A Virtual Assets Regulatory Authority (VARA) audit refers to an evaluation that includes a review of a firm’s financial documentation, business activities, and regulatory standing to ensure compliance with the rules established by the Virtual Assets Regulatory Authority in the UAE.
This audit is particularly relevant for businesses engaged in activities related to virtual assets, including digital currencies (such as cryptocurrencies), tokenized assets, and other digital products.
Also read: Top 10 Certified VARA Auditors in Dubai
The VARA audit involves assessing internal controls' effectiveness, preparing and delivering financial reports, and legal compliance. It also requires a comprehensive understanding of the firm’s operations, risk management practices, and protective laws.
Why Is VARA Audit Compliance Important?
Here are several reasons:
- Legal and Regulatory Protection: Failure to the VARA regulations results in serious consequences, for instance, fines and prosecutions. Some of these risks can be explained and avoided with the help of an effective audit.
- Reputation Management: Businesses should follow the rules because they can improve their standing with brands, customers, shareholders, and other regulatory agencies. Traders with non-compliance may harm the company’s reputation and relations with its stakeholders.
- Operational Efficiency: Reviews enable the organization to discover areas of weakness in terms of time and cost therefore enhancing efficiency.
- Transparency and Accountability: An extensive VARA audit promotes bureaucracy as well as efficiency, which is crucial in more sensitive regions and industries that are anchored on trust.
- Prevention of Fraud and Mismanagement: Audits can help detect and prevent fraudulent activities, ensuring that companies operate within legal and ethical boundaries.
Essential Documentation and Practices for a Successful VARA Audit Compliance
The following documentation & practices are essential:
- Financial Records: Preparation of cash flow statements, balance sheets of financial statements, and income statements are the documents that should show the business's financial status.
- Operational Procedures: Any business activities that can be performed, duties, responsibilities, routines, and requirements should be recorded.
- Compliance Records: It is important to maintain records that will establish compliance with VARA regulations. This includes; policies and procedures manuals and letters and documents sent and received from any regulating authority.
- Risk Management Policies: Risk management procedures should be precise finally for any foreseeable risk. This entails the assessment of risks related to virtual assets as well as outlining ministry measures for handling the risks.
- Employee Training Records: It is recommended to preserve evidence of the training done to staff and the compliance with VARA. What this shows is that the employees’ awareness of regulation lets them know the best practices to undertake.
VARA Audit Requirements
VARA audit requirements include:
- Financial Records Accuracy: Businesses should keep proper records of finances. This involves getting reports and reconciliations at the right time.
- Internal Controls: The principle of internal control is vital so that the organization avoids fraud, and all processes adhere to the law. This includes the following procedures: separation of duties and responsibilities, approval procedures, and checks and balances.
- Comprehensive Documentation: The example that can illustrate this is an absolute necessity for detailed documentation of all the business activities as auditors will always require a clear trail. This includes; transaction documents, communication, and meetings analysis.
- Updated Compliance Policies: Conduct periodic formal corporate compliance reviews and change the existing compliance policies and procedures concerning VARA reforms.
Steps for Effective Preparation
- Conduct an Internal Pre-Audit: This is the first step and is made to determine the state of the company for an audit. Recommend technical changes before it’s too late and if the results are not satisfactory, they make corrections to the problem areas.
- Gather Documentation: Collect all the paperwork required and make certain about the correctness of the data. This category includes financial and compliance documents and records, annexures and procedures for business operations, and records of training activities for employees among others.
- Train Staff: Make it clear that every employee in your organization knows the audit processes and compliance issues. The audit process prepares the organization to develop a culture of compliance.
- Establish a Timeline: Develop a definite schedule of preparation activities and time frames within which the documentation and internal audits should be collected.
Alert to VARA Regulations in UAE
Regulations of VARA are likely to change so businesses should always be aware of the current status of VARA legislation as well as its changes affecting the business. As the market of virtual assets is truly global, nothing is surprising in the fact that the regulation of this market is dynamically changing.
Also read: How to Prepare for a VARA Compliance Audit
VARA requires that businesses understand existing rules as well as any upgrades in the future so they can confirm accordingly.
