Audit quality in Oman is under closer regulatory scrutiny in 2026. The Financial Services Authority (FSA) has intensified its supervision of accounting and auditing firms following the transfer of regulatory responsibility for the profession under Royal Decree No. 20/2024. Recent inspections and enforcement decisions show that compliance with International Standards on Auditing (ISA) is not treated as a formality. The FSA is examining how audit engagements are planned, performed, documented, evidenced, and reported.
For companies seeking external audit in Oman, this regulatory focus matters because the quality of the audit depends on more than the final opinion signed by the auditor. Engagement documentation, audit evidence, materiality assessments, related-party procedures, engagement terms, working papers, and report presentation all form part of the audit quality framework.
In April 2026, the FSA reported more than 45 regulatory and professional-development actions, including nine field visits. Its inspections identified violations involving licensing, audit documentation, evidence, related parties, materiality, engagement letters, and audit reporting. Four firms were deregistered, three received warnings, and two were suspended from practice.
What Are the Oman External Audit Requirements?
External audit requirements in Oman come from several regulations and professional standards. Companies meet the requirements applicable to their legal structure, industry, financial reporting framework, and regulatory status, while auditors need to perform engagements in accordance with applicable laws and approved professional standards.
The FSA now plays a central role in regulating the accounting and auditing profession in Oman. The Authority’s 2026 supervisory activity has placed particular emphasis on compliance with International Standards on Auditing and the Law Regulating the Accounting and Auditing Profession.
The practical requirements include:
- Using a properly licensed audit firm.
- Establishing clear engagement terms.
- Planning the audit based on assessed risks.
- Determining and documenting materiality.
- Obtaining sufficient and appropriate audit evidence.
- Performing required procedures for significant balances and transactions.
- Addressing related-party relationships and transactions.
- Maintaining complete audit documentation and working papers.
- Applying appropriate quality and independence controls.
- Preparing audit reports that comply with applicable requirements.
- Retaining audit files for the required period.
Why the FSA’s 2026 Findings Matter
The FSA’s April 2026 regulatory update provides one of the clearest summaries of the Authority’s current audit-quality concerns. Following desk-based reviews and field examinations, the FSA identified violations involving unlicensed practice, unauthorised signing of audit reports, failure to retain audit files for ten years, and non-compliance with several ISAs.
The findings included deficiencies under:
- ISA 210: Terms of audit engagements
- ISA 230: Audit documentation
- ISA 500: Audit evidence
- ISA 550: Related parties
- ISA 700: Forming an opinion and reporting on financial statements
- ISA 320: Materiality in planning and performing an audit
The Authority has continued enforcement action throughout 2026. In October 2026, the FSA warned an audit firm after identifying deficiencies in audit evidence and documentation of the nature and extent of procedures performed. The firm was given three months to implement regulatory directives aimed at improving professional competence and work quality.
ISA 210: Engagement Terms Must Be Properly Established
One of the FSA’s identified deficiencies was the absence of engagement letters between audit firms and clients. This relates directly to ISA 210, which establishes requirements concerning the terms of an audit engagement.
An engagement letter establishes the basis of the professional relationship. It defines the audit’s objective and scope, management’s responsibilities, the auditor’s responsibilities, and the applicable financial reporting framework. The FSA specifically identified missing engagement letters as a weakness that undermines contractual clarity and the definition of responsibilities required under ISA 210.
ISA 230: Audit Documentation Must Support the Work Performed
Audit documentation was another major concern in the FSA’s findings.
ISA 230 requires auditors to prepare documentation that provides a sufficient record of the basis for the auditor’s report and evidence that the audit was planned and performed in accordance with applicable requirements.
The FSA found deficiencies in audit documentation where working papers were insufficient to trace the audit procedures performed and assess the quality and compliance of the engagement. Working papers need to show what was tested, what evidence was obtained, what conclusions were reached, and how significant issues were addressed. A conclusion without supporting documentation creates a weakness even when the underlying audit procedure was performed.
