An accounting scandal at one of Saudi Arabia’s largest telecommunications companies is posing the first major test of the Gulf monarchy’s regulators, as Riyadh moves to open up the Arab world’s largest stock market to foreign investors next year.

Etihad Etisalat, known as Mobily, on Sunday suspended Khalid al­Kaf, chief executive, and put Serkan Okandan, his deputy, in temporary charge while the company’s audit committee probes accounting errors that wiped out about $380m in previous profits. The capital markets authority earlier this month opened up an investigation into the accounting errors to determine whether the company violated the stock market’s rules. Mobily reported a shock profit drop in the third quarter and restated earnings through 2013. Restatement of income from a loyalty programme since 2013 amounted to SAR1.42bn ($378m.) The company also revealed that it had mis­accounted revenues related to the sale of top­up cards with handsets via third party vendors, restating revenues down by SAR6.3bn since the beginning of 2013.

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