An Overview of Accounting and Auditing in Egypt
The Arab Republic of Egypt is in Northeast Africa and the Middle East. It has a favorable climate for the development of agriculture and tourism. It is surrounded by the Mediterranean Sea in the north and the Red Sea in the East. The Nile River runs through Egypt from south to north. There is no restriction on foreign investment. The low cost of renting real estate and company registration make Egypt an attractive jurisdiction for starting a business.
The Companies Law No. 159 and the Capital Market No. 95 of 1992 regulates the keeping of accounting records. The financial statements are prepared based on these laws. As per Egyptian legislation, all companies are required to file annual financial statements. Annual Financial Statements include:
- Balance Sheet
- Statement of Comprehensive Income
- Cash Flow Statement
- Statement of changes in equity
- Auditor’s Opinion
The articles of association of a company can provide for preparing interim financial statements. All companies must prepare financial statements per the Egyptian Accounting Standards (EAS). Only foreign companies listed on the Egyptian Stock Exchange have to prepare their financial statements as per the International Financial Reporting Standards (IFRS). In 2019, the Standards Committee of the Egyptian Society of Accountants and Auditors under the Ministry of Investment and International Cooperation laid down the national accounting standards based on Decree No. 69/2019. The new national standard is based on the IFRS.
Egyptian Law requires that the financial statements of all companies must be audited. The financial statements should be audited as per the national standards on auditing and related services. The Ministry of Investment and International Cooperation supervises the development of national standards. The national standards on auditing conform with the 2015 version of the International Standards on Auditing (ISA).
Only a certified auditor listed with the Ministry of Finance of Egypt can audit the financial statements. Auditors auditing the financial statements of listed companies should also be included in the list of auditors formed by the Financial Regulatory Authority.
Preparation of Financial Statements and Tax Accounts
In Egypt, the financial year is different from the calendar year. The financial year lasts from the 1st of July to the 30th of June. However, per Companies Laws No. 159, the companies may determine the financial year to make the books of accounts and state it in their articles of association. Companies with foreign investments must quarterly fill out a form on the General Authority for Investment and Free Zones website and attach interim financial statements or the latest annual financial statement. Such companies exclude companies that operate under production-sharing agreements with state organizations. The deadline for filing financial statements is 45 days after the end of each quarter.
Egyptian public companies are required to file annual financial statements along with the auditor's opinion with the Financial Regulatory Authority. The deadline file is one month before the general meeting of shareholders. The annual financial statements of public companies have to be published in the newspaper in a condensed form in Arabic. The financial statements shall be published 21 days before the general meeting of shareholders. If any changes are made to the financial statements at the general meeting, the new version of the financial statements must be published within one week after the changes are made. Public companies are also required to publish the interim accounts and board resolutions signed by all of the directors on the website of the Company and the website of the Egyptian Exchange in case of distribution of interim dividends.
Apart from the above, a profit tax return must be filed with the tax authority within four months from the end of the financial year. VAT returns should be filed monthly within one month from the end of the tax period.
Liability for Late filing or failure to file accounts
A penalty not exceeding 50,000 Egyptian pounds (EGP) is imposed in case of non-fulfillment of the obligation to fill out the form on the General Authority for Investment and Free Zones website or the non-filing of financial statements.
A 3000 to 50,000 EGP penalty is imposed if the tax return is filed within 60 days of the deadline. If the tax return is filed after 60 days from the deadline, a penalty of 5000 to 200,000 EGP is levied.
Consolidated Financial Statements
There is a requirement to file consolidated financial statements, including interim consolidated financial statements. The 42nd National Accounting Standard “Consolidated Financial Statements” (EAS 42) applies while making consolidated financial statements.