ISA 500: Audit Evidence Must Be Sufficient and Appropriate
An audit opinion depends on evidence. The FSA has specifically identified failures to obtain sufficient and appropriate audit evidence as a recurring quality issue.
ISA 500 establishes the auditor’s responsibilities concerning audit evidence. The evidence obtained needs to support the conclusions reached during the engagement and ultimately provide a basis for the audit opinion.
The FSA’s April 2026 findings identified cases where evidence supporting audit procedures on financial statements was insufficient or inappropriate.
This issue was also reflected in later enforcement action. In August 2026, the FSA suspended an audit firm after identifying deficiencies involving audit documentation, materiality, inventory verification, related-party procedures, and the sufficiency and appropriateness of evidence supporting the professional opinion.
ISA 320: Materiality Must Be Determined and Documented
Materiality influences audit planning, risk assessment, testing, evaluation of misstatements, and the final audit opinion.
The FSA identified non-compliance with ISA 320, particularly failures to document materiality thresholds for significant misstatements and audit execution.
An effective audit file needs to demonstrate the basis for materiality decisions and how those decisions influenced audit procedures. If materiality is not properly established and documented, the auditor’s approach to risk and testing becomes difficult to evaluate.
ISA 550: Related-Party Transactions Require Specific Attention
Related-party transactions create particular audit risks because they can involve transactions that are not conducted under normal market conditions or that are not adequately disclosed.
The FSA identified non-compliance with ISA 550, including failures to perform required audit procedures relating to related parties.
Auditors need to identify related-party relationships and transactions, understand their nature, assess the associated risks, and perform appropriate procedures.
Companies also have an important role in this process. Management needs to maintain accurate information about shareholders, directors, key management personnel, subsidiaries, associated entities, and other relevant relationships.
ISA 700: Audit Reports Must Meet the Required Standard
The final audit report is the document users rely on to understand the auditor’s conclusion on the financial statements. The FSA found cases where audit report structures did not comply with ISA 700 requirements relating to format, content, and the formation of the audit opinion.
ISA 700 establishes requirements for forming an opinion on financial statements and presenting that opinion in the auditor’s report.
The report needs to communicate the auditor’s conclusion clearly and contain the required elements. Errors in the structure or content of the report can undermine the reliability and regulatory acceptability of the audit engagement.
Audit File Retention Is a Regulatory Requirement
Audit documentation needs to remain available after the audit report is issued. The FSA has highlighted the legal requirement for auditors to retain audit working papers and files for ten years.
The Authority identified failures to maintain files for the required period during its supervisory examinations.
The ten-year retention requirement was also referenced in FSA enforcement decisions issued during 2026. In July, the Authority warned two audit firms over breaches involving audit report signing, working-paper retention, and compliance with applicable ISAs.
Audit firms therefore need effective systems for file retention, access, security, and retrieval. Maintaining the file is not simply an administrative responsibility; it forms part of professional compliance.
FSA Oman Audit Requirements Include Proper Licensing
The FSA’s regulatory focus extends beyond audit procedures. The Authority has repeatedly stressed that accounting and auditing activities require the appropriate professional licensing.
In February 2026, the FSA warned businesses and other users of audit services to verify that an accounting or auditing office holds an FSA licence. The Authority specifically stated that a Commercial Registration does not itself authorise an entity to practise accounting and auditing.
The FSA maintains official information on authorised and accredited accounting and auditing firms through its regulatory platform.
What Recent FSA Enforcement Shows About Audit Quality
The pattern across the FSA’s 2026 actions is clear. Audit quality problems are not limited to one stage of the engagement.
The Authority has identified deficiencies involving:
- Unlicensed individuals performing audit work.
- Unauthorised signing of audit reports.
- Missing engagement documentation.
- Inadequate audit evidence.
- Weak audit documentation.
- Failure to retain audit files.
- Poor materiality assessment.
