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  • Part 8: Accounting and Auditing

    • Chapter 1 — General Provisions and Auditing Prohibitions

      • 97. Definitions

        In this Part, unless expressed otherwise:

        (a) an Auditor means:
        (i) in relation to a Domestic Firm, Public Listed Company or Domestic Fund, a Registered Auditor; or
        (ii) in relation to an Authorised Person which is not a Domestic Firm, an auditor of that Authorised Person;
        (b) a Registered Auditor means a person registered by the DFSA under Article 98;
        (c) an Audit Principal means an individual appointed by a Registered Auditor who is responsible for:
        (i) managing the conduct of audit work undertaken by the Registered Auditor; or
        (ii) signing audit reports, or any other reports as may be required under the Rules, on behalf of the Registered Auditor; and
        (d) an Audit Service means:
        (i) an audit of the financial statements of an Authorised Person, Public Listed Company or Domestic Fund;
        (ii) an audit of whether an Authorised Person, Public Listed Company or the Fund Manager or Trustee of a Domestic Fund has complied with applicable requirements in legislation administered by the DFSA; or
        (iii) the preparation of an opinion or report relating to an audit referred to in (i) or (ii),
        but does not include the performance of any internal audit function by or for a person referred to in (i) or (ii).

      • 97A. Adoption of financial reporting and auditing standards

        (1) A Rule made by the DFSA for the purposes of this Part may require compliance with or be expressed by reference to requirements in a specified financial reporting or auditing standard or code of ethics issued by a professional body (including such a standard or code as amended or re-enacted from time to time).
        (2) In this Article, "specified" means specified in the Rules.

      • 97B. Rules about financial statements and records

        The DFSA may make Rules applying to Authorised Persons, Reporting Entities and Domestic Funds relating to:

        (a) the preparation and maintenance of financial statements;
        (b) the keeping of accounting records;
        (c) the preparation of regulatory returns relating to financial statements;
        (d) the determination of a financial year; and
        (e) the giving of a direction by the DFSA to a particular person or class of persons requiring the use of a particular financial reporting standard.

      • 97C. Auditing Prohibitions (Domestic Entities)

        (1) A person shall not provide any Audit Service to a Domestic Firm, Public Listed Company or Domestic Fund, unless that person is a Registered Auditor.
        (2) A Registered Auditor shall not permit any person to undertake any of the responsibilities of an Audit Principal unless that person is registered by the DFSA as an Audit Principal for that Registered Auditor.

    • Chapter 2 — Registration of Auditors and Audit Principals

      • 98. Registration and conditions and restrictions

        (1) The DFSA shall make Rules setting out the criteria a person must meet to become and remain registered by the DFSA as a Registered Auditor or as an Audit Principal.
        (2) An application to be registered as an Audit Principal shall be made jointly by the Registered Auditor and the person who will be the Audit Principal if registration is granted.
        (3) The DFSA may:
        (a) grant or refuse to grant an application for registration as a Registered Auditor or Audit Principal; and
        (b) impose restrictions and conditions upon the registration.
        (4) Upon granting registration as a Registered Auditor or as an Audit Principal, the DFSA shall inform the applicant of that fact and whether there are any restrictions or conditions imposed upon the registration.
        (5) A Registered Auditor and an Audit Principal shall act within the scope of the relevant registration and comply with any restrictions and conditions imposed upon such registration.
        (6) The DFSA may at any time by notice to a Registered Auditor or Audit Principal, as appropriate:
        (a) impose restrictions or conditions on the registration of that Registered Auditor or that Audit Principal; and
        (b) vary or withdraw restrictions or conditions imposed on such registration.
        (7) The DFSA may act under Article 98(6) on its own initiative or at the request of the Registered Auditor or Audit Principal.
        (8) The procedures in Schedule 3 apply to a decision of the DFSA under this Article to refuse to grant an application for registration or to impose or vary conditions and restrictions on any registration. If a power is being exercised in relation to an Audit Principal, the DFSA shall give both the Audit Principal and its Registered Auditor an opportunity to make representations under those procedures.
        (9) If the DFSA decides to exercise its power under this Article to refuse to grant an application for registration or to impose or vary conditions or restrictions on any registration, the applicant or Registered Auditor or Audit Principal may refer the matter to the FMT for review.

