How to prepare for a successful annual audit in the UAE

Auditing Firms in Dubai

Preparation for Annual Audit

The prospect of an independent audit of your company accounts is unlikely to trigger delight. An auditor needs to delve deep into the inner workings of a company, and it may feel as if you’re being presented with a long list of demands at the end of each financial year. 
But this exchange needn’t be too demanding of your firm. By taking some simple measures throughout the year, you can ensure that your annual audit is as seamless and effortless as possible.

Perform year-round reconciliations

Leaving it until the last minute to complete reconciliations will prove a sure-fire way to prolong and complicate an audit. To avoid this, we recommend that your finance department completes reconciliations on a quarterly or monthly basis. This will flush out any anomalies early on, leaving you plenty of time to fix them prior to the start of the audit.

Address potential complications throughout the year

If your company inputs an unusual or new transaction that your auditor is likely to quiz further down the line, don’t wait until your financial year-end to address it. Give your auditor a call and provide them with the information they need to make sure it has received the correct accounting treatment. This way you avoid having to backtrack through months of documentation to explain yourself at the end of the year.

Ask for the prepared-by-client list in advance

Just prior to your audit and after your financial year-end, your company will receive a prepared- by-client (PBC) list from the auditor. This will detail much of the documentation that the auditor requires for the audit and is likely to be quite extensive. 
It will typically include requests for documents such as the trial balance, bank statements and reconciliations, inventory records and plenty more, and can take a long time to compile in one go. By requesting the PBC list in advance, you can incorporate fulfilling these requests into your year-end processes. This will avoid unnecessary duplication of work whilst ensuring you have everything to hand when required.

Don’t leave anything to chance – ask questions

Once you have the full PBC list from the auditor, examine it to make sure that you understand everything that is requested of your company. If there are any items that you don’t understand,seek clarification prior to the start of the audit. The auditor will be happy to field any questions that you may have, and consulting with them ahead of schedule could even help you identify more efficient processes.

Plan around the audit

Set aside plenty of time for the audit and ensure that all of your key staff are available when required. This means making sure that your finance and accounting staff haven’t booked time off during the audit, and that they generally have a free schedule whilst the auditor is carrying out fieldwork. 
You will have provided much of the documentation requested by the auditor prior to the actual audit. However, in order to gauge a comprehensive understanding of your company, they will be after additional information and details behind the figures. Not being able to answer any queries promptly will inevitably prolong the process.

Go digital

Thanks to the emergence of online accounting and invoicing software, it’s now far easier for firms to document and categorise documents that will be required in preparation for an audit. Much of this is automated, meaning less work is required of your finance department. 
Alternatively, you can store your documents digitally by scanning them and uploading them onto the cloud. This means you have the information you need readily accessible online, rather than having to rifle through filing cabinets come your financial year-end.

Guaranteed assurance with Alya Auditors

By raising a red flag to any potential problems and making amends, an audit can offer unparalleled value to a business. At Alya Auditors, we provide an efficient, comprehensive service which means less legwork for our clients and more solutions to their problems.
It may be that your company is exempt from carrying out an audit, if it meets the Government’s definition of a small company or micro-entity. In which case, we can provide a Limited Assurance Report to help you meet the requirements of modern business without the need for an audit. Get in touch for further details.

Are some audit firms/auditing better than others in Dubai ?

Approved Auditors in Dubai,UAE

We would hope that all audits carried out by all registered auditors are as reliable as each other.  Generally, experience confirms this.  The question might therefore be rephrased as: “Do some audits offer better value for money than others?” To this we can definitely say “yes”!  There are two reasons why:

  1. Some auditors are more efficient than others
  2.  Some auditors apply their knowledge better than others.
    We like to think we do both.  Certainly our clients tell us we do.

