professional or legal obligations.
The board will be chaired by a High Civil Court judge, with another judge nominated by the Supreme Judicial Council, alongside a government representative and two professional specialists.
Under the revised law, violators could face warnings and written reprimands; mandatory training or educational programmes for up to three years; restrictions on audit licences for up to one year, fines of up to BD100,000; bans on auditing certain types of companies for up to one year; suspension from practice for up to three years and permanent revocation of licences and removal from the official register.
Authorities will be required to consider the seriousness of the violation, any financial benefit gained, and harm caused to others when determining penalties. Auditors may also be forced to pay investigation and procedural costs, while complainants could be held liable if allegations are proven to be malicious.
In addition, the proposed rules also prohibit auditors from acting as creditors or debtors to entities outside normal business dealings, hold partnership or accounting roles in other audit firms and provide consultancy services that breach international auditing standards.
They are also required to comply fully with anti-money laundering and counter-terrorism financing laws.
New provisions empower authorities to carry out comprehensive or selective inspections of auditors’ work to ensure compliance.
The draft law also imposes stricter requirements on audit firms, including – Bahraini ownership and qualified partners, minimum 10 years’ accounting experience for firm owners and mandatory rotation of auditors every five years for unlisted companies.
Non-qualified partners may be allowed limited ownership stakes, subject to ministerial controls designed to protect independence and governance.
The Cabinet says the amendments are intended to boost transparency, protect investors and reinforce confidence in Bahrain’s financial system, particularly amid growing regional and international scrutiny of audit quality and corporate governance.
mohammed@gdnmedia.bh
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