Failing to Appoint an Auditor prevents a company from conducting any reliable assessment for various purposes due to the absence of audited financial statements.

Local Content

The Local Content Authority prohibits engagement with any client unless audited financial statements are provided. Failing to Appoint an Auditor directly violates this requirement.

IKTVA Program

Aramco prohibits enrolling any client in the IKTVA program without audited financial statements. Failing to Appoint an Auditor results in ineligibility for participation in this critical initiative.

New Partners or Investors

If the company seeks new investors or partners, their decision to invest will depend on the availability of audited financial statements. Failing to Appoint an Auditor can significantly reduce the company’s attractiveness and credibility.

Financing or Government Support

All types of funding or support—whether from banks or government entities—formally require audited financials. Failing to Appoint an Auditor jeopardizes access to these essential resources.

Contractor Classification

Audited financial statements, signed and stamped by the auditor, are a mandatory requirement for contractor classification.

Business and Legal Implications

The absence of an auditor means there are no sound accounting procedures, weak internal controls, poor asset protection, and inadequate documentation and reconciliation processes. This exposes the company to risks of financial loss, inability to prove rights, and lack of legal evidence.

Decision-Making and Asset Monitoring

Weak oversight often leads to asset losses and embezzlement. Furthermore, inaccurate or poorly prepared reports lead to poor or delayed decisions by company management.

Securing International Agencies

Most global companies require audited financials to grant agencies for trademarks and products. Failing to Appoint an Auditor may prevent the company from securing international deals and partnerships.

Looking Forward

If the company plans to be listed in the financial market someday, audited financials are a fundamental prerequisite. Failing to Appoint an Auditor undermines this future ambition.

Furthermore, the decision not to appoint an auditor must be agreed upon by all partners annually and submitted to the Saudi Ministry of Commerce.

In case there are no financial statements during the early years, or if the company stops operating, this must align with the new Companies Law issued by the Ministry of Commerce. Later, when the company decides to prepare financial statements, the opening balances may be significantly affected, and verifying their accuracy would be impossible due to the previous lack of audited financial records.

Read also:

• Corporate Income Tax in Saudi Arabia and How to Calculate It
• Guidelines for Selective Taxation
• Withholding Tax in Saudi Arabia and How to Calculate It
• Accounting Expertise in the Judiciary and Its Contribution to Resolving Tax Disputes
• Standardization of Financial Statements: What Are Its Conditions and Presentation Criteria?