    • Chapter 3 — Suspension and Withdrawal of Registration of Registered Auditors and Audit Principals

      • 98A. Suspension and withdrawal of registration

        (1) The DFSA may suspend or withdraw the registration of a Registered Auditor or an Audit Principal:
        (a) in the case of the registration of a Registered Auditor, at the request of the Registered Auditor;
        (b) in the case of the registration of an Audit Principal, at the request of the Audit Principal or the Registered Auditor who appointed the Audit Principal; or
        (c) on its own initiative.
        (2) The DFSA may exercise its powers under Article 98A(1)(c) in the following circumstances:
        (a) the Registered Auditor or Audit Principal is in breach of, or has been in breach of, one or more restrictions or conditions applicable to its registration;
        (b) the Registered Auditor or Audit Principal is in breach of, or has been in breach of, this Law or the Rules;
        (c) the Registered Auditor is no longer fit and proper to provide the Audit Services permitted under its registration or the Audit Principal is no longer fit and proper to perform the role of Audit Principal;
        (d) the Registered Auditor has failed for a period of at least twenty-four consecutive months to provide Audit Services permitted under its registration;
        (e) in the case of an Audit Principal, if the Audit Principal:
        (i) becomes bankrupt;
        (ii) is convicted of a serious criminal offence;
        (iii) becomes incapable (through mental or physical incapacity) of managing his affairs; or
        (iv) is no longer employed by the Registered Auditor who appointed the Audit Principal; or
        (f) in the case of an Audit Principal, if the registration of its Registered Auditor is suspended or withdrawn.
        (3) The DFSA may make Rules setting out requirements that a Registered Auditor and an Audit Principal must meet before it will grant a request to suspend or withdraw registration.
        (4) The procedures in Schedule 3 apply to a decision of the DFSA under Article 98A(1)(c) to suspend or withdraw registration on its own initiative. If a power is being exercised in relation to an Audit Principal, the DFSA shall give both the Audit Principal and its Registered Auditor an opportunity to make representations under those procedures.
        (5) Where:
        (a) either or both of the following occur:
        (i) the DFSA conducts an investigation under Article 78 that relates to a Registered Auditor or Audit Principal; or
        (ii) a recognised professional body conducts an investigation relating to a member who is an Audit Principal; and
        (b) arising out of such an investigation, the DFSA believes on reasonable grounds that the Registered Auditor or Audit Principal has engaged in serious misconduct that may form grounds for the withdrawal of the registration of the Registered Auditor or Audit Principal,
        the DFSA may suspend the relevant registration for the duration of the investigation or any related proceedings insofar as the investigation or proceedings relate to that Audit Principal or Registered Auditor.
        (6) The procedures in Schedule 3 apply to a decision of the DFSA under Article 98A(5). If a power is being exercised in relation to an Audit Principal, the DFSA shall give both the Audit Principal and its Registered Auditor an opportunity to make representations under the procedures in Schedule 3.
        (7) If the DFSA decides to exercise its power under this Article to suspend or withdraw the registration of a Registered Auditor or Audit Principal, the Registered Auditor or Audit Principal may refer the matter to the FMT for review.

    • Chapter 4 — Appointment and Removal of Auditors

      • 99. Appointment and removal of auditors

        (1) In this Article, a Relevant Person means an Authorised Person, a Public Listed Company and, in relation to a Domestic Fund, the Fund Manager of that Fund.
        (2) A Relevant Person, subject to Article 99(5), shall:
        (a) at each annual general meeting appoint a person to act as Auditor from the conclusion of that meeting to the conclusion of the next annual general meeting; or
        (b) at the beginning of each financial year appoint a person to act as Auditor until the beginning of the next financial year.
        (3) A person who becomes a Relevant Person after the beginning of a financial year must, subject to Article 99(5), appoint a person who shall act as Auditor until the conclusion of that financial year.
        (4) A Relevant Person shall as soon as practicable fill any vacancy that arises in the appointment of an Auditor.
        (5) The DFSA may, by Rules, exempt a specified class of Relevant Person from the requirements in this Article. If a Relevant Person is exempted from the requirements in this Article, then the other requirements in this chapter and in chapters 5 and 6 of this Part do not apply to, or in relation to, the Relevant Person.
        (6) In the case of a Domestic Fund which is an Investment Trust:
        (a) the Trustee of that Fund shall ensure that at all times the Domestic Fund has an Auditor; and
        (b) the Fund Manager of that Fund shall obtain the prior approval of the Trustee before carrying out any activities under this Article relating to the appointment or removal of an Auditor for that Domestic Fund.
        (7) A Relevant Person shall not appoint an Auditor under this Article unless:
        (a) the Auditor has, prior to the appointment, consented in writing to the Relevant Person acting as Auditor; and
        (b) the Relevant Person, and the Trustee of a Domestic Fund which is an Investment Trust, are not, on reasonable inquiry, aware of any matter which should preclude the Auditor from giving his consent under Article 99A(2).
        (8) A Relevant Person may at any time remove an Auditor notwithstanding anything in any agreement between it and the Auditor.
        (9) The DFSA may direct, or the Court on an application made by the DFSA may order, a Relevant Person to:
        (a) appoint an Auditor, where an Auditor has not been appointed by the Relevant Person; or
        (b) remove an Auditor and appoint a new Auditor, where in the opinion of the DFSA or the Court (as the case may be) the Auditor appointed by the Relevant Person is not suitable to provide Audit Services to the Relevant Person.
        (10) The procedures in Schedule 3 apply to a decision of the DFSA under Article 99(9) to give a direction.
        (11) If the DFSA decides to exercise its power under Article 99(9) to give a direction, the person may refer the matter to the FMT for review.
        (12) The appointment of a firm as an Auditor of an Authorised Person, a Public Listed Company or a Domestic Fund is taken to be an appointment of all persons who are partners of the firm.
        (13) Nothing in this Article is to be taken as depriving an Auditor removed under it of compensation or damages payable to the Auditor in respect of the termination of appointment as Auditor.

