The main concern of GCC states, due to the lack of an established profession and as it appears from the reading of related articles of the commercial laws of each state, is found to centre around the recording of (not recognising) economic transactions, keeping source documents, preparing financial statements (mainly balance sheet and profit and loss statements), and auditing these statements by a “registered” auditor(s)[2].

Before the establishment of SOCPA, accounting regulations in KSA were not any different from other GCC states. The commercial regulation (law), issued in 1930 by Royal Decree No. 23, stipulates, inter alia, the bookkeeping and recording of economic transactions. The company regulation (law), issued in 1965, instructs enterprises to prepare financial statements, which are to be audited by “registered” auditors. The procedures and requirements of appointing the registered auditors as well as his responsibility are laid down by the same regulation (SOCPA – Accounting Standards Committee, 2000). In 1968, the Ministry of Trade issued Order No. 422 that sets forth the criteria to be met by an applicant wishing to become registered auditor. This order was in effect until the issuance of the “First” regulation (law) for Certified Public Accountant in 1974 by the Royal Decree No. M/43 dated 13/7/1394 (Islamic). This regulation established a supreme committee charged with the responsibility of supervising the auditing profession. It is clear that the main concern was the auditing profession rather than the financial and accounting reporting. Although there is no solid (or rather visible) evidence, it might be thought, at the time, that auditing profession encompasses the related issues in financial and accounting reporting.

Few years later, in 1981 and onwards, the University of King Saudd (hereafter, the University) held a number of seminars and conferences concerning the development of accounting and auditing profession (hereafter, the profession) in the Kingdom. Accordingly, the Scientific Council of the University established the Saudi Accounting Association (SAA), whose goals are to develop accounting thoughts, to promote the exchange of scientific research and experience, provide consultation in emerging issues, and conduct the necessary studies and surveys.

In mid-1979, a dialogue took place between the undersecretary of the Ministry of Trade and Mr Abdul-Aziz Al-Rashid[3], the owner of the Local Accounting Office. The essence of the dialogue was the present situation of the profession and the possible means of improving it. Three months later, a discussion with the Trade Minister was held and an agreement that the profession, given its current conditions, was not keeping pace with the rapid economic development in the country was reached. Yet, there was a lack of “scientific” evaluation of the profession and, therefore, there was a need of a detailed, well-structured report that can serve as an acceptable base for the development of the profession. Accordingly, the Local Accounting Office[4] prepared with the help of a Saudi academic, accounting professor Abdullah Al-Faisal from the University, a preliminary, abridged report highlighting the main shortcomings of the profession.

The Ministry of Trade accepted the findings of the report and decided that it could serve as an adequate base for the next step, the suggestion of complete plan for the development of the profession, and asked the local office to provide its views and proposal in this regard. The proposal should clearly numerate the necessary steps towards the overall development of the profession including, inter alia, the setting of accounting and auditing standards, and establishing internal system for the profession.

Previously published in: Managing Service Quality, Volume: 20, Number 3, 2005  less