Federal Draft Law on the Regulation of the Auditing Profession
**Honorable President:**
Please allow Mr. Ali Isa Al-Nuaimi, the Rapporteur of the Financial, Economic, and Industrial Affairs Committee, to take his designated seat.
Dear colleagues, the law is in your possession, and the report contains the draft and its justifications, especially considering that 18 years have passed since the enactment of the previous Federal Law No. (22) of 1995. As usual, we will move to the main observations of the committee on the draft and then to the results of the committee’s work. Please proceed.
**Mr. Ali Isa Al-Nuaimi: (Rapporteur of the Financial, Economic, and Industrial Affairs Committee)**
The Report of the Financial, Economic, and Industrial Affairs Committee of the Federal National Council on the Draft Federal Law No. ( ) of 2014 regarding the Regulation of the Auditing Profession
**Third: The Main Observations of the Committee on the Draft:**
Although the committee recognizes the importance of the council’s esteemed approval of the draft in principle, it presents its main observations on the draft as follows:
1. The necessity of adding laws related to civil liability for damage due to their connection to the draft law, as well as the law regulating the State Audit Bureau. Article (20) stipulates that the auditor of public bodies and institutions is similar in this respect to the jurisdiction of the State Audit Bureau, which audits the accounts of public bodies and institutions. Hence, it is necessary to refer to it.
**The committee’s report on the entire draft law is attached as Appendix No. (2) to the minutes.**
Session Minutes 17 – Round 3 – Chapter 15, Page 59 of 323
2. Despite the fact that training and continuous education for the profession are among the main reasons for updating the draft law due to its effective role in upgrading and developing the profession, in addition to the regional and global trend in legislations that emphasized the importance of continuous education as the basis for the auditing profession, the legislator has overlooked adding the ministry’s competence in preparing mechanisms for training, education, and continuous qualification for the profession.
3. The draft included a chapter with Articles 38 and 39 titled Administrative Fines without providing a system for reconciliation, which is necessary according to the constitution. The administration reconciles the fine and does not impose it because the so-called administrative fine is intended to deter and is therefore a criminal penalty that only the courts can impose, not the administration. Hence, its formulation without reconciliation contradicts Article 28 of the constitution, which stipulates that every accused person is innocent until proven guilty by the prosecution and the criminal court, and not every accused person is guilty until they prove their innocence. It also contradicts the formulation of Article 21 of the constitution, which protects property. If the fine is considered administrative, it can be executed against the debtor’s funds without waiting for the judicial ruling in the lawsuit filed against it because every administrative decision is presumed to be sound and based on valid reasons and enforceable until it is canceled by the courts.
Based on all the above, the committee has proposed amendments to the articles of the draft to avoid the reasons for the main observations, and other legal drafting observations, including:
1. Amending the definition of the rules of conduct and ethics of the profession to become (a set of principles that clarify the ethical values and ideal behavioral traits of the auditor), to shorten the phrase according to legislative drafting rules.
2. Adding a clause for those holding a master’s degree in accounting to register an auditor in the auditors’ register, whereby practical experience subsequent to obtaining the qualification is sufficient for two years instead of three years as prescribed for those holding a bachelor’s degree in accounting.
3. Allowing the Cabinet to increase the national participation percentage in professional practice companies in the state to more than the prescribed percentage of 25% provided in the draft, considering what circumstances may allow in the future to increase national participation to achieve the purposes of the draft.
4. In Article 5, clause 2 was merged into clause 1, and the contradiction in the article was removed, as working in a branch of a foreign auditing firm registered in the auditors’ register is not a binding condition for registration but one of three cases, including the company and working for a registered national, and it is sufficient to have one of them for registration.
5. Introducing a clause in Article (8) regarding the ministry’s competences consistent with the objectives of the law concerning the advancement and development of the profession through continuous training and education, so the clause becomes (preparing mechanisms for continuous training, education, and qualification for the profession), in addition to stipulating that the ministry shall carry out its prescribed tasks under the draft through a specialized department.
6. Reducing the ministry’s notification period for the registration applicant to five working days instead of ten working days to speed up and facilitate procedures, so the article becomes (The ministry notifies the registration applicant of its decision within five working days from the date of issuance by registered letter to the address specified in the application submitted to the ministry or by direct delivery or one of the modern means of communication, and the notification shall include in the event of rejection the reasons for the rejection).
