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Audit in Israel

Auditing in Israel is a mandatory requirement by law. The purpose of this legislation is to supervise companies’ financial reports. Auditors in Israel are supervised by the Israeli Accountancy Council (IAC) and by the Institute of Certified Public Accountants in Israel (ICPA). Only licensed accountants can certify audited accounts.

Audit in Israel- The basis of the auditing requirement

The conduct of an audit in Israel is based on generally accepted auditing standards, namely those prescribed by the Auditors’ Regulations (Auditors’ Mode of Performance) 1973. Under these regulations, auditors are required to prepare and perform the audit to obtain reasonable assurance about whether the financial statements recorded, accounting principles used and significant estimates made by the board of directors and managers are correct.

Legislation concerning audit in Israel also requires all companies in Israel to undergo audit and to comply with all other laws and by-laws of the State of Israel (although they may often follow international accounting standards: e.g. IFRS).

Governing Bodies

There are two main bodies which administer processes concerning audit in Israel: the ICPA and the Israeli Accountancy Council. Both play a vital role in securing high professional standards and compliance with statutory requirements.

The ICPA’s role is to supervise and amend the regulations and laws relating to audit in Israel. Its main functions include developing auditing standards and enforcing its regulations. The ICPA also contributes its expertise and knowledge to the Israeli legislator ("the Knesset”), and provides a number of voluntary services to the community.

The second body in charge of audit in Israel is the Israeli Accountancy Council, a statutory body, overseen by the Ministry of Justice. Its role is divided between drafting the licence exams, issuing accountancy licenses and supervising auditing trainees. It has disciplinary powers to punish failure to meet its technical standards, and can fine and/or revoke licences.

Who can carry out a licensed audit in Israel?

As noted above, the Israeli Accountancy Council is in charge of issuing Accountancy licenses. In order for auditors to certify an audit in Israel, they must have an Israeli accountancy certificate, which can be obtained by passing all the necessary examinations.

Each trainee who specializes in audit in Israel must complete a 2 year apprenticeship within an acknowledged auditing firm, before obtaining a licence. A trainee does not have to have an academic degree in accounting to become an auditor. However, he may obtain certain exemptions when taking the accountancy examinations if does.

Recent trends affecting Israeli audits

A lot of financial turmoil and high-profile fraud cases have affected auditing legislation worldwide. Most prominently, Oxley-Sarbanes has had a significant influence on the way that an audit in Israel is carried out. This is to a great extent the case because Israel has a booming market for high-tech and multinational companies, and many of these internationally quoted companies have registered offices in Israel. Therefore, they are compelled to ensure that their accounts meet international standards imposed on and by their parent companies.