Audit of accounts is mandatory for some forms of entities in the free zone like the free zone companies (FZCO) and free zone establishments (FZE), for branches of local and foreign company audit reports may not be necessary for most free zones. In order to finalize the audit, it is obvious that the accounting records and documents must be available and well maintained. In UAE the general requirement for businesses is to maintain their records for no less than five years. The Commercial Companies Law states that the audit of accounts is necessary for all companies in the mainland. Generally, though the law stipulates the preparation of the audit report, the submission of the same is not enforced by the authorities and hence many organizations do not follow the same. Some free zones, particularly in the northern emirates do not require the submission of audited accounts for certain companies; one needs to bear in mind that this waiver is only for the submission of the audit report to the authorities however the preparation of audit report for the entity itself cannot be overlooked. The maintenance of accounting records will become more important for nearly all kinds of entities in the UAE in light of the forthcoming VAT in 2018. Companies have generally a time period between 3 to 6 months after the close of their financial year/period to complete the audit report and submit to the general assembly. Maintenance of accounting records and audit of same also assists the management to understand the performance of the company and areas which need more attention.
As per the new UAE Commercial Companies Law, Federal Law No. 2 of 2015, Article 27, Chapter 2, every company shall appoint auditors for auditing their books of accounts by a licensed auditor registered under the Ministry of Economy in the UAE. But many companies do not follow this requirement. In general, companies belonging to the SME category get their books of accounts audited in the following circumstances.
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.
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Courtesy to Khaleej Times