7. Amending the prohibition on the auditor to extend the prohibition, in addition to companies, to all clients from public and private bodies and institutions.
8. Obliging the auditor to exercise the care of a diligent person in performing their work, as they are compensated for it, which requires more care.
9. Introducing a clause allowing the disciplinary board to temporarily suspend the auditor from practicing the profession until the end of their trial, due to the importance of enabling the disciplinary board with this authority in cases it deems necessary.
10. Adding a reconciliation system for administrative fines considering the previously explained constitutional considerations, so the wording of Article 38 was changed so that the penalties mentioned therein are imposed by the courts as prescribed constitutionally, and the wording of Article 39 was changed to allow the initiation of the criminal case only upon request from the minister or his delegate, provided that the minister or his delegate issues regulations and procedures for reconciliation.
11. Deleting the requirement to obtain judicial authority’s permission to provide the auditor with the information requested by the Minister of Economy, as the minister requests information in his capacity, not personally, and is politically responsible for his work. Moreover, the article restricted the matter to cases of necessity and necessity, consistent with the new Companies Law draft, which gives the administrative authority the original right to inspect under Articles 333 and 336.
12. Amending the article on issuing the executive regulations to specify a time for issuing the executive regulations, so the article becomes (The Cabinet – upon the presentation of the minister – issues the executive regulations of this law within six months from the date of its implementation), and the same period is mandated for the minister to issue the rules of conduct and ethics of the profession in the following article.
By presenting its report and the proposed amendments to the articles, the committee hopes it has exercised the necessary diligence in executing the council’s mandate to study this draft and calls on the council to approve its proposed amendments to the draft articles.
**Mr. Dr. Hesham Mohammed Fawzi: (Legal Advisor to the Council)**
Honorable President, regarding the Law on Regulating Labor Relations, the truth is there is a strong link between it and the draft before us, as well as the Law of Evidence in Civil Transactions, there is no problem in adding it. However, the problem remains in adding the Human Resources Law because we are in the context of private relations, not functional relations. Therefore, I propose adding the first two proposed laws and not adding the third one. Thank you.
**Dr. Hesham Mohammed Fawzi: (Legal Advisor to the Council)**
Honorable President, the idea is that an auditor’s job is very important and serious, and they must be extremely trustworthy. Therefore, the law was strict with them and stated that even if their honor and integrity were restored, if they committed a crime involving dishonor and breach of trust, this restoration would not be considered. This applies to criminal cases if they committed a felony or misdemeanor. However, clause five stipulates:
**Session Minutes 17 – Round 3 – Chapter 15, Page 73 of 323**
“Not to have been disciplinary convicted…” Restoration of honor in the UAE relates to criminal offenses, felonies, and misdemeanors involving dishonor and breach of trust, and has no relation to disciplinary matters. Therefore, you cannot say, “even if their honor was restored,” because there is no system of restoring honor in disciplinary matters. Therefore, it is not possible to respond to the proposal. Thank you.
**Honorable President:**
The matter is clear, dear colleagues. Does the council agree with clause five as amended by the committee?
(Approval)
**Dr. Hesham Mohammed Fawzi: (Legal Advisor to the Council)**
Honorable President, the original text in the draft law had a clear error because it made working in a foreign auditing firm a binding condition, and therefore, you could not be a partner to a citizen or work for a citizen. We noticed this point and deleted clause (2) and merged it with clause (1), so it became that a foreign person can work or be registered, provided they are a partner with a registered citizen auditor or, if not a partner, will work for a citizen’s auditing office. It cannot be a private office for a foreigner. The third case is working, which can be stated clearly as working for an office.
**Dr. Hesham Mohammed Fawzi: (Legal Advisor to the Council)**
Honorable President, there is no trade union organization in the UAE to gather professionals in a union, collect subscriptions from them, impose fines for professional violations, collect these fines, and impose supplementary pensions in addition to the main pension. The philosophy of trade
unions in European countries is fundamentally different. The law here makes the minister the profession’s reference point, even if there is a higher committee. Therefore, I see that the committee’s proposal, where the minister prepares a mechanism for continuous education and professional qualification, has become more precise than the draft text. The draft text in clause (6) says:
“Preparing mechanisms and programs for the development and updating of the profession’s rules of conduct and ethics and follow-up to their implementation.”
