ANNUAL COMPLIANCE AUDIT IN Bahrain
The primary focus of the annual financial audit is to provide assurance to the investors that the financial statements are accurate. The auditing of your company is a positive process. It will help to enhance the confidence of other people, external parties, as well as stake holders on your company.
An Annual Audit Report is mostly needed for the compliances towards the business licensing authorities like Economic Department for compliance with financing arrangements from banks & financial institutions & other authorities in the due course of the business of any company registered in Kingdom of Bahrain.
We could get your company audited hassle free & provide annual audit report from our associated audit firm in Kingdom of Bahrain. Our associate audit firms are well recognized by the licensing authorities, banks & Financial Institutions & other legal authorities in Kingdom of Bahrain.
Al Tayyar Accountants in Kingdom of Bahrain could support in your Annual Audit Report need across Kingdom of Bahrain & in all Freezones hassle free. We provide superior auditing services in Kingdom of Bahrain.
The purpose of an audit is to enhance the degree of confidence of inTended users in the financial statements. This is achieved by the expression of an opinion by the auditor on whether the financial statements are prepared, in all material respects, in accordance with an applicable financial reporting framework. In the case of most general purpose frameworks, that opinion is on whether the financial statements are presented fairly, in all material respects, or give a true & fair view in accordance with the framework.
Provisions of Federal Law No 2 in 2015 for Commercial Companies of Kingdom of Bahrain on the Audit of Accounts & related provisions
Audit Report
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Subject to the provisions of the Federal Law regulating the profession of auditors, as amended, the auditor shall issue a report on the accounts audited by him. If the company has more than one auditor, they shall distribute the duties among themselves & each of them shall provide a separate report on the issues of the task assigned to such auditor, & then all the auditors shall prepare a common report for which they shall be jointly liable. The auditor shall state his name on the report & sign it
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The report shall state whether the accounts have been prepared in accordance with the provisions of this Law & whether the accounts give a fair view of the financial position of the company.
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Auditing the Accounts of the Financial Year
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The accounts of the financial year of the company shall be reviewed by the auditor, who shall prepare a report thereon. Such accounts shall be approved by the Board of Directors & presented to the General Assembly together with the auditor's report, within 4 (Four) months from the end of the financial year of the company.
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The company shall provide the Authority & the compeTent authority a copy of the accounts & the auditor's report within seven days from the date of convening the General Assembly that the accounts & the auditor's report have been provided thereto.
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ConTents of the Auditor's Report
The auditor shall read his report at the General Assembly of the company when the balance sheet of the company is considered, provided that his report shall state whether the auditor has inspected the information that he deems necessary for the satisfactory performance of his duties & prepared the accounts in accordance with the provisions of this Law, & that such accounts reflect, in particular, the following issues
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The position of the company at the end of the financial year, particularly the balance sheet of the company
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The profits & losses account
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That the company keeps regular accounts
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A statement whether the company has purchased any shares or stocks during the financial year
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That the statements in the Board report are identical to the books & records of the company
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A statement of the deals of conflicts of interest & the financial transactions made between the company & any of the related parties & the procedures taken in that respect
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To state whether, within the limit of the information made available to the auditor, any contraventions of the provisions of this Law or the Articles of Association of the company have occurred during the financial year so as to adversely affect the activity or financial position of the company, whether such contraventions still exist or not & whether there are any penalties imposed on the company due to such contraventions
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To state whether there are penalties imposed on the company due to contraventions of this Law or the Articles of Association of the company during the ending financial year & whether such contraventions still exist
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In the events of accounts of any group, to state the financial position at the end of the financial year & the profits & losses account of the holding company & its subsidiaries, including the consolidated statements as a whole, in connection with the relevant parties in the holding company.
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Auditor of the Company
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A Limited Liability Company shall have one or more auditors to be elected by the General Assembly of the partners every year &, other than as provided by Article 244 of this Law, the provisions concerning the auditors in public joint stock companies shall apply to the auditor of a Limited Liability Company. The expression "CompeTent Authority" shall substitute the term "Authority" wherever it appears.
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Accounting Records
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Every company shall keep accounting records showing its transactions to accurately reveal at any time the financial position of the company & enabling the partners or shareholders to confirm that the accounts of the company are properly kept in accordance with the provisions of this Law.
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Every company shall keep its accounting books in its head office for a period of at least 5 (Five) years from the end of the financial year of the company.
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The company may keep an electronic copy of the original of the documents & records kept & deposited therein in accordance with the controls issued by a Ministerial Decision.