      • 99A. Auditor not to act in certain circumstances

        (1) In this Article, a Relevant Person means an Authorised Person, Public Listed Company and, in relation to a Domestic Fund, the Domestic Fund, the Fund Manager, the Trustee and any member of the Governing Body of the Domestic Fund.
        (2) A person must not consent to an appointment, or if appointed continue to act, as the Auditor of an Authorised Person, Public Listed Company or Domestic Fund if:
        (a) the person has, or may on reasonable grounds be perceived to have, a conflict of interest with respect to the Relevant Person;
        (b) the person does not have, or may on reasonable grounds be perceived not to have, a requisite degree of independence from the Relevant Person;
        (c) the person provides prescribed non-audit services to the Relevant Person; or
        (d) the person or any associate of the person or an Audit Principal appointed by the person has provided Audit Services to the Relevant Person within such earlier period or such frequency as may be prescribed in the Rules.
        (3) The DFSA may make Rules for the purposes of Article 99A(2), including prescribing what constitutes a conflict of interest, a requisite degree of independence and a prescribed non-audit service.

    • Chapter 5 — Auditors Reports and Duties

      • 100. Auditors' reports

        (1) In this Article, a Relevant Person means an Authorised Person, Public Listed Company or Domestic Fund.
        (2) The DFSA may make Rules in relation to:
        (a) the functions to be carried out by an Auditor when auditing a Relevant Person;
        (b) the scope of the Auditors' report;
        (c) the scope of ad-hoc reports of the Auditor;
        (d) the submission of Auditor's reports to the DFSA; and
        (e) the naming in the Auditor's report of persons responsible for the audit work and their liability as a result of being named.

      • 101. Auditors' duties

        (1) In this Article, a Relevant Person means an Authorised Person, Public Listed Company or Domestic Fund.
        (2) An Auditor shall, in preparing the report in relation to a Relevant Person carry out such investigations as will enable the Auditor to form an opinion as to the following matters:
        (a) whether proper accounting records have been kept by the Relevant Person and proper returns adequate for the audit have been received from branches not visited by the Auditor;
        (b) whether the financial statements of the Relevant Person are in agreement with the accounting records and regulatory returns;
        (c) whether the financial statements of the Relevant Person have been prepared in compliance with the applicable financial reporting standards; and
        (d) whether the financial statements of the Relevant Person represent a true and fair view of the financial condition and the state of affairs of the Relevant Person.
        (3) If the Auditor is of the opinion that proper accounting records have not been kept, or that proper returns adequate for the audit have not been received from branches not visited by the Auditor, or that the financial statements are not in agreement with the accounting records and regulatory returns, or that the financial statements do not comply with accounting standards or they do not represent a true and fair view, the Auditor shall state that fact in the report.
        (4) If the Auditor fails to obtain all the information and explanations which, to the best of the Auditor's knowledge and belief are necessary for the purposes of the audit, the Auditor shall state that fact in the report.
        (5) An Auditor of a Domestic Fund shall disclose to the Trustee of the Domestic Fund, if appointed, and to the person providing the oversight function of a Domestic Fund which is a Public Fund, any information relevant to that person's role.