Strategies for Staying Updated:
- Subscribe to Regulatory Updates: Pay attention to VARA’s posts and sign up for newsletters of organizations that cover updates regarding regulatory shifts.
- Engage with Industry Groups: Join Virtual Asset Industry Associations and Groups. Things like new trends, new regulations, and policies can well be learned from fellow scholarly persons.
- Regularly Review Policies: Conduct a periodic assessment of the organizational policies and internal control measures to check their relevance with the current standard.
The Report Required By VARA Audit Standards
The general standards aim at maintaining the highest level of audit since a higher level of detailed examination is done during the audit. Key Standards to Follow:
- International Auditing Standards: Integration of audit practices with internationally recognizable auditing standards increases credibility.
- Ethical Standards: Ethical norms should be followed by auditors with the view of delivering accurate work in the audit.
- Continuous Improvement: Something we should regularly do is revisit the analyses for audit practices and try to incorporate the feedback that has been given to enhance efficiency.
The final audit report should contain some findings and recommendations on the state of the compliance of the company as well as any problems found.
Also read: Verification of Fixed Assets in Auditing
Key Components of an Audit Report:
- Executive Summary: A brief general summary of the audit, listing current compliance status, and notable issues revealed.
- Detailed Findings: Achieving a detailed understanding of audit issues specific to the organization, such as compliance issues and further improvements.
- Recommendations: Ideas for mitigating discovered deficiencies and improving compliance measures are clearly stated.
- Follow-Up Plan: An action plan to guide activities in case recommendations formulated are implemented and details of where and when the next review should be conducted.
Farhat and Co can help you with this complicated process to make your preparations for the audit as easy as possible. Addressing the concerns of regulators shouldn’t come at the expense of the firms’ sustainable business models while engaging with virtual assets.
Key Qualities of a Reliable VARA Audit Firm in UAE
Good reputed VARA Audit firms provide knowledge regarding VARA rules. Key Qualities to look for are:
- Experience and Expertise: Hire consultants who have experience with VARA audits for your organization and who understand the current regulatory factors.
- Industry Knowledge: Industry specialists dealing with virtual assets will offer additional knowledge that can effectively improve compliance and audits in preparation.
- Communication Skills: There should be a good flow of communication especially when conducting the audits. These individuals must be able to communicate complex information and advice regarding the undertaking to be paid for.
- Industry Knowledge: Consultants who specialize in the virtual asset sector will have insights that can enhance compliance efforts and audit preparations.
- Communication Skills: Choose consultants who can convey complex information and recommendations.
VARA Audit Services in UAE
Reputable firms including Farhat & Co provide VARA audit services in the UAE particularly involved in the executing of extensive audits, offering of training sessions, and confirmation that all legal compliance has been met by firms.
Services Offered:
- Comprehensive Audits: Auditing in a way that demands critical analysis of every aspect of a company's activities and its levels of compliance.
- Training and Workshops: Organizing sessions to familiarize staff with VARA regulations and recommended practices concerning animals.
- Consultation Services:- Continuing to assist the organizations to provide consultation and support in commodity regulation issues.
FAQs
What Does VARA Audit Mean?
A VARA audit means that all the companies involved in working with virtual assets, adhere to the legislation and requirements of the Virtual Assets Regulatory Authority (VARA Audit).
When Should the VARA Audit Be Done?
VARA audit is best run on an annual basis or any time there is a major change in business processes or regulatory requirements. Consequences for non-compliance may extend to fines, legal claims, and, most significantly, reputational costs that the companies must observe all VARA rules.
Can I Carry Out a VARA Audit Internally?
Businesses can undertake internal audits to assess compliance on an as-and-when basis. However, it can be recommended that big firms hire professional audit firms so as to be accredited fully and without bias.
In What Ways Can Farhat & Co Be Useful to Firms Facing VARA Audits?
Farhat & Co has experience helping businesses prepare for the audit process and also meet the necessary regulations set by VARA. By employing this guide, businesses can gain an understanding of the var process, which they need to undertake for compliance and to continue doing business in the virtual asset realm.
