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  • AU-1.5 AU-1.5 Licensee/Auditor Restrictions

    • Financial Transactions with Auditors

      • AU-1.5.1

        Islamic bank licensees must not lend to their auditors, nor enter into any contracts of professional indemnity insurance with their auditors.

    • Outsourcing to Auditors

      • AU-1.5.2

        Section OM-2.7 generally prohibits Islamic bank licensees from outsourcing their internal audit function to the same firm that acts as their external auditors. However, the BMA may allow short-term outsourcing of internal audit operations to an Islamic bank licensee's external auditor, to meet unexpected urgent or short-term needs (for instance, on account of staff resignation or illness). Any such arrangement will normally be limited to a maximum period of one year and is subject to BMA prior approval.

    • Other Relationships

      • AU-1.5.3

        Islamic bank licensees and their auditors must comply with the restrictions contained in Article 217 (c) of the Commercial Companies Law (Legislative Decree No. (21) of 2001).

      • AU-1.5.4

        Article 217(c) prohibits an auditor from (i) being the chairman or a member of the Board of Directors of the company he/she audits; (ii) holding any managerial position in the company he/she audits; and (iii) acquiring any shares in the company he/she audits, or selling any such shares he/she may already own, during the period of his audit. Furthermore, the auditor must not be a relative (up to the second degree) of a person assuming management or accounting duties in the company.

      • AU-1.5.5

        The restriction in Paragraph AU-1.5.3 applies to overseas Islamic bank licensees as well as Bahraini Islamic bank licensees.

      • AU-1.5.6

        A partner, Director or manager on the engagement team of auditing an Islamic bank licensee may not serve on the Board or in a controlled function of the licensee, for two years following the end of their involvement in the audit, without prior authorisation of the BMA.

      • AU-1.5.7

        Chapter HC-2 sets out the BMA's "controlled functions" requirements.

    • Definition of "Auditor"

      • AU-1.5.8

        For the purposes of Section AU-1.5, "auditor" means the partners, Directors and managers on the engagement team responsible for the audit of the Islamic bank licensee.