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25 June 2022

26 Thul-Qi'dah 1443

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Law No. 5 of 2002, promulgating the Law of Commercial Companies

Law Summary Record Type: LawNumber: 5Date: 25/05/2002 Corresponding to 14/03/1423 HijriNumber of Articles: 348Status: In force

Official Gazette :Issue: 7Offcial Journal Issue Publication Date: 03/08/2002 Corresponding to 25/05/1423 HijriPage from: 17

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Auditors

141 Article

The JSC Company shall have one or more auditor who shall be appointed by the general assembly for one-year. The general assembly shall determine the remunerations of the auditor(s). The general assembly may reappoint such auditor(s) provided that the period of appointment shall not exceed five consecutive years.

The Board of Directors may not be authorised in this respect. However, the founders may appoint an auditor who shall carry out his duties until the first general assembly is convened.

142 Article

The Auditor shall be enrolled in the professional auditors' register in accordance with the applicable laws and regulations in the State.

143 Article

An auditor shall not be permitted, in any capacity, to participate in the incorporation of the company or to be a member of its Board or to carry out any technical or administrative or advisory works in the company. An auditor shall also not be permitted to be a partner or a proxy or an employee of any of the company founders or any Board member or to become a relative of the company founders or any Board member up to the fourth degree.

Any appointment of an auditor contrary to these provisions shall be null and void

144 Article

In the event where there is more than one auditor, they shall be jointly liable for activities pertaining to auditing.

145 Article

Article 145

The accounts auditors shall assume the following tasks:

Audit the operations of the company.
Verify the accounts of the company according to the applicable rules of auditing, requirements of the profession and its scientific and technical principles.
Inspect the balance sheet and the profit and loss accounts.
Take note of the implementation of the law and the Articles of Association of the company.
Inspect the financial and administrative systems of the company as well as the internal financial auditing systems of the company in order to confirm its compliance with good conduct and good keeping of finances of the company.
Verify the assets of the company and its ownership and confirm the legal compliance and validity of company obligations.
Review the decisions of the Board of Directors and instructions issued by the company.
Any other duties to be carried out by the auditor pursuant to this Law, the Auditors' Profession Regulation Law and other relevant auditing systems and principles.

The accounts auditor shall submit a written report to the general assembly on his function. He or his representative shall read out the report before the general assembly. A copy of this report shall be sent to the concerned authority.

146 Article

The report of the auditor aforementioned in the previous Article shall include the following:

Whether the auditor has satisfactorily obtained all information, statements, and explanations that he deems necessary to perform his duties.
Whether the balance accounts and regular records are consistent with the established universal principles and whether they clearly reflect the financial position of the company and the results of its operations and whether the company's balance sheet and profit and loss account are consistent with its ledgers and records.
Whether the auditing procedures made by him for the accounts of the company are considered sufficient in his opinion to form the reasonable basis for expressing his opinion as to the financial position, business results and cash flows of the company in accordance with internationally approved auditing principles.
Whether the financial statements contained in the report of the Board of Directors addressed to the general assembly conform to the company records and ledgers.
Whether stocktaking was conducted according to established principles.
Whether there were violations of the provisions of this Law or the Articles of Association of the company which occurred during the year the subject of the auditing and whether they had fundamental impact on the results of the company business and its financial position and if these violations still exist, in the light of information available to him.

147 Article

Where it is not possible for the auditor to conduct functions and duties assigned thereto in accordance with the provisions of this Law, for any reasons, the auditor shall, before excusing himself from auditing, submit a report to the Ministry copied to the Board of Directors explaining the reasons preventing him from performing his duties. The Ministry shall discuss these reasons with the Board where possible, otherwise the Ministry shall call for a general assembly meeting to consider such matters.

148 Article

Where the company has one or more auditors, they shall submit one report. This report shall be read out by one of them at the general assembly meeting. Where the general assembly decides to approve the report of the Board of Directors without hearing the report of the auditor, such decision shall be deemed null and void.

149 Article

The auditor shall be responsible for the authenticity of the information and details stipulated in his report in his capacity as the representative for all shareholders. Every shareholder shall have the right, during the general assembly meeting, to discuss and request explanations from the auditor with regard to the content of his report.

150 Article

The auditor and his employees shall not be permitted to trade in the shares of the company whose accounts are audited by him, whether this trading is conducted directly or indirectly, otherwise the auditor shall be dismissed and held accountable. The auditor shall also be requested to indemnify against any damage resulting from the breach of the provisions of this Article.

151 Article

The auditors shall keep the secrets of the company and shall not, except in the general assembly meeting, disclose to the shareholders or others, any of the secrets of the company known to him by virtue of his assignment, otherwise he shall be dismissed and held accountable.

The auditor shall indemnify the company or the shareholders or third parties against damages sustained thereby as a result of defaults on his part. In the case of more than one auditor, they shall be jointly liable for damages caused by their default.

Any liability claim on the ground set out in the preceding paragraph shall not be considered after one year from the date of the general assembly meeting in which the report of the auditor was submitted. If the act attributed to the auditor constitutes a criminal offence, the claim shall stand valid throughout the duration of the general claim.

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