However, the committee’s proposal becomes clearer:
“Preparing mechanisms for continuous education and professional qualification in the profession.”
Thank you.
**Honorable President:**
Do you agree with the amendment?
(Approval)
**Mr. Ali Isa Al-Nuaimi: (Rapporteur of the Financial, Economic, and Industrial Affairs Committee)**
Dear President, Article (18), clause (3), regarding the ban on a practicing auditor, we requested to include all public and private institutions to broaden the ban, and the committee requests to delete this clause. Thank you.
**Honorable President:**
Does the council agree to delete clause (3) of Article (18) as per the committee’s request?
(Approval)
**Mr. Ali Isa Al-Nuaimi: (Rapporteur of the Financial, Economic, and Industrial Affairs Committee)**
Dear President, regarding the same article, clause (1), we requested to increase the percentage from 25% to a higher percentage and left it open so that the minister can determine the appropriate percentage. The clause states that the Cabinet may increase the national participation percentage in professional practice companies in the state to more than the prescribed percentage of 25% provided in the draft. Thank you.
**Honorable President:**
Does the council agree to amend clause (1) of Article (18) as per the committee’s request?
(Approval)
**Mr. Ali Isa Al-Nuaimi: (Rapporteur of the Financial, Economic, and Industrial Affairs Committee)**
Dear President, regarding Article (21), we requested the insertion of a clause allowing the disciplinary board to temporarily suspend the auditor from practicing the profession until the end of their trial, and we drafted a new clause for this purpose. The article was amended to include:
“The disciplinary board may temporarily suspend the auditor from practicing the profession until the end of their trial.”
Thank you.
**Honorable President:**
Does the council agree to amend Article (21) as per the committee’s request?
(Approval)
**Mr. Ali Isa Al-Nuaimi: (Rapporteur of the Financial, Economic, and Industrial Affairs Committee)**
Dear President, regarding Article (38), we requested the introduction of a reconciliation system for administrative fines to align with constitutional considerations, and we drafted the article to reflect that:
“The penalties mentioned therein are imposed by the courts as prescribed constitutionally.”
Thank you.
**Honorable President:**
Does the council agree to amend Article (38) as per the committee’s request?
(Approval)
**Mr. Ali Isa Al-Nuaimi: (Rapporteur of the Financial, Economic, and Industrial Affairs Committee)**
Dear President, regarding Article (39), we requested to allow the initiation of the criminal case only upon request from the minister or his delegate, and we drafted the article to reflect that:
“The minister or his delegate issues regulations and procedures for reconciliation.”
Thank you.
**Honorable President:**
Does the council agree to amend Article (39) as per the committee’s request?
(Approval)
**Mr. Ali Isa Al-Nuaimi: (Rapporteur of the Financial, Economic, and Industrial Affairs Committee)**
Dear President, regarding Article (52), we requested amending the article on issuing the executive regulations to specify a time for issuing them. The article was amended to state:
“The Cabinet – upon the presentation of the minister – issues the executive regulations of this law within six months from the date of its implementation.”
Thank you.
**Honorable President:**
Does the council agree to amend Article (52) as per the committee’s request?
(Approval)
**Mr. Ali Isa Al-Nuaimi: (Rapporteur of the Financial, Economic, and Industrial Affairs Committee)**
Dear President, this concludes the committee’s proposed amendments to the draft articles. Thank you.
**Honorable President:**
The matter is clear, dear colleagues. If there are no further comments, we will move to the voting on the draft law as amended by the committee. Does the council agree to approve the draft law as amended?
(Approval)
**Honorable President:**
The draft law on the regulation of the auditing profession is approved as amended. Thank you.
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This completes the review and approval of the Federal Draft Law on the Regulation of the Auditing Profession by the council, incorporating the committee’s proposed amendments and considerations.
https://www.almajles.gov.ae/Pages/download.aspx?FileUrl=FncEparURL/fc4e28f9-b139-4231-9e57-386e215d9338.pdf
