Every trader must keep an original journal, an inventory book, and a general ledger, and retain them for at least 10 years. Companies, in turn, must prepare financial statements in accordance with the accounting standards approved in the Kingdom and file them within 6 months of the end of the financial year. The Law of Commercial Books and the Companies Law work together on this point: the former sets the minimum discipline for day-to-day accounting records, while the latter sets the requirements for a company's final financial statements and their audit.
Mandatory Commercial Books
The Law of Commercial Books provides that every trader must keep the commercial books required by the nature and importance of their trade, in a manner that ensures an accurate statement of their financial position and of their rights and obligations relating to their trade. These books must be kept in an orderly manner and in Arabic, and at a minimum the trader must keep the following books:
- The original journal.
- The inventory book.
- The general ledger.
A trader whose capital that does not exceed one hundred thousand riyals is exempt from keeping these books.
Retention Period for the Books
The trader and their heirs must retain the books stipulated by the Law, together with the correspondence and documents relating to their trade, for at least 10 years.
Penalty for Violating the Law of Commercial Books
Any violation of the provisions of the Law of Commercial Books or of the regulations and decisions issued to implement it is punishable by a fine of not less than five thousand riyals and not more than fifty thousand riyals.
Information Sharing Between a Parent Company and Subsidiaries
If preparing interim or annual financial statements requires a controlling company, or a company holding shares or interests in another company's capital, to obtain information from the controlled company, the controlled company must provide that information to the extent needed to enable the controlling or owning company to prepare its financial statements in accordance with the accounting standards approved in the Kingdom.
Computerized Books
Data relating to the commercial books may be recorded by computer for establishments and companies that use a computer for their accounts, provided the system used for processing that data allows it to be inspected at any time. Commercial establishments that use a computer for their commercial books are directly responsible for the accuracy of the accounting data recorded in their commercial books.
Preparing and Filing Financial Statements (Companies Law)
Under the Companies Law, a company must prepare financial statements at the end of each financial year in accordance with the accounting standards approved in the Kingdom, and file these statements, as specified by the regulations, within 6 months of the end of the financial year.
Appointing an Auditor
A company must have one or more auditors licensed in the Kingdom, appointed by the partners, the general assembly, or the shareholders, as applicable, who also set the auditor's fees, term, and scope of work, and the auditor may be reappointed, though the regulations set a maximum term for the auditor's tenure. If the auditor is removed, the manager or chairman of the board must notify the competent authority of the removal decision and its reasons within a period not exceeding 5 days from the date of the decision. That said, the requirement to appoint an auditor does not apply to micro and small companies, except in specific cases set out in the Law, such as companies listed on the capital market or those required to appoint an auditor under other relevant laws.
Legal References
- Law of Commercial Books — Articles One, Eight, and Twelve.
- Implementing Regulation of the Law of Commercial Books — Article Three.
- Companies Law (new) — Articles Seventeen, Eighteen, and Nineteen.
For questions about your specific situation, you can ask the Saudi Arabia Private-Sector Accounting Helper on Helpers, or consult a licensed chartered accountant.