Decision of the Board of Directors of the Authority

No. (33) of 2009
Dated 29/4/2009

Regarding the Conditions for Registration, Continuation of Registration, and Deregistration of Auditors in the Authority's Register

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Board of Directors of the Capital Market Authority

After reviewing the Law on Joint Stock Companies, Limited Liability Companies, and Companies Limited by Shares issued by Law No. 159 of 1981 and its executive regulations; And the Capital Market Law issued by Law No. 95 of 1992 and its executive regulations; And Presidential Decree No. 51 of 1997 regarding the regulations governing the management of the Cairo and Alexandria Stock Exchanges and their financial affairs; And Decision of the Chairman of the Board of Directors of the Authority No. 96 of 2006 issued on 27/8/2006, Regarding the conditions for registration of auditors in the Authority's register, And Decision of the Board of Directors of the Authority No. 84 of 2008 regarding the establishment of a Quality Control Unit for Auditors' work within the Authority's registers, And the approval of the Board of Directors of the Authority in its session No. 6 of 2009 dated 29 April 2009.

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Definitions

Article (1)

A special register shall be established at the Capital Market Authority for the registration of auditors permitted to audit companies whose securities are listed on stock exchanges, public offering companies, companies operating in the securities sector, investment funds established by banks, and insurance companies.

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Article (2)

Only auditors registered in the register shall be permitted to perform the following activities:

a. Auditing financial statements and issuing auditor reports thereon for companies listed on stock exchanges, public offering companies, companies operating in the securities sector, investment funds established by banks, and insurance companies.

b. Conducting financial statement audits for any of the legal entities mentioned in the preceding paragraph, or for any company in which such entities hold, directly or indirectly, 20% or more of voting rights.

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Article (3)

Registration in the register requires meeting the following conditions:

a. Submission of evidence confirming that at least five years have passed since the auditor's registration in the General Register of Accountants and Auditors at the Ministry of Finance ("Register of Accountants and Auditors") with the right to audit and approve financial statements of joint stock companies.

b. Submission of the original and a copy of the auditor's membership card issued by the Free Practice Chamber for Accounting and Auditing at the Chamber of Commerce.

c. Submission of evidence confirming that the auditor has audited joint stock companies for at least five years, with a requirement to have audited at least five joint stock companies annually, in accordance with Egyptian Auditing Standards.

d. The applicant must meet exactly one of the following:

• 1. Membership in the Egyptian Society of Accountants and Auditors, or obtaining one of the equivalent foreign professional certifications, or holding a PhD in Accounting from a university recognized in Egypt.

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Article (4)

Auditors registered in the register are bound by Egyptian Auditing Standards and the regulations issued by the Capital Market Authority, to ensure the integrity and accuracy of the data and information that must be produced for the capital market participants.

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Article (5)

Auditors (including team members) are prohibited from having any direct or indirect financial interest in the companies or funds they audit, in accordance with Article 104 of Law No. 159 of 1981 mentioned above. They are specifically prohibited from participating in the management of these companies, investing in them, or holding securities in such funds.

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Article (6)

Registration in the auditors' register shall be conducted in accordance with procedures and forms approved by the Authority, and the Authority is committed to ruling on registration applications within sixty days from the date of submission.

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Article (7)

The Quality Control Unit for Auditors' Work shall examine the quality of work performed by registered auditors to verify compliance with the application of Egyptian Auditing Standards, specifically regarding listed companies, public offering companies, companies operating in the securities sector, and investment funds.

The Unit shall prepare an independent report for each auditor, recording and registering the results of periodic and non-periodic inspections of their work.

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Article (8)

The following violations are considered offenses requiring inspection and the proposal of appropriate measures and sanctions:

To Address:

a. Committing errors in recording incomplete or incorrect data, whether intentional or unintentional, in any forms, data, or reports submitted by auditors to the Quality Control Unit for Auditors' Work / or the Capital Market Authority.

b. Violation of professional standards and rules, including but not limited to:

• Egyptian Auditing Standards, including quality and professional independence standards.
• Failure to verify that the client has followed Egyptian Accounting Standards in preparing the audited financial statements.
• Non-compliance with professional rules and codes of conduct issued by the Capital Market Authority.
• Non-compliance with continuing professional development requirements stipulated in the policies and procedures for registration in the auditors' register.
• Failure to provide all required information during the registration and/or inspection processes for auditors.
• Lack of cooperation in providing required information during inspection and/or investigation processes regarding reported violations.
• Materiality and/or inadequacy of disclosure data in any financial statements issued by companies listed on stock exchanges, public offering companies, companies operating in the securities sector, and investment funds established by banks and insurance companies, and the auditor's failure to qualify their opinion on these errors.

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Article (9)

The Board of Directors of the Unit shall propose disciplinary measures and sanctions established by the Quality Control Unit for Auditors' Work.

The Board of Directors of the Unit may propose the following disciplinary measures and sanctions:

a. Issuing a warning to the auditor regarding the alleged violations, the timeframe required to rectify them, and the statute of limitations for their recurrence.

b. Mandating an increase in professional competence through adding team members or enhancing their qualifications or training.

c. Requiring the appointment of a supervisor or monitor for the quality of the auditor's current engagements.

d. Prohibiting the auditor from accepting new work falling within the scope of activities stipulated in Article Two 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.

f. Deregistration from the register.

g. The Board's decisions on proposing measures shall be issued by a majority of those present, except for the measures stipulated in paragraphs (d), (e), and (f), which require the approval of at least five members.

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Article (10)

The proposals of the Board of Directors of the Unit regarding the measures and procedures mentioned in the preceding article shall be notified to the auditor subject to the measure, to prepare a response to the alleged violations, before being submitted to the Board of Directors of the Authority for approval, for a period of no less than thirty days.

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Article (11)

The Board of Directors of the Authority may request a technical re-inspection of the violation subject to the measure.

In all cases, measures shall not take effect until approved by the Board of Directors of the Authority.

The implementation of Decision No. 96 of 2006 mentioned above is hereby repealed. This Decision shall take effect from the day following its issuance. The registration of auditors currently in the auditors' register shall be transferred to the new register, subject to completing the data update form within thirty days from the date of notification to the auditor, and subject to meeting the professional competence and capability conditions stipulated in paragraph (g) of Article Three of this Decision, within a maximum period of six months from the date of notification.

Ahmed Saad Abdel Latif
Chairman of the Board of Directors