Instructions on Standards and Conditions for Licensed Chartered Accountants Auditing Exchange Companies No. (3/2024)

[Central Bank of Jordan]

Number: 9 / 2 / 1445
Date: 11 / 7 / 1445 AH Corresponding to: 23 / 1 / 2024 AD

Instructions for the Standards and Conditions Required for Licensed Chartered Accountants to Audit the Accounts of Licensed Exchange Companies No. (3/2024) Issued by Virtue of the Decision of the Board of Directors of the Central Bank of Jordan No. (9/2024) dated 14/1/2024 pursuant to the provisions of Article (4/b) of the Central Bank of Jordan Law No. (23) of 1971 and its amendments, and the provisions of Article (23/a) of the Exchange Business Law No. (44) of 2015.

Article (1): These instructions shall be called the Instructions for the Standards and Conditions Required for Licensed Chartered Accountants to Audit the Accounts of Licensed Exchange Companies and shall come into force from 23/1/2024.

Article (2): Definitions
A. The following words and phrases shall have the meanings assigned to them below wherever they appear in these instructions, unless the context indicates otherwise.

• The Bank: The Central Bank of Jordan.

• The Board: The Bank's Board of Directors.

• The Association: The Jordanian Association of Certified Public Accountants.

• The Profession: External auditing in accordance with the provisions of the Law Regulating the Profession of Legal Accounting and the regulations and instructions issued thereunder.

• Chartered Accountant: A natural person authorized to practice the auditing profession in accordance with the provisions of the Law Regulating the Profession of Legal Accounting and the regulations and instructions issued thereunder.

• Audit Firm: The company or office through which the Chartered Accountant practices the profession and which is registered with the Ministry of Industry, Trade and Supply.

• Responsible Chartered Accountant: The authorized Chartered Accountant responsible for the audit engagement at the audit firm and holding a valid auditing practice license.

• Audit Team: Team members who perform audit procedures under the supervision of the Responsible Chartered Accountant.

• Audit Quality Reviewer: A person in the audit firm, other than the audit team members, who possesses the experience and suitability to evaluate the tasks performed by the audit team and the conclusions reached during the preparation of the audit report.

• Audit Services: The Responsible Chartered Accountant expressing an opinion on the fairness of financial statements.

• Technical and Technological Audit Services: Include reviewing and evaluating the administrative controls of the information technology environment and the company's operations based on it, and the company's ability to protect infrastructure, information assets, and the security, integrity, and availability of information efficiently and effectively according to the standards determined by the Bank.

• The List: The list of practicing Chartered Accountants who meet the conditions stated in these instructions.

• Related Party: A person who has any financial or commercial relationship with the company, partners, or managers outside the scope of the accounting auditing profession, or a kinship up to the second degree, or a relationship that affects their independence, in accordance with the Code of Ethics for Professional Accountants issued by the International Federation of Accountants.
  B. Words and phrases contained in these instructions shall have the meanings assigned to them in the Exchange Business Law and the Law Regulating the Profession of Legal Accounting and the regulations and instructions issued thereunder, unless the context indicates otherwise.

Article (3): External Audit Policy
The company must prepare an external audit policy and have it approved by the highest administrative authority in the company, depending on the type of company (General Manager, Board of Directors, Board of Directors), so that it is consistent with what is stated in these instructions, and review and evaluate it periodically and amend it whenever necessary. This policy must include, at a minimum, the following:
A- Criteria for selecting the audit firm.
B- Mechanism for determining audit firm fees.
C- Periodic change of the audit firm and the Responsible Chartered Accountant.
D- Independence requirements for the audit firm and audit team, including the company's procedures to verify this.
E- Audit-related reports.

F- Tasks and responsibilities of the audit firm.
G- Technical and technological audit services.
H- Additional services outside the scope of audit services that the audit firm may be assigned.

Article (4): Criteria for Selecting an Audit Firm
Taking into account international auditing and quality control standards, the following are the minimum standards and conditions that must be met by the audit firm and audit team for the purpose of auditing the company:

Firstly: Audit Team:
A. Responsible Chartered Accountant

1. The Responsible Chartered Accountant must hold a valid practice license to practice the accounting auditing profession and be registered in the register of Jordanian Chartered Accountants practicing auditing with the Association in accordance with the provisions of the Law Regulating the Profession of Legal Accounting and the System for Practicing the Profession of Legal Accounting.
2. The Responsible Chartered Accountant must not have been subject to penalties resulting from professional errors, material errors, or legal violations related to practicing the profession by the Association for the last five years from the date of the penalty.
3. Must have practical experience in accounting auditing and be familiar with banking operations and their risks, and with legislation related to the business of exchange companies, including those issued by the Bank.
4. Must be familiar with International Auditing Standards and International Financial Reporting Standards and keep abreast of their developments.
5. Adherence to the Code of Ethics for Professional Accountants.
6. Must continue to meet the requirements stated in this paragraph throughout the audit process.

B. Audit Team:
1- Each member must hold at least a first university degree in accounting or any related specialization, in accordance with applicable legislation.
2- At least one team member must have at least three years of experience in accounting auditing.

3- At least one team member must have received appropriate and continuous training in the field of combating money laundering and terrorist financing and related developments, and be familiar with banking operations and their risks, and with legislation related to the business of exchange companies, including those issued by the Bank. 4- The audit team must continue to meet the requirements stated in this paragraph throughout the audit period.

