CMA review of audit reports boosts market confidence: Analyst

Tadawul trading screen

The Capital Market Authority’s (CMA) periodic review of reports by chartered accountants and accounting firms aims to enhance confidence in the stock market, economic analyst Ahmed Alrasheed told Argaam exclusively.

He added that this reflects the authority's role in regulating and developing Saudi Arabia’s stock market, especially as it seeks to make the market more stable by boosting the level of transparency and disclosure.

Alrasheed said the circular sent by the CMA to the financial market institutions – that the authority would not accept any application to register and offer securities if the financial statements were reviewed by two chartered accountants and two accounting firms – is a positive step that helps stabilize the financial market environment.

It confirms the CMA efforts towards supervision of the financial statements of not only the listed companies, but also those planning to float shares.

"It is good for the audit committees and boards of directors to choose the audit offices," he said.

He added that the circular provided for applications to register and offer securities, which indicates that it is mainly related to companies that apply for listing.

Accounting firms pay closer attention to the services provided to listed companies than those provided to their unlisted peers. However, the other competent authorities are supposed to review the reports of unlisted companies' auditors and take the necessary steps in case of failures.

The circular sent to competent parties underlines the importance of preparing, approving, and reviewing financial statements, to maintain their quality and transparency and convey correct and accurate data to shareholders. It also alerts against manipulation and fraud, which could lead to penalties and suspension.

The inspection program was launched in 2019 with the aim of protecting investors by enhancing the quality of the audit process, Argaam earlier reported. The CMA initiates inspection processes to assess the compliance of registered offices with the related laws, regulations, and professional standards.

In 2018, the CMA issued rules for registering auditors of entities subject to the authority's supervision to set out the standards and conditions to be met by the auditors of entities subject to the authority's supervision.

In 2022, the market regulator amended the rules for registering auditors of entities subject to the authority's supervision to improve the registration procedures.