Decision No. 161 of 2014 of the General Authority for Financial Regulation on Registration Criteria for Accountants in the Microfinance Register

General Authority for Financial Regulation Decision of the Board of Directors of the General Authority for Financial Regulation No. 161 of 2014 Dated 3/17/2014

Regarding Registration and Continuing Registration Criteria for Accountants in the Register of Accountants for Microfinance Companies, Associations, and Non-Profit Institutions Licensed to Conduct this Activity with the Authority

The Board of Directors of the General Authority for Financial Regulation Having reviewed Law No. 159 of 1981 on Joint Stock Companies, Commandite Companies, and Limited Liability Companies and its executive regulations; Having reviewed Law No. 95 of 1997 on the Capital Market and its executive regulations; Having reviewed Law No. 84 of 2002 on Associations and Non-Profit Institutions; Having reviewed Law No. 10 of 2009 on Regulating Supervision over Non-Egyptian Securities and Financial Instruments; Having reviewed Law No. 141 of 2014 on Regulating the Microfinance Activity; Having reviewed Presidential Decree No. 197 of 2009 Issuing the Statute of the General Authority for Financial Regulation; Having reviewed Decision of the Board of Directors of the General Authority for the Capital Market No. 84 of 2008 Regarding the Establishment of a Quality Control Unit for the Work of Accountants Registered in the Authority's Registers, as amended by Decision No. 24 of 2009; Having reviewed Decision of the Board of Directors of the Authority No. 72, 73 of 2009 Regarding the Register of Accountants Registered with the General Authority for Financial Regulation; Having approved by the Board of Directors of the General Authority for Financial Regulation in its meeting No. (21) dated 3/17/2014

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Article 1 - A special register shall be established at the General Authority for Financial Regulation for the registration of accountants authorized to perform audit duties for companies, associations, and non-profit institutions licensed to conduct microfinance activity. Registration conditions in the register shall be determined by observing the following criteria:

1. The nature of the legal form of the entity to be audited by the accountant and the resulting obligations and duties for the accountant.
2. The size of the microfinance portfolio of entities engaged in microfinance activity and its impact on the scope of the accountant's duties.

Article 2 - In accordance with the criteria referred to in Article (1), the register of accountants authorized to audit companies, associations, and non-profit institutions shall be divided into three sub-sections as follows:

1. Section (A): Dedicated to all companies engaged in microfinance activity, and associations and non-profit institutions whose microfinance portfolio value at the end of the previous fiscal year reaches fifty million Egyptian pounds or more.
2. Section (B): Dedicated to associations and non-profit institutions whose microfinance portfolio value at the end of the previous fiscal year ranges from ten million Egyptian pounds to less than fifty million Egyptian pounds.
3. Section (C): Dedicated to associations and non-profit institutions whose microfinance portfolio value at the end of the previous fiscal year is less than ten million Egyptian pounds.

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Article 3 - Only accountants registered in the register shall be authorized to review financial statements and issue accountant reports thereon for companies licensed to conduct microfinance activity, as well as statements prepared for the microfinance activity of associations and non-profit institutions licensed by the Authority to conduct this activity. The work of accountants registered in Sections (B) and (C) of the register shall be limited to the associations and non-profit institutions referred to in Article (7).

Article 4 - Accountants registered in the Authority's register shall be entitled to directly register in the aforementioned Section (A), subject to updating data and fulfilling the registration conditions therein, free of charge.

Article 5 - Registration in the register requires fulfilling the following conditions:

Regarding Section (A) of the register: (a) Submission of evidence indicating that at least three years have passed since the accountant's registration among those authorized to review and approve financial statements for joint stock companies in the General Register of Accountants and Auditors at the Ministry of Finance ("Table of Accountants and Auditors"). (b) Submission of a copy of the accountant's membership card from the Free Practice Chamber for Accounting and Auditing at the Chamber of Commerce, certified against the original membership card. (c) Submission of evidence indicating that the accountant has audited joint stock companies for at least three years, and it is required that they have audited at least three companies each year, in accordance with Egyptian Auditing Standards. (d) Submission of evidence indicating that no final criminal judgments have been issued against the accountant or any of its executive partners. (e) Submission of a certificate from the Free Practice Chamber for Accounting and Auditing at the Chamber of Commerce stating that no disciplinary rulings have been issued against the registration applicant. (w) Payment of the service fees referred to in Article (6) of this Decision. (z) Fulfillment of professional competence and capacity conditions by submitting evidence of the following:

1. A work team comprising at least two experienced persons in the field of accounting.
2. Experience in auditing joint stock companies for a period of no less than two years.
3. An implemented system within the establishment for quality control and verification of professional independence.
4. An implemented system within the establishment for compliance with continuing professional instructions, aimed at raising the work team's awareness of various matters related to any updates and new developments in Egyptian accounting and auditing standards.

Regarding Section (B) of the register: (a) Submission of a copy of the accountant's membership card from the Free Practice Chamber for Accounting and Auditing at the Chamber of Commerce, certified against the original. (b) Submission of evidence indicating that the accountant has audited joint stock companies, and it is required that they have audited at least three companies each year, in accordance with Egyptian Auditing Standards. (c) The work team must include at least one experienced person in accounting and auditing for joint stock companies for a period of no less than one fiscal year. (d) An implemented system within the establishment for compliance with continuing professional instructions and new developments in Egyptian accounting and auditing standards. (e) Submission of evidence indicating that no final criminal judgments have been issued against the accountant or any of its executive partners. (w) Submission of a certificate from the Free Practice Chamber for Accounting and Auditing at the Chamber of Commerce stating that no disciplinary rulings have been issued against the registration applicant. (z) Payment of the service fees referred to in Article (6) of this Decision.

