A question we are asked constantly by business owners: is my company actually required to appoint an auditor, or is it optional? The short answer is that the Companies Law makes it mandatory by default, and the exemption is an exception, conditional on specific quantitative thresholds and on a formality that must be satisfied.
Many businesses assume they are exempt simply because they are small, and discover otherwise when filing financial statements, bidding for a government contract, or applying for bank facilities.
Table of contents
The default rule: every company has an auditor
The Companies Law, issued by Royal Decree No. M/132 and in force since 19 January 2023, provides in Article 18 that a company shall have one auditor or more, licensed to practise in the Kingdom.
Article 19 then sets out the exception: exemption of micro and small enterprises from this obligation, as determined by the Implementing Regulations.
The exemption thresholds: two out of three
The Ministry of Commerce set the exemption thresholds in the Implementing Regulations. A company is exempt from appointing an auditor if, during the financial year, it meets at least two of the following three criteria:
| Criterion | Threshold |
|---|---|
| Annual revenue | Not exceeding SAR 10 million |
| Total assets | Not exceeding SAR 10 million |
| Number of employees | Not exceeding 49 |
We stress “two of three” because it is commonly misread. All three criteria do not need to be met. A company with SAR 8 million of revenue, SAR 7 million of assets and 60 employees has met two of three and falls within the exemption despite exceeding the headcount threshold.
The formality without which the exemption is incomplete
The exemption is not automatic on meeting the thresholds. When depositing the financial statements, the company manager or chairman of the board must submit a declaration that the company is not required to appoint an auditor, and that no partner or shareholder holding the prescribed percentage has requested that one be appointed.
In other words, the exemption is a right the company exercises and declares — not a status it falls into automatically.
Who loses the exemption despite being small?
- Companies listed on the capital market. Listing requires a licensed external auditor in all cases regardless of size, under Capital Market Authority requirements in addition to the Companies Law.
- Companies issuing debt instruments.
- Any company where a partner or shareholder holding the prescribed percentage requests the appointment of an auditor. That request alone defeats the exemption.
Obligations that survive the exemption
Exemption from appointing an auditor is not exemption from preparing and filing financial statements. Article 17(2) of the Companies Law requires financial statements to be prepared at the end of each financial year in accordance with the accounting standards approved in the Kingdom, and deposited within six months of the end of that financial year.
The Ministry of Commerce clarified on 16 December 2025 that the six-month filing period applies to all company types, and that filing is done electronically through the Qawaem platform at the Saudi Business Center.
Other bodies that may require an audit
The requirement for audited financial statements does not come from the Companies Law alone. In practice it arises from several directions:
| Body or purpose | Nature of the requirement |
|---|---|
| Ministry of Commerce | Deposit of financial statements with the auditor’s report where an appointment was required |
| Capital Market Authority | Licensed external auditor for listed companies, with periodic disclosure requirements |
| ZATCA | Financial statements prepared under the standards endorsed by SOCPA, and certificates approved by a certified public accountant in defined cases |
| National Center for Non-Profit Sector | Filing of audited financial statements for associations and foundations |
| Government tenders and prequalification | Audited financial statements within qualification documents in many tender packages |
| Banks and financiers | Audited financial statements for facility assessment and renewal |
The practical question is therefore not “am I legally exempt?” but “can I operate without audited financial statements?” — and for most businesses the answer becomes no before the end of the first year.
When should the appointment happen?
Appointing an auditor is not something to postpone until after year end. The correct sequence is:
| Step | Deadline |
|---|---|
| Ordinary general assembly meeting | At least once during the six months following the end of the financial year — Article 88(1) |
| Giving the auditor access to records and documents | At least 45 days before the general assembly |
| Providing partners or shareholders with a copy of the financial statements | At least 21 days before the ordinary general assembly |
| Depositing the financial statements | Within six months of the end of the financial year — Article 17(2) |
The 45-day and 21-day requirements derive from the Ministry of Commerce clarification of 16 December 2025, not from the text of the Companies Law itself.
The 45-day requirement is what makes a late appointment a practical problem. A company that appoints its auditor in May for a year ended in December does not have enough time to complete the audit before the general assembly and then file within the deadline.
The Implementing Regulations also contain provisions restricting how long an auditor may serve the same company — provisions worth reviewing in their current text when reappointing the same auditor over consecutive years.
Which framework applies to the financial statements?
- Publicly accountable entities, including listed companies: IFRS Accounting Standards as endorsed in the Kingdom by the Saudi Organization for Chartered and Professional Accountants (SOCPA).
- Small and medium-sized entities: the IFRS for SMEs as endorsed in the Kingdom, with the option to apply the full standards.
- Non-profit entities: SOCPA’s non-profit standards, whose amendments apply to annual periods beginning on or after 1 January 2025.
Note that the correct phrasing is “IFRS as endorsed in the Kingdom“, not “IFRS” without qualification — the local endorsement adds disclosure requirements reflecting Shariah principles and local law.
Frequently asked questions
What is the audit exemption threshold in Saudi Arabia?
A company is exempt from appointing an auditor if it meets at least two of three criteria: annual revenue not exceeding SAR 10 million, total assets not exceeding SAR 10 million, and no more than 49 employees.
Must all three criteria be met for the exemption to apply?
No. Two of the three are sufficient. A company that exceeds the headcount threshold but is below both the revenue and asset thresholds has met two of three and falls within the exemption.
Is the exemption automatic?
No. When depositing the financial statements, the company manager or chairman of the board must submit a declaration that the company is not required to appoint an auditor and that no partner or shareholder holding the prescribed percentage has requested that one be appointed.
If my company is exempt, am I also exempt from preparing financial statements?
No. The exemption concerns the appointment of an auditor only. The company remains obliged to prepare financial statements at the end of each financial year under the standards approved in the Kingdom, and to deposit them within six months of year end through the Qawaem platform.
Can a single shareholder force the company to appoint an auditor?
Yes. A request by a partner or shareholder holding the prescribed percentage defeats the exemption even where the micro and small enterprise thresholds are met.
When should an auditor be appointed in practice?
Before the financial year ends, or at the start of the following year. The auditor must be given access to records at least 45 days before the general assembly, the ordinary general assembly must meet within six months of year end, and the financial statements must be deposited within that same period.
Is a sole establishment required to appoint an auditor?
The Companies Law addresses companies. For sole establishments, an obligation to provide audited financial statements typically arises from other requirements — government tenders, financiers, or specific ZATCA requirements — and is determined case by case according to the purpose of the report.
How we can help
Almousa & Altamimi, Certified Public Accountants and Auditors is licensed to practise audit in the Kingdom. We assess your company’s position on the mandate or exemption before the financial year closes rather than after, audit the financial statements and issue the auditor’s report, and sequence the statutory deadlines so that filing completes within its period.
See our external audit service, or contact us to establish your company’s position. For filing details, see our guide to depositing financial statements on the Qawaem platform.
Quick reference: Glossary · FAQ
Official sources: Companies Law issued by Royal Decree No. M/132 (Articles 17, 18, 19 and 88); Implementing Regulations of the Companies Law; Ministry of Commerce statement on the exemption of micro and small enterprises (29 January 2023); Ministry of Commerce clarification on filing financial statements (16 December 2025); SOCPA. This content is general guidance and is not a substitute for professional advice on a specific case. Last updated: 14 September 2026.
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