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Is Audit Necessary for Companies in the UAE, Dubai ?

Yes, audit is mandatory for all companies registered in the UAE, regardless of their legal form or nature of their activities. The requirement for audit is established under Federal Law No. 2 of 2015 on Commercial Companies (the “Company Law”), which mandates that all companies must appoint an auditor and prepare audited financial statements each year.

The audited financial statements must be prepared in accordance with International Financial Reporting Standards (IFRS) or other accounting standards approved by the UAE Ministry of Economy. The auditor must be a registered auditor with the UAE Ministry of Economy and comply with the auditing standards set by the UAE Auditing and Accounting Organization (AAO).

Legal Requirements

  1. Free Zone companies: Some of the Free Zones Authorities made it mandatory to submit the audited financial statements to the authority for renewing the trade licenses of the companies registered under them. Such free zones include; Dubai Multi Commodities Centre (DMCC), Dubai Airport Free Zone (DAFZA), Dubai World Central (DWC), Jebel Ali Free Zone (JAFZA), Dubai International Financial Center (DIFC), Dubai Silicon Oasis (DSO), Creative City – Fujairah, etc.
  2. Branch of Foreign Companies: It is mandatory for foreign companies to submit the audited financial statements of the branch of foreign companies registered in the UAE every year.
  3. Liquidation of the Company: Audited financial statements of Companies under liquidation is one of the most important documents for a liquidator to prepare the liquidator’s Report.
  4. Other Government Authorities such as Municipalities, various Ministerial Departments, Insurance Authorities, etc. also demand the companies submit their audited financial statements as of and when it is required for the authorities.

It is important to note that some free zones in the UAE have their own regulations regarding auditing, which may differ from the requirements of the Company Law. Therefore, it is advisable to check with the relevant authorities or seek professional advice to ensure compliance with all applicable regulations.

Management purposes

  1. To understand the financial position, to evaluate the performance of the entity, to assess the progress of the business, also to get guidance from professional financial experts, some of the SME companies get their books of accounts audited. In the SME sector; small companies normally cannot afford the service of full-time CFO’s or experienced management accountants under their payroll to get professional guidance in decision making.
  2. Sometimes, the small companies employ only a bookkeeper to update their day-to-day activities. They expect the auditor to finalize the books of accounts and provide the necessary inputs for management decision-making on financial matters. Such business owners even take advice from the external auditor as to whether it is feasible to withdraw part of the profit or should it be retained in the business.
  3. The owners even seek advice on the net worth of the business to know if selling part of the shares to prospective owners (partners or shareholders) at a premium is a prudent proposition. At the same time, the majority of the SME companies managed properly are getting their books audited every year.

Third-Party Requirements

  1. Lenders such as banks and/or other non-banking financial institutions insist companies get their books of accounts audited by an audit firm which are listed by them as approved auditors.
  2. Suppliers or other dealers/institutions also ask the SME companies to submit their audited financial statements to ensure the credentials as well as financial credit-worthiness of the companies to deal with them.

Every company registered under UAE Commercial Company law must amend their Memorandum of Association (MOA) on or before 30th June 2017 to be in line with the provisions of the new UAE Commercial Company law issued in 2015. As per the provisions of the Law, it is mandatory to get the books of accounts audited every year. Hence with effect from 1st July 2017, every company registered under the law should get their accounts audited by a registered auditor.

Looking for Approved Audit Firms in UAE?

We provide ProfessionalAudit Services in UAE providing clients with a wide range of  quality Audit Services in UAE with accordance to the client’s business needs. Auditors at Alya Al Marzooqi Auditing are committed to provide the best Auditing Services in the UAE  to the clients in compliance with the latest updates on IFRS  in the UAE having their international experience in Auditing. The Audit Team at Alya Al Marzooqi Auditing are professionally equipped with relevant industry experience from different ends.

Courtesy to Khaleej Times