Republic of Egypt

Ministry of Foreign Trade

Minister's Office

---

Decree

Minister of Foreign Trade

No. 146 of 2004

Amending Certain Provisions of the Executive Regulations of the Capital Market Law

Issued by Ministerial Decree No. 135 of 1993

---

Minister of Foreign Trade

After reviewing the Companies Law No. 159 of 1981 concerning Joint Stock Companies, Commandite Partnerships, and Limited Liability Companies, and its executive regulations;

And the Capital Market Law No. 95 of 1992, its executive regulations, and the decisions issued in implementation thereof;

And Ministerial Decree No. 503 of 1997 concerning Egyptian Accounting Standards;

And amendments to financial statement models for Joint Stock and Commandite Partnership companies;

And the recommendations of the Egyptian Society of Accountants and Auditors;

And after obtaining the opinion of the Capital Market Authority;

Decided:

---

(Article One)

Egyptian Accounting Standard No. (24) attached to this decree, titled "Professional Conduct Standard - Independence", shall be added to Annex No. (3) attached to the Executive Regulations of the Capital Market Law issued by Ministerial Decree No. 135 of 1993.

(Article Two)

This decree shall be published in the Egyptian Gazette and shall take effect from the day following its publication date.

---

Minister of Foreign Trade

(Dr. Youssef Boutros Ghali)

Issued on: 4/4/2004

---

Egyptian Accounting Standard No. (24)

Professional Conduct Standard "Independence"

1. Definitions

The following terms are used in this standard with the meanings stated alongside each:

Audit Client refers to the entity for which the audit firm performs an audit. When this entity is listed on a securities exchange, the term audit client refers to the audited entity and all related entities.

Audit Process is a process that provides a high level of assurance that the financial statements are free from any material misstatement. Such processes are performed in accordance with Egyptian Auditing Standards, and include mandatory audits required by local laws and other regulations.

Assurance Client refers to the entity for which the audit firm performs an assurance process.

Assurance Process is a process performed for the purpose of providing:

(a) A high level of assurance that the subject matter of the assurance service conforms in all material respects to the appropriate criteria.

(b) A moderate level of assurance that the subject matter of the assurance service appears reasonable and fair under the surrounding circumstances.

These processes include audit and limited review processes performed in accordance with Egyptian Auditing Standards.

Assurance Service Team refers to the assurance service team, which includes the following:

(a) All professionals participating in performing the assurance process.

• All other employees in the audit firm who directly influence the results of the assurance process.

---

(b) With respect to the audit client, the service team includes all employees in the audit firm - whether at the local level or in external units of the firm - who directly influence the results of the audit process.

Close Family Members are parents, as well as dependent children.

Direct Financial Interest is a financial interest acquired directly by or under the control of the individual or entity (including interests managed by other individuals or entities), or a financial interest obtained through a comprehensive investment vehicle, inherited estate, trust, or any other means subject to the control of the individual or entity.

Directors are those responsible for the management, supervision, and follow-up of the entity, regardless of their specific job titles.

Financial Interest refers to an interest in equity, securities, debt instruments, or loans of a specific entity, including any rights, obligations, or connections, as well as any financial derivatives directly related to such an interest.

Audit Firm refers to:

(a) An individual practicing the profession, a partnership of accountants, or a joint stock company of practicing accounting and auditing accountants.

(b) Any entity controlling what is stated in (a) above.

(c) Any entity controlled by what is stated in (a) above.

Family Members refers to the spouse and children who are dependent on the individual.

---

Independence refers to the following:

(a) Independence in fact, which refers to a state of mind that allows expressing an opinion without any pressure that may affect the individual's professional judgment, and allows working with integrity, objectivity, and exercising professional skepticism.

(b) Independence in appearance, which refers to avoiding facts and circumstances that a reasonable and informed third party - objective and aware of all related information, including applied safeguards - might conclude have affected the integrity, objectivity, and professional skepticism of the audit firm or a member of the assurance service team.

Indirect Financial Interest is a financial interest obtained through a comprehensive investment vehicle, inherited estate, trust, or any other means not subject to the control of the individual or entity.

Engagement Partner is the partner responsible - with respect to an audit process - for signing the report on the consolidated financial statements of the audit, as well as the partner responsible for signing the report issued on the financial statements of an entity whose financial statements are part of the consolidated financial statements and for which a report is issued separately. In the absence of consolidated statements, the engagement partner may be the partner responsible for signing the report on the audited financial statements.

Listed Entity is an entity whose shares or bonds are registered and traded on an active securities exchange, or are traded according to regulations governed by an active securities exchange or a similar authority.

---

External Units of the Firm are units subject to control, ownership, or joint management with the audit firm. As well as units that a reasonable third party, aware of all relevant facts and information, might consider part of the audit firm, whether locally or globally.

Objectivity is a combination of a comprehensive perspective, intellectual honesty, and absence of conflicting interests.

Professional Firm is an individual practicing the profession, a partnership, or a joint stock company of professional accountants who provide professional services to the community.

---

2. Since the accounting and auditing profession aims to serve the public interest, it is required that all members of the audit team and employees of the audit firm, whether at the local or global level - if necessary - maintain independence from clients for whom assurance services are provided, in which the auditor issues a report containing an opinion, assurance, or certification regarding information related to a subject, referred to as "assurance services".

3. Assurance processes aim to lend credibility to specific information that is the subject of assurance, by evaluating the extent to which this information - in all its material aspects - conforms to the appropriate framework for its preparation. Egyptian Auditing Standards have specified the symptoms and types of assurance services, which aim to provide a certain level of assurance, either high or moderate, depending on the nature of the engagement. For example, the auditor provides a high level of assurance when performing a full scope audit of financial statements, whereas a moderate level of assurance is provided if a limited review service of these financial statements is performed.

4. This standard addresses the general framework, prepared in light of a set of principles, to identify, assess, and address threats that may face independence.

The general framework includes the foundations and principles that audit team members and audit firms must follow to identify threats to independence, whether at the local level or in external units of the firm, to assess the materiality of the impact of these threats. If the impact is material, these foundations and principles are used to identify and apply appropriate safeguards to eliminate the threats or reduce them to an acceptable level. Determining the appropriate safeguard to be applied requires the use of professional judgment, as some safeguards may eliminate threats while others may limit their impact to an acceptable level.

---

It is required that audit team members and audit firms apply the foundations and rules set forth in this standard, taking into account the specific circumstances of each case. The cases and examples provided in this standard aim only to clarify the practical applications of the mentioned rules and foundations, and are not intended to be exhaustive of all cases and circumstances that may pose a threat to independence.

Accordingly, it is insufficient for audit team members or audit firms to merely comply with the examples provided in this standard; rather, the rules and foundations set forth therein must be applied to each case they encounter individually.

The Professional Concept of Independence

5. Independence requires both:

(a) Independence in fact:

Which refers to a state of mind that allows expressing an opinion without any pressure that may affect the individual's professional judgment, and allows working with integrity, objectivity, and exercising professional skepticism.

(b) Independence in appearance:

Which refers to avoiding facts and circumstances that a reasonable and informed third party - objective and aware of all related information, including applied safeguards - might conclude have affected the integrity, objectivity, and professional skepticism of the audit firm or a member of the assurance service team.