FSA strengthens regulatory oversight to enhance accounting and auditing efficiency

Muscat: The Financial Services Authority (FSA) continues its supervisory efforts to enhance the efficiency and regulation of the accounting and auditing profession, as part of its ongoing commitment to strengthening professional compliance and improving the quality of audit services in line with legal requirements and international professional standards. 

It has undertaken over 45 regulatory actions, as well as awareness and development initiatives, aimed at improving the performance of licensed accounting and auditing firms. These efforts included nine field visits, seven workshops and meetings, 11 stakeholder engagements, and 10 collaborative initiatives with local and international entities, reflecting a comprehensive and integrated approach to advancing the accounting and auditing profession in the Sultanate of Oman.

Since assuming responsibility for regulating the accounting and auditing profession under Royal Decree No. 20/2024, the FSA has developed a comprehensive plan based on two main pillars: assessing the current operational landscape of firms in the sector, and enhancing the legislative framework governing the profession.

At the operational level, the FSA conducted a comprehensive assessment of existing accounting and auditing firms, alongside field visits aimed at evaluating professional practices and the level of compliance with approved standards. This was undertaken to develop a clear understanding of the challenges and opportunities within this vital sector. As a result, four firms were deregistered, three firms were issued warnings, and two firms were suspended from practice, as part of efforts to strengthen compliance and uphold professional standards.

On the legislative front, the FSA has placed significant emphasis on evaluating the legal framework governing the profession, given the outdated nature of the current law and the need to align it with local and international developments. In this regard, a specialised consultancy firm has been appointed to conduct a comprehensive study of the regulatory landscape, including a review of the existing law, analysis of global practices, and alignment of the legislative framework with the direction of relevant government entities.

Through both desk-based and field examinations, the FSA identified a number of regulatory observations, most notably the practice of the profession by unlicensed individuals and entities in violation of the law, as well as the signing of audit reports by unauthorised persons. In addition, some firms were found not to retain audit files and working papers for the legally required period of ten years, in breach of the Law of Accounting and Auditing Profession.

The FSA also identified shortcomings among several firms in adhering to professional standards, including violations of the International Standards on Auditing (ISA). These included the absence of engagement letters between audit firms and their clients, which undermines contractual clarity and scope of responsibility as required under ISA 210. Significant deficiencies were also observed in audit documentation in accordance with ISA 230, where insufficient working papers hinder the traceability of audit procedures and the ability to assess audit quality and compliance.

Furthermore, non-compliance with ISA 500 on audit evidence was identified, with insufficient and inappropriate evidence to support audit procedures performed on financial statements. Firms were also found to be non-compliant with ISA 550 relating to related-party transactions, which may result in overlooking material risks affecting the integrity of financial statements.

With regard to audit reporting, supervisory reviews revealed that the structure of some audit reports did not comply with the requirements of ISA 700 in terms of format, content, and the formation of opinion. Additionally, non-compliance with ISA 320 on materiality was observed, particularly in the failure to document materiality thresholds for significant misstatements, which impacts the accuracy of planning and the quality of audit execution.

The FSA affirmed that these efforts are part of its ongoing commitment to enhancing the efficiency of the accounting and auditing profession, strengthening compliance with international standards, and promoting integrity, transparency, and confidence in financial reporting, thereby supporting financial stability across relevant sectors.