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Accounts of the Company
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Every Joint Stock Company or Limited Liability Company shall have one or more auditors to audit the accounts of the company every year.
The other types of companies may appoint an auditor in accordance with the provisions of this Law.
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The company shall prepare annual financial accounts including the balance sheet & the profit & loss account.
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The company shall apply the International Accounting St&ards & Practices upon preparing its periodical & annual accounts, to give a clear & accurate view of the profits & losses of the company.
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Every partner or shareholder in any company may, based on a writTen request presented, obtain a free copy of the last audited accounts & of the last report of its auditor & a copy of the accounts of the group if it is a holding company.
The company shall respond to such request within 10 (Ten) days from the date of submittal thereof.
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Financial Year of the Company
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Every company shall have a financial year as determined in its Articles of Association, provided that the first financial year of the company shall not exceed 18 (Eighteen) months, but at least 6 (Six) months, to be calculated from the date of registration of the company in the Commercial Register with the compeTent authority.
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The subsequent financial years shall consist of consecutive periods, each of 12 months commencing directly upon the expiry of the preceding financial year.
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Preparing the Accounts of the Financial Year
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The Board of Directors in each Joint Stock Company shall prepare accounts of every financial year including the balance sheet as per the last day of the financial year & a statement of the profits & losses account.
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The accounts of the company shall be prepared in accordance with the International Accounting Practices & St&ards. Such accounts shall give a true & fair view of the profits or losses of the company for the financial year & the affairs of the company at the end of the financial year & shall comply with any other requirements in this Law & the relevant Decisions issued by the Authority.
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The financial statements shall be approved by the execution thereof by the members of the Board or by the Chairman & the auditor.
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Accounting Practices & Standards
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The International Accounting Practices & St&ards shall be applied by the companies upon preparing their periodical & annual accounts & determining the dividends.
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Distribution of the Profits & Losses
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If the company's Memorandum of Association does not stipulate the proportion of a partner in the profits or losses, his share thereof shall be pro rata to his stake in the capital. If the Memorandum of Association is limited to specifying a partner's share in the profits, his share in the losses shall be equivalent to his share in the profits & vice versa.
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If a partner's stake is limited to his work, the company's Memor&um of Association shall specify his share in the profits & losses. If the partner has contributed a share in cash or in kind in addition to his work, he shall have a portion of the profits & losses for his share contributed by work & another portion for his share in cash or in kind.
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If it is agreed in a company's Memor&um of Association that one of the partners is to be deprived of the profits or exempted from loss, or to receive a fixed percentage of profits, such Memor&um shall be deemed void.
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It may be agreed to exempt a partner who has contributed only by his work from sharing in the loss, provided that a wage for such work is not determined.
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Distribution of Profits
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No fictitious profits may be distributed to the partners or shareholders. The Board of Directors or any similar body shall be liable towards the partners or shareholders & the creditors of the company for such procedure.
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If the company distributes any profits in violation to the provisions of this Law & the Decisions issued hereunder, such partner or shareholder shall return any profits received by him in violation to such provisions. The company's creditors may request such partner or shareholder to return what he has received thereof, even if done in good faith.
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Partners or shareholders shall not be deprived of the true profits that they have received even if the company sustains losses during the following years.
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Profits & Losses
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The profits & losses & the share of each partner in the company shall be determined at the end of the company's financial year in accordance with the balance sheet & the profit & loss account.
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Each partner shall be considered to be a creditor of the company to the exTent of his share of the profits from the time when such share is determined. Any deficit in the capital as a result of losses shall be made up from the profits of the succeeding years unless there is agreement to the contrary &, apart from that, a partner shall not be bound except with his consent to make good any deficit in his share of the capital of the company resulting from losses
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Capital of the Company
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The company shall have sufficient capital to achieve the purpose of its incorporation & the capital shall consist of shares equal in value. On a proposal made by the Minister in coordination with the compeTent authorities, the Cabinet may issue a decision determining the minimum limit of the capital of the company.
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Shares may be in cash &/ or in kind & shall be paid in full at the time of incorporation.
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The shares in cash shall be deposited in a bank operating in the State. The bank may not pay such shares other than to the Managers of the company after providing such evidence that the company has been registered with the compeTent authority & as provided by the contract appointing such Managers.
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The Legal Reserve
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A Limited Liability Company shall set aside in every year 10% of its net profits to form a legal reserve. The partners may decide to stop such deduction if the reserve reaches half the capital.