Audit efficiency

An efficient auditor deals with those areas which are important to the audit – the ones which might make a difference to how he reports.  An inefficient auditor wastes time worrying about things that will make no difference to the accounts. An efficient auditor prepares by getting to know you, understanding your needs, so that during his audit he can focus his attention on matters that matter to the company, rather than matters that are of little interest to you.

Applying knowledge

No outsider will get to know your company as well as your auditor. There are rules that prevent an auditor getting involved in running your company, but there is nothing to stop an auditor advising you on the matters that come to his attention for the benefit of the company.  And who better to help you solve the problems your company faces than the people who have just gone through the transactions for the last year and know exactly what is happening with your company?

Best Chartered Accountants in Dubai,UAE

ALYA Chartered Accountants – Certified Chartered Accountants Firm in Dubai,Abu Dhabi,Sharjah,Jebel Ali, Saif Zone, UAE. Alya is one of the best Audit firm in Dubai and VAT Consultants in UAE, providing audit, accounting, and business setup services across UAE.

To find out more, call us on  +971 52 9750690  and speak to one of our ​audit experts.

Is auditing creating problems or solutions for businesses in UAE?

-auditing-in-dubai

The truthful answer is, maybe.  An auditor is there as an independent person to give a statutory report.  In doing so, it has been said that an auditor has many roles:

  •  An investigator, looking for problems (though his intention is to prove that there are none).
  •  An accuser: he will ask you what happened once he does find a problem.
  • A defender: he will seek a way to find that a problem has been or can be resolved.
  •  A juror: he will decide in the end whether the problem he has found is a problem or isnot a problem as a matter of fact.
  • A judge: finally, if a matter does need reporting, he will determine how it is to be
    reported.
    Yet within all this, our auditors want to solve your problems.  They cannot solve problems if they cannot find them, so it is actually in your interest that they find problems and then solve them.

Business Audits Are Not Something to Be Afraid Of

A small business audit is never fun, but there is no need to fear the possibility of one. In fact, an internal audit can be a welcome way to spot business inefficiencies and plan better for the future. Even external audits can help you stay on good terms with shareholders, investors, and lenders. As far as FTA audits go, they are nothing to fear either, as long as you are accurate about your income and deductions. At the end of the day, the best way to prepare for any business audit is to keep well organized financial records.

How Does A Small Business Audit Work?

We’ll provide more information below about different types of small business audits, but all business audits share some things in common. The auditor, whether that’s someone within your business or an external auditor, will do a thorough evaluation of your accounting books and financial statements.

You can either provide a physical copy of your books or set up the auditor with login access to your accounting software. The auditor usually will check a year’s worth of financial data. Ideally, your financial records—whether kept in physical files or electronically—should be well organized by year and category of income or expenses.Otherwise, an audit might take much longer than necessary.

When an audit is finished, you should receive an audit report. The audit report will contain a statement about the auditor’s identity, the scope of the audit, and whether the auditor found the company’s financial records to be accurate or not. Audit reports generally follow a certain structure to comply with generally accepted accounting principles.

Types of Business Audits

You should be familiar with three main types of business audits:

  • Internal Audit
  • External Audit / Statutory Audit
  • FTA Audit/ Correspondence audit
Internal Audit

An internal audit is a self-audit that’s scheduled and conducted by a representative of your own company. Many businesses do an internal audit once per year to ensure the accuracy of their books and financial statements. An internal audit is for your own purposes you don’t submit the results to an external organization.

Larger companies usually have audit departments, but a smaller business might employ just one or two people to conduct audits. Internal auditors don’t just check a business’s finances. They also check company policies, procedures, and processes to check compliance with internal guidance and federal, state, and local laws.

Public companies generally conduct internal audits to update shareholders and investors on how a company is performing. Even if you’re not a public company, internal audits can be an important way to catch operational issues.

A correspondence audit—the more common kind—is when the IRS sends you a letter
describing the possible errors in your tax return. You can reply with documentation to
support your position. Field audits are when you meet an IRS examiner at your place of
business, accountant’s office, or local IRS office. The examiner will look through your
financial records and books to see if they match up with the tax return and comply with
tax laws.

