Financial Crime World

Compliance vs Audit in Israel: A Look at the Profession’s Regulation

The Unique Regulatory Framework of Auditors in Israel

Auditors in Israel are the only segment of the accounting profession that is heavily regulated. The audit profession is overseen by both the Auditors’ Council and the Institute of Certified Public Accountants in Israel (ICPAI).

The Auditors’ Council

The Auditors’ Council, a branch of the Israeli Ministry of Justice established under the Auditors Law 5715-1955, is responsible for:

  • Conducting exams leading to receipt of an Auditor’s License
  • Supervising professional education and training
  • Responding to complaints regarding ethical and professional conduct

ICPAI: A Voluntary Body of Licensed CPAs

ICPAI, on the other hand, is a voluntary body of licensed Certified Public Accountants (CPAs) that:

  • Sets auditing standards
  • Develops ethical requirements for its members
  • Promotes accountancy education and training
  • Undertakes investigative and disciplinary procedures

Licensing and Exams in Israel

The Auditors Law and related regulations cover matters concerning licensing, exams, and ongoing supervision of the profession in Israel. To achieve an audit license, candidates can take one of two pathways:

Academic Route

  • Begins with a bachelor’s degree with dual major
  • Followed by additional studies and two final exams set by the Auditors’ Council
  • Eligible for a two-year apprenticeship in an auditing firm before receiving their license

Non-Academic Route

  • Based on self-study or studies at non-academic schools
  • Candidates required to pass 15 external exams and complete a two-year apprenticeship before receiving their license
  • Only licensed auditors may practice auditing in Israel

Disciplinary System and Quality Assurance

In addition to the Auditors’ Council’s investigation and disciplinary system, ICPAI also maintains its own Disciplinary Tribunal that has the authority to administer sanctions against members violating its rules. Audit quality assurance is undertaken by the Israeli Oversight Board (IOB), which conducts mandatory inspections of all CPA firms that audit financial statements of reporting companies.

Unique Feature: IOB Inspections

IOB inspection is not limited to only publicly traded companies, and members of ICPAI can voluntarily join the oversight process if their firm does not audit public companies. This comprehensive regulatory framework ensures that auditors in Israel are held to high standards, ensuring transparency and accountability in the profession.

Overall, the unique regulatory framework in Israel provides a robust system for ensuring compliance and audit quality, setting a high standard for the profession.