For financial statements to be applicable, important decision-makers need to be able to analyze and interpret the statements. The externally audited financial statements help managers and investors evaluate an organization’s past performance, predict its future performance, and make intelligent and informed financial decisions.
While an external audit is mandatory for Freezone companies in UAE, it is optional for some companies on the mainland.
However, audit firms in Dubai are urging companies to conduct an external audit voluntarily. Only a licensed independent firm can audit the financials as it is independent of the company’s interests.
Here Are the 5 Reasons for Conducting an External Audit
- Having a Solid Bookkeeping Foundation
- Provide Credibility
- Enhance Internal Control Measures
- Boost Shareholders Confidence
- Keeping the Organization Legal and Regulatory Compliant
Having a Solid Bookkeeping Foundation
Bookkeeping is the foundation of financial reporting. Hence if there is an error or mistake in the bookkeeping entries and the company’s accountants overlook it, it can prove even more fatal. An external auditor in Dubai will ensure that your bookkeeping methods are error-free and in line with the IFRS reporting standards. Due to Core income-generating activities, some companies benefit from tax reductions and exemptions.
External accountants study these transactions and help companies even save on tax. They are up to date with the changes in industrial audit methods and regulations and can advise companies on such benefits. A finance department accountant may not be aware of such benefits and can overlook this aspect by not booking the correct journal entries.
An external audit firm in Dubai is a licensed firm by the government, allowed to conduct audits in the UAE. The audited financial statements provide credibility and weightage to the accuracy of the financial records of the company. The audited financials can be shared with the public, shareholders, government authorities, and investors as reliable financial data that can help decision-making.
Companies who want to trade publicly in the future need to put out their financial statements online; investors, analysts, banks, and financial experts can predict the company’s performance through the audited financials and having been approved by an audit firm in Dubai, the financials have much higher leverage to boost the investor’s confidence.
Enhance Internal Control Measures
The internal audit is a solid organizational function, ensuring the accounting procedures comply with government regulations. However, since the internal audit teams are from the organization itself and sometimes have worked in the same process for quite a long time, they may tend to have a biased approach toward the company’s accounting procedures.
Several external Audit firms in Dubai, Sharjah, Abu Dhabi, and the other emirates specialize in providing a compliance report regarding a company’s internal controls and offer urgent measures to amend the control process within the finance department.
Boost Shareholders Confidence
Shareholders and investors do not wish to invest their money in high-risk firms. The only way to navigate risk is by analyzing the company’s financials. Audited financials are crucial to gaining the confidence of shareholders and future investors. Regular external audits by an authorized audit firm in Dubai or any other emirates ensure that the company’s financial data is reliable and presentable to a third party outside the organization who wishes to become an investor.
Keeping the Organization Legal and Regulatory Compliant
Conducting business in the UAE has some strict regulations and guidelines. It seems easy to comply with minuscule errors that have resulted in companies paying hefty fines. An external audit ensures your company follows the government’s regulatory requirements compared with the industry standards. VAT (value-added tax), ESR ( Economic Substance Regulations) and CIGA is a compliance company that needs to abide by the government.
Audit companies in Dubai also conduct AML-CFT ( Anti Money Laundering and Combating Financing of Terrorism) audits whilst regularly training their auditors on the most recent updated laws on AML.
Also read: External Auditor Responsibilities
Hiring an External Audit Firm in Dubai, UAE
The transparency and accuracy of financial records are a must for any business. If you are a business in the market to grow, you will be required to audit your financials at one point in time. It is better late than never to audit your company’s finances to avoid surprises in your financial statements and bookkeeping methods.
Audit Firms in Dubai provide consultation to companies regarding audits and help companies identify deficiencies in their internal control policies, to avoid fraud or theft and function seamlessly without any accounting hassle.
We help companies like yours to meet statutory audit reporting requirements and provide a financial consultation so your company can proactively strategize and budget toward driving your business forward.
Umapathy Anuruthan, is a Senior Auditor at the firm, holds a Business Management Degree and carries with him an experience of 6+ Years, having worked in two of the Big 4 audit firms. He has a ‘hands-on’ understanding of external audits and financial reporting and is well-known for his approach to ensuring the highest quality and accuracy in audits for clients of numerous industries.