On 18 March 2020, the Auditor General’s Office (AGO) issued the Regulations on Statutory Audit Services in the Maldives (Regulation No. 2020/R-23) (“the Regulations”), detailing the procedure for issuing license to conduct statutory audits in the Maldives and circumstances where a license may be revoked. The Regulations also prescribe the professional code of conduct for licensed auditors and define a framework for assuring audit quality.

Major provisions in the Regulations are summarized below.

Categories of License

• Three categories of license will be issued to firms and individuals – Category A, Category B and Category C. Only firms will be allowed to operate under Category A and Category B.
• To qualify for Category A license, an individual must be a full member of an IFAC (International Federation of Accountants) member association and have at least 7 years of experience in external audits. To qualify for a Category B license, an individual must be a full member of an IFAC member association and have at least 5 years of experience in external audits. To qualify for a Category C license, an individual must be a full member of an IFAC member association and have at least 3 years of experience in external audits or at least 7 years of experience in internal audit or accountancy.
• Category B and Category C license will be issued to Maldivian citizens only. In addition, at least one partner in a Category A firm must be a Maldivian citizen while all partners in Category B and Category C firms must be Maldivian citizens, and at least 25% of shares of a Category A firm must be held by Maldivian citizens by 2025. Further, full-time employees of Category A, B and C firms must be at least 50%, 80% and 80% Maldivian citizens respectively.
• Category A firms will be allowed to audit any business, whereas Category B firms can audit any business other than large businesses (i.e. commercial banks, financial institutions, public companies, state-owned enterprises and any other business whose annual turnover exceeds MVR 100 million). Category C firms and individuals can audit only small and micro businesses (i.e. businesses whose annual turnover does not exceed MVR 60 million).

Audit License

• All applicants must pass a test or interview conducted by the “Licensing and Disciplinary Committee” for the purpose of determining whether the applicant has sufficient knowledge of relevant laws and regulations.
• The Audit License will be issued for a calendar year and must be renewed annually. Renewal application must be made before 45 days prior to its expiry.

Licensing and Disciplinary Committee

• All aspects of licensing will be overseen by a 9-member Licensing and Disciplinary Committee, comprising representatives from the following institutions:
  • 6 from the AGO;
  • 1 from the Maldives Inland Revenue Authority (MIRA);
  • 1 from the Registrar of Companies/Ministry of Economic Development; and
  • 1 from the Capital Market Development Authority (CMDA).
• The Committee will be appointed for a term of 2 years.

Other Major Provisions

• All statutory audits must be conducted in accordance with the International Standards on Auditing (ISA) issued by the International Auditing and Assurance Standards Board (IAASB) or the Auditing Standards issued by the Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI).
• In addition to the professional code of conduct prescribed in the Regulations, auditors must comply with the International Code of Ethics for Professional Accountants issued by the International Ethics Standards Board for Accountants (IESBA).
• Licensed auditors must submit an annual “compliance report” within 2 months from the end of the financial year, in a format prescribed by the AGO.
• Licensed auditors must complete 40 hours of continuing professional development (CPD) annually.
• Licensed auditors must obtain professional indemnity insurance.

The Regulations, which repeal and replace the Regulations on Statutory Audit and Assurance Services in the Maldives (Regulation No. 2012/R-24) issued in 2012, came into effect on 18 March 2020. Existing “Audit Practicing Certificate” holders must apply for a license under the Regulations within 1 month from its date of effect.

The Dhivehi version of the Regulations is available on the AGO’s website.