ARTICLES & UPDATES

The inclusion of state-owned land leased by companies as fully owned assets in financial statements does not reflect the legal reality. Such land remains the property of the state, and the lease may be terminated or the land withdrawn at any time. In many cases, shareholders ultimately bear the cost of this incorrect treatment.

This approach is sometimes justified as “common practice” in Kuwait. However, common practice cannot override the requirement to present accurate and truthful financial information.

Responsibility for this lies with the auditor. The auditor may be required to compensate shareholders or third parties who suffer loss as a result of relying on financial statements that do not reflect the true position of the company.

Article (230) of the Companies Law requires the auditor, along with any accountants involved in the audit, to submit a report to the General Assembly confirming that the information in the Board of Directors’ report matches the company’s books and records. The auditor must also confirm that the financial statements reflect the company’s actual position, comply with the law and the company’s articles of association, and clearly present the true financial status of the company.

Article (233) of the same law states that the auditor is responsible for the financial information in their report and is liable for any damage caused to the company, its shareholders, or third parties due to errors made in the course of their work.

For this reason, the auditor must act independently and not follow instructions from others. The auditor is entrusted by shareholders to protect their interests and monitor the company’s funds and assets. It is important to distinguish between full ownership and usufruct rights, as leasing state-owned land gives the company only a right to use the land, not full ownership.

Lawyer AbdulRazzaq Abdullah E-mail: azq@arazzaqlaw.com