- Insufficient inventory procedures.
- Inadequate related-party procedures.
- Non-compliant audit report presentation.
- Independence concerns where firms prepare financial statements and audit them for the same client.
The FSA’s July 2026 accounting and auditing profession forum specifically highlighted issuing audit reports without performing actual audit procedures, ISA non-compliance, unlicensed practice, and the preparation and auditing of financial statements for the same client as significant professional concerns.
These findings demonstrate that FSA Oman audit requirements extend beyond producing an audit report. The entire engagement needs to be professionally controlled and properly documented.
How Companies Can Prepare for a High-Quality External Audit
Companies also have a role in making the external audit efficient and properly supported.
Maintain Complete Financial Records
Financial statements need to be supported by organised accounting records, reconciliations, schedules, invoices, contracts, bank records, and other relevant documentation.
Prepare Related-Party Information
Management needs to provide accurate information about related entities, directors, shareholders, key management personnel, and related-party transactions.
Reconcile Major Accounts
Bank accounts, receivables, payables, inventory, fixed assets, loans, tax balances, and other significant accounts need to be reconciled before the audit begins.
Provide Supporting Evidence
Auditors need evidence to test balances and transactions. Delays in providing supporting documents slow the engagement and make it harder to resolve audit findings efficiently.
Address Previous Audit Findings
Previous audit adjustments, control weaknesses, management-letter points, and unresolved issues need to be reviewed before the next audit cycle.
Select an Authorised Audit Firm
Companies need to verify that their external auditor is appropriately licensed and authorised to provide audit services in Oman.
Why ISA Compliance Matters for Businesses in Oman
ISA compliance protects the quality and credibility of the external audit. It gives financial statement users greater confidence that the audit was planned properly, evidence was obtained, significant risks were addressed, and the final opinion was supported by documented work.
The FSA’s recent supervisory activity shows that the standard expected from audit firms in Oman is becoming increasingly clear. Proper licensing, professional competence, strong documentation, sufficient evidence, appropriate materiality assessment, related-party procedures, and compliant reporting all form part of that expectation.
Preparing for External Audit Requirements in Oman
The latest FSA findings make one point clear: quality in external audit in Oman depends on the complete audit process, not simply the final report. Every engagement needs proper planning, sufficient evidence, clear documentation, appropriate professional judgment, and compliance with applicable ISAs and Omani regulatory requirements.
MFN Auditing provides external audit and assurance services in Oman with a focus on accurate financial reporting, professional audit procedures, regulatory compliance, and well-supported audit conclusions. Our approach addresses the areas receiving increased regulatory attention, from audit documentation and evidence to materiality, related-party transactions, and reporting requirements.
FAQs
What are the main Oman external audit requirements?
Key requirements include proper auditor licensing, engagement documentation, audit planning, materiality assessment, sufficient and appropriate audit evidence, audit documentation, related-party procedures, compliant reporting, and retention of audit files.
What did the FSA find in its 2026 audit inspections?
The FSA identified deficiencies involving engagement letters, audit documentation, audit evidence, related-party procedures, materiality, audit reporting, file retention, licensing, and compliance with International Standards on Auditing.
How long must audit files be retained in Oman?
The FSA has stated that audit working papers and audit files must be retained for ten years under the applicable Law Regulating the Accounting and Auditing Profession.
What is the role of the Financial Services Authority Oman in auditing?
The Financial Services Authority Oman regulates and supervises the accounting and auditing profession and takes enforcement action where licensed practitioners fail to comply with applicable laws, regulations, and professional standards.
Does an Omani Commercial Registration authorise a company to provide audit services?
No. The FSA has specifically stated that a Commercial Registration does not itself authorise an entity to practise accounting and auditing. The appropriate FSA professional licence is required.
Why is audit documentation important?
Audit documentation records the procedures performed, evidence obtained, professional judgments made, and conclusions reached. The FSA has identified inadequate documentation as a significant audit-quality deficiency.