The chance of being selected for an IRS audit is extremely low—less than 1% for most
types of businesses. However, if you are selected, you should have your accountant,
tax professional, or business attorney present during the audit.

External Audit/ Statutory Audit

An external audit, also known an independent audit, is an audit that’s conducted by someone outside the organization. This is called an independent audit because the auditor has no loyalty or responsibility to the business that could create a conflict of interest.

Usually, businesses conduct independent external audits to comply with some kind of legal requirement. 

The external auditor will provide you with an audit report that follows generally accepted accounting principles. In their report, they’ll have to provide an opinion as to whether your company passed the audit. An auditor might take one of the following stances in  business audit:

  •  Clean opinion – The business’s books and financial statements accurately represent the company’s financial position.
  •  Qualified opinion – The auditor disagrees with some parts of the company’s financial records, but the audit was too limited in scope or access to come to a definitive conclusion.
  • Adverse opinion – The auditor found that the business’s financial records materially misrepresent the company’s financial position.
  • Disclaimer of opinion – In this type of report, the auditor doesn’t give any opinion on certain financial records. For example, if the auditor is retained to examine this year’s financial statements, they might use a disclaimer of opinion for prior year financial records.

If a company doesn’t receive a clean opinion, they might need to correct errors in their financial records and re-do the audit.

FTA/Correspondence Audit

The more common kind—is when the FTA sends you a letter describing the possible errors in your tax return. You can reply with documentation to support your position. The examiner will look through your financial records and books to see if they match up with the tax return and comply with tax laws.

The chance of being selected for an FTA audit is not extremely low types of businesses. However, if you are selected, you should have your accountant, tax professional, or business attorney present during the audit.

What our audit team will not do is create a problem that did not exist in the first place!

To find out more, call us on  +971 52 9750690 and speak to one of our ​audit experts.

How Can a Business Audit Benefit Your Company in Dubai?

Accounting & Auditing Firms in UAE

Most small business owners are intimidated at the thought of an audit, but an audit can actually help your business to be more productive and plan better for the future.

Here are some benefits of small business audits:

Send a Signal to Investors and Lenders –

If you’re looking to raise capital for your business, having audited financial statements can boost confidence of investors and lenders in your
company.

Root Out Productivity Killers –

Doing an audit can help you spot fraud, employee theft, and operating inefficiencies. In turn, that can help you to achieve profitability or increase your profit margin.

Make Tax Time Easier –

If you’ve self-audited your financial statements, filing small business taxes at year end will be a breeze. You also make things easier for your accountant, and save on the money that you have to pay them.

Receive certifications –

Certain business certifications, like ISO 9001 certification, require regular business audits. These certifications can increase business revenue and lower operating costs.

Ultimately, you should think of an audit as a quality control mechanism to improve your business’s efficiency. Business audits take time and money, but are often worth the boost to your business’s bottom line.

Select The Leading Auditors & Accountants in Dubai

Alya Al Marzooqi Auditing( www.alyaauditors.com) is one the Top Chartered Accounting firm in the UAE, with high efficiency in the services we provide. Our Accounting division has well experienced professional executives who are well versed with the rules and regulations and laws in the UAE. For companies, our accountants shall guide to clean your books up thus making your business smooth.

Our Accounting Services Includes :

Payroll Management, Accounts payable and receivable, Credit card Management and Financial Reporting.

Other business bookkeeping services that we provide include business bank and trial balance reconciliations, balance sheets, labor cost management, and debt planning and reduction.

Also interested in Reading: Accounting & Bookkeeping For Startups

When you analyse these ratios, you get an overall idea of a business. You can easily decide whether to invest in a company or not.

What Is Financial Ratio Analysis?

