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  • AA-1 AA-1 Auditor Requirements

    • AA-1.1 AA-1.1 Appointment of Auditors

      • AA-1.1.1

        Investment firm licensees must obtain prior written approval from the CBB before appointing or re-appointing their auditors.

        Amended: January 2007

      • AA-1.1.1A

        Where an investment firm licensee fails to appoint an external auditor within four months from the beginning of the financial year, Article 61 (b) of the CBB Law provides the CBB with the power to appoint the external auditor.

        Adopted: January 2011

      • AA-1.1.2

        As the appointment of auditors normally takes place during the course of the firm's annual general meeting, investment firm 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 auditors does not limit in any way shareholders' rights to subsequently reject the Board's choice.

        Amended: January 2007

      • AA-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 investment firm 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.

        Amended: January 2007

      • AA-1.1.4

        In the case of overseas investment firm licensees, the CBB will also take into account who act as the auditors of the parent firm. As a general rule, the CBB does not favour different parts of an investment group having different auditors.

        Amended: January 2007

    • AA-1.2 AA-1.2 Removal or Resignation of Auditors

      • AA-1.2.1

        Investment firm licensees must notify the CBB as soon as they intend to remove their auditors, with an explanation of their decision, or as soon as their auditors resign.

        Amended: January 2007

      • AA-1.2.2

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

        Amended: January 2007

      • AA-1.2.3

        In accordance with the powers granted to CBB under Article 63 of the CBB Law, auditors of investment firm 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.

        Amended: January 2007

    • AA-1.3 AA-1.3 Audit Partner Rotation

      • AA-1.3.1

        Unless otherwise exempted by the CBB, investment firm licensees must ensure that the audit partner responsible for their audit does not undertake that function more than five years in succession.

        Amended: January 2007

      • AA-1.3.2

        Investment firm licensees must notify the CBB of any change in audit partner.

        Amended: January 2007

    • AA-1.4 AA-1.4 Auditor Independence

      • AA-1.4.1

        Before an investment firm 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.

        Amended: January 2007

      • AA-1.4.2

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

      • AA-1.4.3

        If an investment firm 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.

        Amended: January 2007

      • AA-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.

        Amended: January 2007

    • AA-1.5 AA-1.5 Licensee/Auditor Restrictions

      • Financial Transactions with Auditors

        • AA-1.5.1

          Investment firm licensees must not provide regulated investment services to their auditors.

      • Outsourcing to Auditors

        • AA-1.5.2

          Investment firm licensees may not outsource their internal audit function to the same firm that acts as their external auditors.

          Amended: October 2009
          Amended: January 2007

        • AA-1.5.3

          Further Guidance on this issue is provided in the Risk Management Module.

          Amended: October 2009
          Amended: January 2007

      • Other Relationships

        • AA-1.5.4

          Investment firm 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), as well as in Article 61(d) of the CBB Law.

          Amended: January 2007

        • AA-1.5.5

          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.

          Amended: January 2007

        • AA-1.5.6

          Article 61(d) prohibits an auditor from (i) being the chairman or a member of the Board of Directors 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.

          Added: January 2007

        • AA-1.5.7

          The restriction in Paragraph AA-1.5.4 applies to overseas investment firm licensees as well as Bahraini investment firm licensees.

        • AA-1.5.8

          A partner, Director or manager on the engagement team of auditing an investment firm 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.

          Amended: January 2007

        • AA-1.5.9

          Chapter AU-1.2 sets out the CBB's "controlled functions" requirements.

          Amended: January 2007

      • Definition of 'Auditor'

        • AA-1.5.10

          For the purposes of Section AA-1.5, 'auditor' means the partners, Directors and managers on the engagement team responsible for the audit of the investment firm licensee.

          Amended: January 2007