Secondly: Audit Firm:

1. The Responsible Chartered Accountant and employees must be fully dedicated to working for the audit firm.
2. The firm must have human resources with diverse expertise to carry out audit work for the company, such as expertise in auditing information technology systems, evaluating policies and procedures related to combating money laundering and terrorist financing, and any other areas required for auditing the business of exchange companies.
3. Work teams assigned to audit services must be separate from work teams assigned to other services outside the scope of audit services provided to the company, and in accordance with the Code of Ethics for Professional Accountants.
4. The number of audit firm members - excluding the Responsible Chartered Accountant - must not be less than two employees, and it should be ensured that the number and level of the audit firm's staff are commensurate with the size and nature of the company's transactions, the number of its branches, the complexity of its operations, and any other related criteria.
5. The number of authorized Chartered Accountants in the audit firm must not be less than two, including the Responsible Chartered Accountant.
6. The firm must have a policy for continuous training and qualification in accordance with the Law Regulating the Profession of Legal Accounting and the regulations and instructions issued thereunder.

Article (5): It is required for an audit firm, through which the Responsible Chartered Accountant practices the profession and which has been selected by licensed exchange companies in categories (A, B), to have an audit quality reviewer who possesses the necessary professional experience and competence to perform the required tasks, in addition to meeting the standards specified in items (4, 5) of paragraph (A) of Article (4).

Article (6): Technical and Technological Audit Services
The provisions contained in the chapter on technical and technological audit services stipulated in the External Audit Instructions for Electronic Payment and Money Transfer Service Companies No. (7/2018) dated 2/5/2018 shall apply to exchange companies licensed to manage and operate electronic payment systems, taking into account the provisions of Article (3/D) of the aforementioned instructions.

Article (7): The company must change the audit firm every (7) years at most. The previously assigned Chartered Accountant or audit firm may not be reassigned again before at least two years have passed from the date of their last appointment.

Article (8): Independence and Objectivity of the Audit Firm and Audit Team
Taking into account international auditing and quality control standards, the audit firm and audit team must enjoy independence and objectivity throughout the contract period, provided the following conditions are met:

1. The audit firm or any member of the audit team must not be a related party.
2. No member of the audit team or the audit firm may permanently perform any technical or administrative work for the company or any other activity that affects their independence, in accordance with the Code of Ethics for Professional Accountants. This prohibition shall continue for the Responsible Chartered Accountant for one year from the date of completion of the audit engagement.
3. The audit firm or any member of the audit team must not be a member of the company's board of directors or its board of managers.
4. The audit firm or any member of the audit team must not be a partner with any of the company's partners, or members of its board of directors, or members of its board of managers, or members of the company's senior executive management, or an agent thereof, or an employee thereof.

Article (9): Companies operating in category (D) are exempted from the conditions and requirements stated in these instructions and are obligated to appoint a Responsible Chartered Accountant in accordance with the provisions of applicable legislation, commensurate with the size and nature of the company's operations as deemed appropriate. The Bank may, if it deems it necessary, obligate any of these companies to all or any of the standards and requirements stipulated in these instructions.

Article (10): Duties of the Responsible Chartered Accountant
In addition to the provisions of Article (23/A) of the Exchange Business Law No. (44) of 2015 and Article (14) of the Anti-Money Laundering and Terrorist Financing Instructions for Exchange Companies and other related legislation, the Chartered Accountant must, at a minimum, adhere to the following:
A- Provide the Bank with the following:

1. A report on the material observations resulting from the audit engagement, including those related to internal control systems and related weaknesses, and its recommendations (if any).
2. Any additional information requested by the Bank that falls within the scope of the audit work and relevant international standards.
3. Any other reports or information that the Responsible Chartered Accountant, in their professional judgment, deems necessary to obtain.
   B- Inform the Bank in writing if declining the company's audit engagement within two weeks from its date, stating the reasons and supported by the necessary documents as appropriate.

Article (11): Mechanism for Including the Chartered Accountant and Audit Firm in the List
A- The Chartered Accountant shall submit an application for inclusion in the List, and the Association shall provide the Bank with these applications after verifying the availability of the conditions and standards stated in these instructions and verifying the validity of the Chartered Accountant's auditing practice.

B- The Board shall issue a list of Chartered Accountants, and the company must choose from it those it appoints to audit its accounts who meet the conditions stated in these instructions. The duration of inclusion in the List shall be three years, ending at the end of December of the third year. For first-time inclusion, the duration shall be from the date of inclusion until the end of December of the third year from the effective date of these instructions.

Article (12): A- The company must inform the Bank in writing of the name of the selected Responsible Chartered Accountant within one month of the appointment decision and before commencing the audit process, taking into account the provisions of Article (23/B) of the Exchange Business Law No. (44) of 2015 in this regard.
B- The company must inform the Bank in writing if it changes the Responsible Chartered Accountant within two weeks from its date, providing the Bank with the reasons supported by all necessary documents, whether the change was made by the company or by the Responsible Chartered Accountant.

Article (13): A- If at any time the Bank finds that the Responsible Chartered Accountant whose name is included in the List has committed professional errors or legal violations related to practicing the profession, or violated the provisions of these instructions, including losing any of the conditions and standards contained therein, and this materially affects the results of the audit process, the Bank may take the following actions:

1. Suspend their inclusion in the List.
2. File a complaint with the Association to rule on the violations.
   B- Notwithstanding what is stated in item (A) of this Article, the Responsible Chartered Accountant whose name is decided to be suspended from the List must continue their duties until the issuance of their report on the annual financial statements for the period in which their inclusion was suspended, or until the complaint submitted to the Association is resolved.

Article (14): In applying the provisions of these instructions, existing contractual obligations between exchange companies and licensed Chartered Accountants shall be taken into account, and a grace period of one fiscal year shall be granted for the application of the instructions if previous contractual obligations have been entered into.

Governor
Dr. Adel Al-Sharkas