Chartered Accountants in Dubai,UAE

It’s not an easy task to invest in any of the companies in Dubai. You should know about the status of the company that you are investing in comparison to other businesses. You are loaded with questions when you think of investing. Financial ratio analysis is the answer to all the questions that you have in your mind. Initially you get confused with a number of financial ratios. The key is to take the right ratios provided that you have knowledge about those.

What are financial ratios?

Financial ratios are nothing but the process of combining two or more numbers in different ways. The numbers are generally taken from the balance sheet or the financial statement. Financial ratios indicate the profitability, efficiency and solvency of a business. While the profitability ratio conveys the ease with which the business is going to make profit, the solvency ratio depicts the way the business is going to meet its financial obligation in time bound manner. The efficiency ratio determines the way the business is going to show positive outcomes with sales and profits.

Some of the basic terms that you should know while doing financial ratio analysis

1. Cost of the goods sold

This is a measure of the direct purchases made by a company for doing specific jobs. This can include the cost of labour, material, subcontractors, equipment and any other expenses.

2. Overhead

This is also a kind of expense which doesn’t include any depreciation of value. This type of expense includes all sorts of administrative expenses.

3. Unpaid invoices

This is the amount of money that your customers owe you as you have provided services to them.

4. Unpaid bills

This is the amount of money that you need to pay your vendors for the equipments that they have provided you to manufacture your goods.

5. Current assets

These are assets which can be converted in to money in one year. These assets include amount of cash, prior expenses, the amount you are going to receive, inventory and other assets which can be easily converted in to money.

6. Current liabilities

These are the debts which you should pay within one year. Taxes, amount of money payable, debts for a short term, notes, withholdings and other liabilities come in this category.

7. Working capital

When you subtract the current liabilities from current assets you get the value of working capital.

Some of the financial ratios that help you in financial analysis

Two profitability ratios

1. Net profit margin

This is the amount of return on sales. This is the profit which you get before paying taxes. The higher amount of net profit margin is healthy for businesses. This helps you stand out in the cut-throat market which low prices competitors dominate. You can calculate the ratio by dividing the net profit before taxed with net sales. You can convert in to percentage by multiplying 100 with it. While industry average in Dubai stands 4 percent, you can increase this ratio to 10 percent for maintaining a healthy profile.

2. Net profit to total assets

This is a ratio of return on assets. This is the most important ratio that shows how much profit a company is making. This ratio is calculated by knowing the value of profit after paying taxes. The higher is the percentage, the higher is the profit percentage of the company. You can calculate the ratio by dividing the net profit after taxes with total assets value.

You will get the value in percentage by multiplying the number with 100. When you reach 15 percent, the ratio indicates that you have a well run company.

Solvency ratios

1. Current ratio

This ratio is indicative of the value of the current assets to meet the current liabilities. When you have this ratio value as 2 your company is termed as a healthy company. This ratio varies from standard of company to company. A sloe selling company needs high current ratio. You can calculate this ratio by dividing the current assets by current liabilities.

2. Quick ratio

This ratio depends upon the liquidity of your current assets. This ratio also measures the ease with which your current assets can be converted in to cash to cover up the current liabilities. This is a hot favourite ratio of the lenders. You can calculate this ratio by dividing the cash plus current receivables with the current liabilities. A number more than 1.35 is a good indicator.

3. Total liabilities to total assets

The value of this ratio above 1.25 indicates that your company is able to absorb the operating losses to meet the financial obligations. You can divide total liabilities by total assets to find this number.

4. Working capital to total assets

As the name of the ratio suggests, this ratio indicates the percentage of the assets in the form of working capital. To easily meet the liabilities, you can convert the working capital in to cash. You can find the ratio by dividing the current assets with working capital. A value of 0.25 or greater is good for a business.

