There are numerous reasons you should invest in an audit for your company. As per the law, if you are running a large company, then you are obligated to invest in an audit, and you should do so even if you are running a smaller company.
For good corporate governance and an effective financial control function within your company, it is crucial for you to have an independent audit. Moreover, with an audit, the information you provide to shareholders will become more credible.
Your investors and anyone else who provides finance will feel more assured and confident about their investment. As a result, the cost of capital will be lowered and your company will become competitive and profitable.
If you hire an auditor, you will be able to:
– Aid in the identification and prevention of material error and fraud.
– Assure stakeholders like customers, employees, the investing community, pressure group and suppliers that published information is credible
– Exhibit good citizenship and corporate governance
– Facilitate the accurate and timely payment of corporate, goods and services tax, and other taxes
Is An Audit Is The Same As A Review?
It is becoming more and more common for companies to invest in a review instead of an audit because they see it as an inexpensive alternative. However, an audit is not the same as a review.
A review engagement does not provide the same level of assurance that an audit provides.
The following aspects are what distinguish an audit engagement from a review engagement:
– A greater degree of positive assurance is provided by audit engagement, often expressed in “fair and true terms.”
However, only a moderate degree of assurance is provided by review engagements. The assurance that is provided is often referred to as “negative” assurance since signs that highly improper preparation of the reported information rarely comes to attention.
– In audit engagements, the accounting and control systems within the company have to be assessed, detailed tests have to be performed of control and substantive processes, and explanations reviewed have to be verified.
In review engagements, only analytical procedures provide such assurances.
– The amount of work that the reviewer performs determines the level of assurance that a review engagement provides. However, everyone relying on the review is not able to properly comprehend that. Usually, material error and fraud are not detected by review engagements like audits tend to do.
This is why an audit is not the same as a review, and a review is not really an ideal alternative.
Is It Worth Investing In An Audit Voluntarily Worthwhile?
It will add to the value of your company if you invest in financial statements audits annually. Unlike larger companies, smaller ones face certain issues that make it even more worthwhile to make such an investment, which include:
– When preparing their own accounts, small companies often need assistance in order to arrive at adjustments like bad debts, obsolete stocks and other provisions.
– Eventually, a statutory audit requirement applies on all companies that grow and if the accounts are not in proper order, the initial years of the audit can be very tiring.
– An audit is necessary in financing buy-out, negotiations and take-over.
– When the auditor is closely involved in the auditing, companies feel more comfortable when facing regulatory and tax investigations.
Just because you are running a smaller company and there will not be any statutory audit requirement, it does not mean that no external “checking” of your books and records will be performed.
The FTA Federal Tax Authority of UAE can ask for the audit report at any time and they have the power and resources that you should not underestimate and they keep on increasing with each passing day.
This means that more investigations are likely to be carried out in the future, and these can be quite thorough.
Does any Public Accountants Board Regulate Audit Fees?
PAB does not regulate audit fees. Generally, the fees charged by auditors depend on how much time they spend on the audit assignment.
The level of experience and skill that the audit requires and the level of complexity and responsibility involved also determine the fees charged.
On the other hand, auditors and clients may come to terms regarding the fees.
Are There Any Accounting Standards That Must Be Followed?
As long as your company is in UAE, the IFRS International Financial Reporting Standards will have to be followed.
Regardless of the accounts, auditors have to adhere to a set of accounting standards too.
However, they may not have to adhere to every standard, depending on the nature of your company’s business.