Regarding Section (C) of the register: (a) Being among the practitioners registered in the General Register of Accountants and Auditors at the Ministry of Finance. (b) Submission of a copy of the registration document in the register referred to in item (a) and its registration number, certified against the original document. (c) Submission of a copy of the accountant's membership card from the Free Practice Chamber for Accounting and Auditing at the Chamber of Commerce, certified against the original. (d) Submission of evidence indicating that no final criminal judgments have been issued against the accountant or any of its executive partners (if any). (e) Submission of a certificate from the Free Practice Chamber for Accounting and Auditing at the Chamber of Commerce stating that no disciplinary rulings have been issued against the registration applicant. (w) Payment of the service fees referred to in Article (6) of this Decision.

Article 6 - The service fees for registration and continuing registration in the register of accountants are determined as follows: (a) Service fee for reviewing and examining new registration applications in Section (A) of the register: one thousand Egyptian pounds. (b) Service fee for reviewing and examining new registration applications in Section (B) of the register: one hundred Egyptian pounds. (c) Service fee for examining new registration applications in Section (C) of the register: fifty Egyptian pounds. (d) Free of charge for those registered in the General Authority for Financial Regulation's register to register within the register of accountants for microfinance activity (Section (A)). (e) Annual service fee of two hundred Egyptian pounds for each company, association, or non-profit institution whose work the accountant reviews, for those registered in Sections (A), (B), and (C), with a partial deduction for those registered in Section (C).

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Article 7 - Accountants registered in the register shall comply with Egyptian Auditing Standards and the controls established by the General Authority for Financial Regulation, to ensure the integrity and accuracy of data and information made available to users of financial statements.

Article 8 - Accountants are prohibited from combining audit work with participating in the establishment of companies, associations, and non-profit institutions engaged in microfinance activity, or serving on their boards of directors, along with all obligations stipulated in Article (106) of Law No. 159 of 1981 on Joint Stock Companies, Commandite Companies, and Limited Liability Companies.

Article 9 - Registration applications in the register of accountants shall be submitted on the form prepared by the Authority for this purpose. The Authority shall be committed to ruling on registration applications within thirty days from the date of submission after fulfilling all conditions.

Article 10 - The Quality Control Unit for Accountants' Work shall be responsible for examining the quality of work of registered accountants to verify compliance with Egyptian Auditing Standards, specifically regarding companies licensed to conduct microfinance activity, as well as associations and non-profit institutions engaged in microfinance activity.

Article 11 - The following violations require examination and the proposal of appropriate procedures and measures for review:

1. Committing errors in recording incomplete or incorrect data, whether certified or uncertified, in any forms, data, or reports submitted by accountants to the Quality Control Unit for Accountants' Work or the General Authority for Financial Regulation.
2. Violation of professional practice standards and rules, specifically:

• Egyptian Auditing Standards, including quality standards and professional independence standards.
• Failure to verify that the client has followed Egyptian Accounting Standards in preparing the audited financial statements.
• Failure to comply with professional rules and conduct issued by the General Authority for Financial Regulation.
• Failure to comply with professional liability coverage limits specified in policies.
• Registration procedures in the register of accountants.
• Failure to provide all required information during registration or/and inspection.
• Regarding accountants.
• Failure to provide required information during examination or/and investigation processes.
• Violation of certain reported violations.

3. Systemic errors or/and inadequate disclosure data in any of the financial statements.
4. Certification and failure of the accountant to estimate/recognize these errors.
5. Failure to comply with disciplinary procedures and measures established by the Quality Control Unit for Accountants' Work.

Article 12 - The Board of Directors of the Quality Control Unit for Accountants' Work may propose administrative procedures and measures against any accountant found to have violated professional performance standards, professional conduct, or Egyptian Auditing Standards, or who fails to meet or violates any registration condition in the register, specifically for accountants registered in Sections (A) and (B), and in particular:

Proposing one or more of the following measures: (a) Issuing a warning to the accountant regarding the alleged violations, granting the necessary time to eliminate their causes and prevent recurrence. (b) Requiring an increase in professional capacity by adding work team members or by enhancing their qualifications or training. (c) Requiring the appointment of a quality controller or supervisor for the accountant's financial engagements. (d) Prohibiting the accountant from accepting new work falling within the scope of activities specified in Article 2 of this Decision, until the alleged violations are rectified and corrected. (e) Temporary suspension of registration in the register for a period not exceeding twelve months. (w) Striking off from the register. (z) The Board's decisions proposing measures shall be issued by a majority of those present, except for the measures specified in items (d), (e), and (w), which require at least two-thirds of the voting members of the Board of Directors of the Quality Control Unit for Accountants' Work.

The Unit's Board proposals regarding the measures and procedures referred to in the preceding article shall be communicated to the accountant, along with the measures, to prepare a response to the alleged violations before being presented to the Authority's Board of Directors for approval. The response period shall be no less than thirty days. The Authority's Board of Directors may request a technical re-examination of the violation subject to the measure. In all cases, measures shall not take effect until approved by the Authority's Board of Directors.

Article 13 - The General Administration of Accountants and Auditors in the relevant sector at the Ministry of Finance shall be notified of any violations by accountants registered in Section (C) discovered by the Authority's competent administration to apply its conditions regarding investigation and disciplinary procedures. If this results in a disciplinary procedure including temporary suspension, prohibition of accepting new work, striking off, or other measures regarding the accountant's status registered in the Authority's register.

Article 14 - The obligation of associations and non-profit institutions to appoint at least one accountant from among those registered in the register under this Decision shall apply starting from the fiscal year 2016.

Article 15 - This Decision shall be published in the Egyptian Gazette and shall take effect from the day following its publication date.

Chairman of the Board of Directors Sherif Samy