5. Cash to current liabilities

This ratio is also known as doomsday ratio. When you have to meet the current financial obligations, your business should be prepared for this. This ratio can be found out by dividing the cash by current liabilities. This is the most crucial solvency ratios of all. When this value is equal to 1, your business is said to have good doomsday ratio.

Efficiency ratio

This ratio is a measure of how easily you can collect the amount receivable by your business. The standard time period is 10 or 15 days in Dubai. This ratio can be calculated by dividing the average accounts receivable with sales. Then you need to multiply 365 with the outcomes. When this ratio goes below 40, the efficiency ratio of a company becomes better.

Sales to total labour ratio

This ratio is indicative of the expenses on the labour from the amount of profit that you earn. You can get this number by dividing labour cost plus labour expenses with sales. You can convert the number in to percentage by multiplying 100 with it. A percentage below 30 is a good indicator for a company.

Top Chartered Accountants in Dubai,UAE

Alya Al Marzooqi Auditing( www.alyaauditors.com) is one the leading Chartered Accounting firm in the UAE, with high efficiency in the services we provide. Our Accounting division has well experienced professional executives who are well versed with the rules and regulations and laws in the UAE. For companies, our accountants shall guide to clean your books up thus making your business smooth.

Our Accounting Services Includes :

Payroll Management, Accounts payable and receivable, Credit card Management and Financial Reporting.

Other business bookkeeping services that we provide include business bank and trial balance reconciliations, balance sheets, labor cost management, and debt planning and reduction.

Also interested in Reading: Accounting & Bookkeeping For Startups

When you analyse these ratios, you get an overall idea of a business. You can easily decide whether to invest in a company or not.

3 Ways to Forecast Your Revenue

Best Auditing & Accounting Services in Dubai,UAE

Your business revenue forecast is an essential part of future business planning. You need to know approximately how much you can make throughout the year, your expected cash flow and how much growth your business may experience. Revenue forecasting is not intended to give you exact figures for yearly earnings. Instead, it does provide several methods that will help you forecast your revenue as accurately as possible. Here are three things to keep in mind to assist you in forecasting your company’s revenue.

1. Research thoroughly

It takes a significant amount of data to forecast revenue. In addition to your standard expenses and recurring payments, look at data from competitors in similar growth stages as your business, predicted seasonal trends and other increased revenue periods. Pull data from your analytics and financial reports, industry case studies and reports, and other data sources for a compilation.

2. Provide a thorough breakdown of expenses

Obtain a full accounting of your yearly expenses. After all, figuring out your revenue is trickier than anticipating your fixed costs. Look beyond your regular costs and estimate the amount of occasional expense costs. Estimate irregular costs on the high side. It’s better to plan for higher costs and be pleasantly surprised if you have a budget surplus.

3. Review your company's cash flow history

You can’t predict sudden growth phases, but you can estimate your future revenue based on your company’s performance during the last few years. If you are planning big changes, such as a new product line or a major company announcement, look at revenue trends from similar events in the past to guide you for the direction your business may be headed.

Entrepreneur recommends taking a look at revenue forecasting with two specific mindsets: the optimistic approach and a more conservative estimate. You always want to hope for a high level of success for your company, so the optimistic estimation looks at a best-case scenario for your business. The conservative revenue forecast takes a more measured approach to determine how much your company will bring in during the coming year.

Best Audit Firms in Dubai

For the flawless services in UAE, all you need is Alya Auditors one of the best audit firms in UAE They have the best range of auditors who know all the rules and regulations that should be kept in mind while carrying out the audit. This is not all about them. There is so much more they offer you. Their international services along with skilled and qualified auditors are something that cannot be explained in words. They will never seize t satisfy you from their services at any cost.

If you want to succeed in your company and run it efficiently, you should hire the top auditing companies in Dubai, UAE. All of their services are provided to the people with the combination of both assurance and consulting services. In the part of assurance, the managers and the governors are told about how well their business is running whereas, in case of a consultation, the companies are told what they can do in order to make their business systems and processes better.