Statutory Audit in the UAE
A statutory audit is an independent assessment of the financial accounts of a company or institution. The auditor’s role is to report on whether the financial statements issued by an organization are ‘true and fair’, and meet all relevant guidelines or legal requirements. This in turn allows companies to guard against risk and plan for the future.
The auditing sector has been under scrutiny recently, with the government calling for reform following the collapse of high-profile firms whose audits have been called into question. Clearly, it’s vital that auditors recognize and report on any issues that emerge from the auditing process so that any problems in the business can be addressed. Here at Alya, we work with clients to provide effective and timely audits that meet and exceed all statutory obligations.
Statutory Audit Requirements in the UAE
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.
Statutory Audit Legal Requirements in the UAE
- 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.
- 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 in every year.
- 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.
- 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.
Management Requirements in the UAE
- 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.
- 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.
- 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 in the UAE
- 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.
- 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.
We at Alya Auditors, assist all our clients in maintaining accurate records of all the business transactions, taxes and duties, account books, and other expenditures required to carry out the hassle-free statutory audit. Alya auditors are also the licensed auditors registered with the tax authority to carry out statutory audits. Our experts can guide clients in all matters related to Statutory Audit. Contact Us for any information regarding the Statutory audit process. We are delighted to help!