AA-1 AA-1 Auditor Requirements
AA-1.1 AA-1.1 Appointment of Auditors
AA-1.1.1
Specialised licensees must obtain prior written approval from the CBB before appointing or re-appointing their auditor.October 2010AA-1.1.2
As the appointment of auditors normally takes place during the course of the firm's annual general meeting,
specialised licensees should notify the CBB of the proposed agenda for the annual general meeting in advance of it being circulated toshareholders . The CBB's approval of the proposed auditors does not limit in any wayshareholders' rights to subsequently reject the Board's choice.October 2010AA-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 auditingspecialised 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 2010AA-1.1.4
In the case of
overseas specialised 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 a specialised licensee group having different auditors.October 2010AA-1.2 AA-1.2 Removal or Resignation of Auditors
AA-1.2.1
Specialised licensees must notify the CBB as soon as they intend to remove their external auditor, with an explanation of their decision, or as soon as their auditor resign.October 2010AA-1.2.2
Specialised 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.October 2010AA-1.2.3
The external auditor of
specialised licensees must inform the CBB in writing, should it resign or its appointment as auditor be terminated, within 30 calendar days, of the event occurring, setting out the reasons for the resignation or termination.October 2010AA-1.3 AA-1.3 Audit Partner Rotation
AA-1.3.1
Unless otherwise exempted by the CBB,
specialised licensees must ensure that the audit partner responsible for their audit does not undertake that function more than five years in succession.October 2010AA-1.3.2
[This Paragraph was deleted in October 2012].
Deleted: October 2012AA-1.3.3
Specialised licensees must notify the CBB of any change in audit partner.October 2010AA-1.4 AA-1.4 Auditor Independence
AA-1.4.1
Article 61(d) of the CBB Law imposes conditions for the auditor to be considered independent. Before a
specialised 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 thelicensee .October 2010AA-1.4.2
For an auditor to be considered independent, it must, among things, comply with the restrictions in Section AA-1.5.
October 2010AA-1.4.3
If a
specialised 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 2010AA-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 2010AA-1.5 AA-1.5 Licensee/Auditor Restrictions
Financial Transactions with Auditors
AA-1.5.1
Specialised licensees must not provideregulated services to their auditor.October 2010Outsourcing to Auditors
AA-1.5.2
Specialised licensees may not outsource their internal audit function to the same firm that acts as their (external) auditor.October 2010Other Relationships
AA-1.5.3
Specialised 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.October 2010AA-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 thelicensee he/she audits; (ii) holding any managerial position in thelicensee he/she audits; and (iii) acquiring any shares in thelicensee 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 licensee.Amended: October 2012
October 2010AA-1.5.5
Article 61(d) of the CBB Law prohibits an auditor from (i) being the chairman or a member of the Board of
Directors of the licensee he/she audits; (ii) acting as a managing director, agent or representative of the licensee concerned; and (iii) taking up any administrative work in the licensee, or supervising its accounts, or having a next of kin in such a position.Amended: October 2012
October 2010AA-1.5.6
The restriction in Paragraph AA-1.5.4 applies to
overseas specialised licensees as well asBahraini specialised licensees .October 2010AA-1.5.7
A partner,
Director or manager on the engagement team of auditing aspecialised licensee may not serve on the Board or in acontrolled function of thelicensee , for two years following the end of their involvement in the audit, without prior authorisation of the CBB.October 2010AA-1.5.8
Chapter AU-1.2 sets out the CBB's "
controlled functions " requirements.October 2010Definition of 'Auditor'
AA-1.5.9
For the purposes of Section AA-1.5, 'auditor' means the partners,
Directors and managers on the engagement team responsible for the audit of thespecialised licensee .October 2010