      • 102. Resignation of an auditor

        (1) In this Article, a Relevant Person means an Authorised Person, Public Listed Company or Domestic Fund.
        (2) An Auditor of a Relevant Person may resign as Auditor by depositing a notice in writing to that effect, together with a statement referred to in Articles 102(3) and (4). at the registered office of the Relevant Person and any such notice operates to bring its term as Auditor to an end on the date on which the notice is deposited, or on such later date as may be specified in it.
        (3) When an Auditor ceases for any reason to act as the Auditor of a Relevant Person, it shall deposit at the registered office of:
        (a) the Authorised Person;
        (b) the Public Listed Company; or
        (c) in the case of a Domestic Fund;
        (i) the Domestic Fund; and
        (ii) if appointed, the Trustee of that Fund,
        a notice setting out the matters specified in Article 102(4).
        (4) The notice must contain either:
        (a) a statement to the effect that there are no circumstances connected with its ceasing to act as Auditor which the Auditor considers should be brought to the notice of the relevant members or Unitholders, or creditors of the Relevant Person; or
        (b) if there are any circumstances referred to in (a), a statement of the nature of those circumstances.
        (5) Where a notice contains information referred to in Article 102(4)(b):
        (a) the Authorised Person;
        (b) the Public Listed Company; or
        (c) in the case of a Domestic Fund, the Fund Manager of the fund, or failing which, the other members of the Governing Body of the Fund, or if appointed the Trustee of the Fund,
        shall provide to the DFSA a copy of the statement and any response by that person.

    • Chapter 6 — Co-operation with Auditors and Auditors Obligations of Disclosure to the DFSA

      • 103. Co-operation with auditors

        (1) In this Article, a Relevant Person means:
        (a) an Authorised Person;
        (b) a Public Listed Company;
        (c) in relation to a Domestic Fund, the Fund Manager and, where appointed, the Trustee of the Fund, any person providing oversight of the Fund and any member of the Governing Body of the Fund; and
        (d) an officer, employee or agent of a person referred to in (a), (b) or (c).
        (2) A Relevant Person shall co-operate with its Auditor and, without limiting the generality of that obligation, shall comply with such measures relating to cooperation with its Auditor as may be prescribed in the Rules.
        (3) A Relevant Person shall not knowingly or recklessly:
        (a) provide information to its Auditor that is materially false, misleading or deceptive; or
        (b) omit to provide information to its Auditor, that its Auditor reasonably requires, or is entitled to require, where the omission of such information is likely to mislead or deceive its Auditor.
        (4) A Relevant Person or any person acting under the direction or authority of such Relevant Person shall not without reasonable excuse engage in any of the following conduct:
        (a) destruction or concealment of documents;
        (b) coercion, manipulation, misleading, or influencing of the Auditor;
        (c) failure to provide access to information or documents specified by the Auditor; or
        (d) failure to give any information or explanation which the person is able to give;
        where that person knows or ought to know that such conduct could:
        (e) obstruct the Auditor in the performance of his duties under this Part or Rules made for the purposes of this Part; or
        (f) result in the rendering of the financial statements of the Authorised Person, Public Listed Company or Domestic Fund, or the Auditor's report materially misleading.

      • 104. Obligation of Disclosure to the DFSA

        (1) An Auditor is subject to the obligations of disclosure under Article 104(3).
        (2) Without limiting the application of any other provision of this Law, an Auditor does not contravene any duty to which the Auditor is subject merely because the Auditor gives to the DFSA:
        (a) a notification as required under this Article; or
        (b) any other information or opinion in relation to any such matter;
        if the Auditor is acting in good faith and reasonably believes that the notification, information or opinion is relevant to any functions of the DFSA.
        (3) Subject to Article 104(4), an Auditor shall disclose to the DFSA any matter which reasonably tends to show one of the following:
        (a) a breach, or likely breach of a provision of the Law or other legislation administered by the DFSA;
        (b) a failure, or likely failure, to comply with any obligation to which a person is subject under such legislation; or
        (c) any other matter as the DFSA may prescribe in Rules;
        which may be attributable to the conduct of the relevant:
        (d) Authorised Person;
        (e) Public Listed Company;
        (f) Domestic Fund, Fund Manager, Trustee or the Governing Body of a Domestic Fund; or
        (g) officer, employee or agent of a person referred to in (d), (e) or (f).
        (4) Article 104(3) shall not apply to the extent that compliance with such requirement would disclose a Privileged Communication.
        (5) An Authorised Person, Public Listed Company or the Fund Manager of a Domestic Fund shall establish and implement appropriate systems and internal procedures to enable its Auditor to comply with Article 104(3).
        (6) Any provision in an agreement between an Authorised Person, Public Listed Company or a Domestic Fund, and a director, officer, employee, agent or Auditor is void in so far as it purports to hinder any person from causing or assisting the Auditor to comply with an obligation under Article 104(3).
        (7) No person shall be subjected to detriment or loss or damage merely by reason of undertaking any act to cause or assist an Auditor to comply with an obligation under Article 104(3).
        (8) A Court may, on application of an aggrieved person, make any order for relief where the person has been subjected to any such detriment or loss or damage referred to in Article 104(7)

      • 105. [Deleted]