Egypt's statutory audit requirement: who must appoint an auditor

Executive summary

• Five categories must appoint an auditor under Companies Law No. 159 of 1981: the joint-stock company (article 103), the partnership limited by shares (article 110), the limited liability company and the one-person company (article 128), and the Egyptian branch of a foreign company (article 166).
• The general assembly appoints the auditor and may not delegate this to the board, save that the founders appoint the first auditor; changing the auditor follows a set procedure, and a decision in breach of it is void (article 103).
• The auditor may not combine the role with founding the company, board membership or permanent work at it, nor be a partner, employee or relative to the fourth degree of any such person (article 104), nor work for the company within three years of leaving its audit (article 107).
• The auditor's eligibility is governed by Law No. 133 of 1951: registration on the accountants' and auditors' schedule after three to six years' training, depending on the qualification, then at least five years' practice in one's own office before certifying a joint-stock company's balance sheet (articles 8 and 25).
• Non-bank financial licensees, companies whose securities were offered for public subscription, and listed companies need an auditor on a separate register kept by the Financial Regulatory Authority (FRA); general registration alone is not enough (FRA Board Decision No. 244 of 2023, as amended).
• The annual tax return must be signed by an accountant on the schedule: for capital companies and cooperatives whatever their turnover, and for individuals and partnerships whose turnover exceeds EGP 2 million a year (article 31, Unified Tax Procedures Law No. 206 of 2020).

The five categories required to appoint an auditor

Article 103 provides that "a joint-stock company shall have one or more auditors meeting the conditions set out in the law on the practice of the accounting and auditing profession", appointed by the general assembly, which sets the fee; the founders appoint the first auditor pending the first general assembly. A partnership limited by shares is subject to all the joint-stock company's rules save five articles unrelated to the auditor (article 110); it must also have a supervisory board of at least three members (article 112), an internal body that does not replace the auditor.

Article 128, as replaced by Law No. 4 of 2018, which added the one-person company, provides that "the provisions on the auditor and on stocktaking and financial statements in joint-stock companies apply" to the limited liability company and the one-person company.

Foreign companies' branches fall under Book Six of the law: article 166 provides that "a branch of a foreign company must have an auditor, on the conditions and arrangements set out in the executive regulations"; article 311 of those regulations (Decree No. 96 of 1982) requires that auditor to meet the conditions for a joint-stock company's auditor; and article 312 requires the branch to send the Companies Department, each year within three months of its year-end, copies of its financial statements and the auditor's report.

Appointing and removing the auditor

Neither the appointment of the auditor nor the setting of a fee without a ceiling may be delegated to the board. If the company is left without an auditor for any reason, the board must at once take the steps to appoint one, and the matter goes to the general assembly at its next meeting. The general assembly may change the auditor at any time on a member's proposal: the proposer notifies the company, with reasons, at least ten days before the meeting, and the company notifies the auditor at once. The auditor may reply in a written memorandum, which the chairman reads to the assembly, and may answer the proposal before the assembly decides. An appointment or replacement in breach of this procedure is void (article 103). The auditor's report and the forms its opinion can take are covered in the Egyptian auditor's report: forms of opinion and what each means.

Limits on who may act as auditor

The auditor may not combine the role with founding the company, board membership, or permanent technical, administrative or advisory work at it, nor be a partner of, or employed by, anyone engaged in its business in those capacities, nor be related to such a person to the fourth degree; an appointment in breach is void (article 104). For three years after leaving a joint-stock company's audit, a former auditor may not become its director or board member, or take on technical, administrative or advisory work there, permanent or temporary (article 107).

Who may act as auditor: Law No. 133 of 1951 and the FRA's own register

Article 103's "conditions set out in the law on the practice of the accounting and auditing profession" points to Law No. 133 of 1951, which confines the profession to those on the general register of accountants and auditors, in its three schedules: trainees, accountants and auditors, and their assistants (article 1). The register is held today by the Ministry of Finance, not the Ministry of Commerce and Industry named in the 1951 text. Registration requires the applicant to be an Egyptian resident in Egypt, of full civil capacity and of good conduct (article 2), and a name moves to the accountants' and auditors' schedule only after three to six years' training, depending on the qualification held (article 8). That is not enough to audit a joint-stock company: article 25 requires, for certifying its balance sheet, at least five years' practice in the accountant's own office from registration on that schedule.

Non-bank financial licensees, companies whose securities were offered for public subscription, and companies whose securities are listed on an Egyptian exchange face a further condition: only an auditor on the FRA's own register may audit them (FRA Board Decision No. 244 of 2023, as amended), and the same applies to companies in which any of them holds 25% or more of the voting rights, directly or indirectly (article 2). Registration on this register has conditions that general registration does not, among them at least five years among those entitled to audit joint-stock companies on the general register, and the audit of at least three joint-stock companies a year over the five years before the application (article 3). The auditor is appointed annually, may not be renewed beyond six consecutive years from appointment, and may not be reappointed until three financial years have passed (article 8); Decision No. 108 of 2026 lets the auditor of a company offering its securities on the Egyptian Exchange, who had served it for at least five years at the offering, continue for at most two financial years afterwards.

The tax return: signed by a registered accountant

The register's reach is not confined to company law. The last paragraph of article 31 of the Unified Tax Procedures Law No. 206 of 2020 requires the annual tax return to be "signed by an accountant registered on the accountants' and auditors' schedule under the law governing it, for capital companies, cooperative societies, individuals and partnerships where the turnover of any of them exceeds EGP 2 million a year", and article 33 of its executive regulations (Minister of Finance Decree No. 286 of 2021) makes clear that capital companies and cooperatives are bound "whatever their turnover". The rule was in article 83 of the Income Tax Law No. 91 of 2005 until Law No. 206 of 2020 repealed that article. It therefore reaches individuals and partnerships above the turnover threshold, even though the Companies Law does not require them to have an auditor.

What this requires

• Establish which category the company falls into; the legal basis and the appointment and replacement procedure differ by legal form.
• Make sure the auditor is chosen or changed by the general assembly, not the board, following the set procedure when a replacement is proposed.
• Check a candidate before nomination, not after appointment: that they meet the conditions of Law No. 133 of 1951, including, for a joint-stock company, the five-year condition in article 25, and that none of the article 104 bars (membership, kinship, permanent work) applies.
• For companies within the FRA register's scope, including companies in which such an entity holds 25% or more of the voting rights: confirm the auditor is on the FRA's register, and track the six-year limit.
• Before filing the annual tax return, confirm the signatory is genuinely on the accountants' and auditors' schedule, as required for every capital company, and for individuals and partnerships above EGP 2 million (article 31, Law No. 206 of 2020).

The firm's Audit & Assurance Department determines which obligation applies to a given company, and verifies a candidate auditor's registration and independence before they are put to the general assembly.

Mahmoud Nassef — Chartered Accountant (Egyptian Register), Founder Partner

Member, Egyptian Society of Accountants & Auditors
Member, Egyptian Tax Society
Member, Egyptian Society for Public Finance and Taxation

Partner profile · Book a consultation

Disclaimer: This bulletin is prepared for general information on the legislation in force at the date of its publication. It does not constitute a professional opinion or tax or legal advice on any particular matter, and it should not be relied upon in place of advice based on an examination of the circumstances of each case. Nassef & Partners International accepts no responsibility for any action taken, or refrained from, in reliance on its contents. The positions stated remain subject to subsequent legislation and decisions.