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  • AU-1 AU-1 Auditor Requirements

    • AU-1.1 AU-1.1 Appointment of Auditor

      • AU-1.1.1

        Islamic bank licensees must obtain prior written approval from the CBB before appointing or re-appointing their auditor, within 4 months of their financial year-end.

        Amended: October 2022
        Amended: January 2011
        October 07

      • AU-1.1.1A

        When seeking the CBB's approval for the appointment or re-appointment of the external auditor, the request for approval should specify the name of the audit firm, the name of the responsible partner, as well as the year which the responsible partner was initially appointed by the Islamic bank licensee.

        Added: July 2014

      • AU-1.1.2

        As the appointment of auditors normally takes place during the course of the firm's annual general meeting, Islamic bank licensees should notify the CBB of the proposed agenda for the annual general meeting in advance of it being circulated to shareholders. The CBB's approval of the proposed auditor does not limit in any way shareholders' rights to subsequently reject the Board's choice.

        Amended: January 2011
        October 07

      • AU-1.1.3

        The CBB, in considering the proposed (re-) appointment of an auditor, takes into account the expertise, resources and reputation of the audit firm, relative to the size and complexity of the licensee. The CBB will also take into account the track record of the audit firm in auditing Islamic bank licensees within Bahrain; the degree to which it has generally demonstrated independence from management in its audits; and the extent to which it has identified and alerted relevant persons of significant matters. Finally, the CBB will also consider the audit firm's compliance with applicable laws and regulations (including legislative Decree No. 26 of 1996; the Ministry of Industry and Commerce's Ministerial Resolution No. 6 of 1998; and relevant Bahrain Stock Exchange regulations).

        October 07

      • AU-1.1.4

        In the case of branches of foreign bank licensees, the CBB will also take into account who acts as the auditor of the parent firm. As a general rule, the CBB does not favour different parts of a banking firm or group having a different auditor.

        Amended: April 2020
        Amended: January 2011
        Added: October 07

    • AU-1.2 AU-1.2 Removal or Resignation of Auditor

      • AU-1.2.1

        Islamic bank licensees must notify the CBB as soon as they intend to remove their auditor, or if their auditor intends to resign, with an explanation of their decision, or as soon as their auditors resigns.

        Amended: January 2011
        October 07

      • AU-1.2.2

        Islamic bank licensees must ensure that a replacement auditor is appointed (subject to CBB approval as per Section AU-1.1), as soon as reasonably practicable after a vacancy occurs, but no later than three months.

        October 07

      • AU-1.2.3

        In accordance with the powers granted to CBB under Article 63 of the CBB Law, auditors of Islamic bank licensees and their licensees must inform the CBB in writing, should they resign or their appointment as auditor be terminated, within 30 calendar days, of the event occurring, setting out the reasons for the resignation or termination.

        October 07

    • AU-1.3 AU-1.3 Audit Partner Rotation

      • AU-1.3.1

        Islamic bank licensees must ensure that the audit partner responsible for their audit does not undertake that function more than five years in succession.

        Amended: July 2013
        October 07

      • AU-1.3.2

        Islamic bank licensees must notify the CBB of any change in audit partner.

        October 07

    • AU-1.4 AU-1.4 Auditor Independence

      • AU-1.4.1

        Article 61(d) of the CBB Law imposes conditions for the auditor of a licensee to be considered "independent". Before an Islamic bank licensee appoints an auditor, it must take reasonable steps to ensure that the auditor has the required skill, resources and experience to carry out the audit properly, and is independent of the licensee.

        October 07

      • AU-1.4.2

        For an auditor to be considered independent, it must, among things, comply with the restrictions in Section AU-1.5.

        October 07

      • AU-1.4.3

        If an Islamic bank licensee becomes aware at any time that its auditor is not independent, it must take reasonable steps to remedy the matter and notify the CBB of the fact.

        October 07

      • AU-1.4.4

        If, in the opinion of the CBB, independence has not been achieved within a reasonable timeframe, then the CBB may require the appointment of a new auditor.

        October 07

    • AU-1.5 AU-1.5 Licensee/Auditor Restrictions

      • [This Subsection was deleted in April 2019].

        • AU-1.5.1

          [This Paragraph was deleted in April 2019].

          Deleted: April 2019
          Amended: January 2011
          October 07

      • Outsourcing to Auditor

        • AU-1.5.2

          Section OM-3.7 generally prohibits Islamic bank licensees from outsourcing their internal audit function to the same firm that acts as their external auditor. However, the CBB 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 CBB prior approval.

          Amended: January 2011
          October 07

      • Other Relationships

        • AU-1.5.3

          Islamic bank licensees and their auditor must comply with the restrictions contained in Article 217 (c) of the Commercial Companies Law (Legislative Decree No. (21) of 2001), as well as in Article 61(d) of the CBB Law.

          Amended: January 2011
          October 07

        • AU-1.5.4

          Article 217(c) of the Commercial Companies Law 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. Article 61 (d) of the CBB Law prohibits an auditor from (i) being the chairman or a director of the company he/she audits (ii) acting as a managing director, agent or representative of the company concerned; and (iii) taking up any administrative work in the company, or supervising its accounts, or having a next of kin in such a position. Furthermore, the auditor must not be a relative (up to the second degree) of a person assuming management or accounting duties in the company.

          Amended: October 2014
          October 07

        • AU-1.5.5

          The restrictions in Paragraph AU-1.5.3 apply to branches of foreign bank licensees as well as Bahraini Islamic bank licensees.

          Amended: April 2020
          Amended: October 2011
          Added: October 07

        • 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 CBB.

          October 07

        • AU-1.5.7

          [This Guidance was deleted in January 2011].

          Deleted: January 2011

      • 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.

          October 07