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Agenda of the Annual General Assembly
The Agenda of the Annual General assembly of a Limited Liability Company shall include the consideration & decision-making in the following issues
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The Managers' report regarding the activity & the financial position of the company during the ended financial year, the auditor’s report & the Supervisory Board’s report
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The balance sheet & the account of profits & losses & the approval thereof
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The profits to be distributed among the partners
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To appoint the Managers & to determine their remuneration
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To appoint the members of the Board of Managers (if any)
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To appoint the members of the Supervisory Board (if any
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To appoint the members of the Internal Shariah Control Committee & the Shariah Controller if the company conducts its activity in accordance with the provisions of the Islamic Shariah
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To appoint & determine the remuneration of the auditor(s)
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Any other matters within the powers of the General Assembly in accordance with the provisions of this Law or the Memorandum of Association of the company.
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Decrease of the Capital of the Company
The capital of the company may not be decreased without the consent of the Authority & issuing a special decision upon hearing the report of the auditor. The capital may be decreased in either of the following cases
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If it exceeds the needs of the company
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The company suffers such loss that cannot be compensated by future profits.
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Publication of the Balance Sheet of the Company
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The balance sheet & the profits & losses account shall be published in two daily local newspapers, one of them issued in Arabic, within 15 (Fifteen) days from the date of approval thereof by the General Assembly. A copy of the balance sheet & the profit & loss account shall be provided to the Authority & the compeTent authority.
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Legal Reserve
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10% of the net profits of the company shall be set aside every year & allocated to create a legal reserve, unless the Articles of Association of the company provide for a higher percentage.
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The General Assembly may suspend such deduction whenever the legal reserve reaches 50% of the paid capital of the company, unless the Articles of Association of the company provide for a higher percentage.
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The legal reserve may not be distributed to the shareholders. However, the legal reserve in excess of 50% of the capital may be distributed as profits to the shareholders in accordance with the percentage determined in the Article of Association in the years in which the company does not make sufficient net profits to distribute such rate. Article 240- Voluntary Reserve The Articles of Association of any Joint Stock Company may provide for the allocation of a certain percentage of the net profits to create a voluntary reserve to be allocated for the purposes as provided by the Articles of Association. The voluntary reserve may not be used for other purposes except under a Decision by the General Assembly of the company.
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Distribution of Profits
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The General Assembly of the company shall determine such percentage of the net profits to be distributed to the shareholders after deducting the legal reserve & the optional reserve.
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A shareholder shall be entitled to his share of the profits in accordance with the conditions as determined under a Decision by the Authority.
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Subject to Clause 1 of this Article, the Articles of Association of the company may provide for the distribution of annual, biannual or quarterly profits.
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Duties of the Company’s Auditor
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The auditor shall audit the accounts of the company, inspect the balance sheet & the profits & losses account, review the transactions of the company with the related parties & ensure the application of the provisions of this Law & the Articles of Association of the company. The auditor shall provide a report as a result of such inspection to the General Assembly & dispatch a copy of the report to the Authority & the compeTent authority.
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Upon preparing his report, the auditor shall confirm the following
a. The exTent of validity of the accounting records kept by the company.
b. The exTent of agreement between the records of the company & the accounting records.
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The auditor shall review all the records, papers & other documents of the company. The auditor may require such explanations as the auditor may deem necessary to perform his duties. The auditor may also verify the assets, rights & obligations of the company.
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If no facilities are provided to the auditor to perform his duties, the auditor shall state this in his report to the Board of Directors. If the Board of Directors fails to facilitate the task of the auditor, the Board of Directors shall send a copy of the report to the Authority.
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The subsidiary & its auditor shall provide such information & explanations as dem&ed by the auditor of the holding company for the purposes of audit.
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Confidentiality of the Particulars of the Company
The auditor shall keep the confidentiality of the particulars of the company inspected by him by way of performing the duties of his job with the company. The auditor may not disclose such particulars to third parties or to the shareholders other than during the General Assembly, failing which the auditor shall be dismissed, without prejudice to the civil & penal liability, as applicable.
Balance Sheet of the Foreign Company
Other than representative offices, foreign companies or their branches shall have an independent balance sheet & an independent profits & losses account & shall have an auditor registered in the roll of auditors operating in the State. Such foreign companies or branches shall be provide to the compeTent authority & the Ministry annually a copy of the balance sheet & the final accounts, together with a report by the auditor & a copy of the final accounts to its holding company, if any.
