In the United Arab Emirates, maintaining the integrity of financial reporting is highly determined by meeting audit requirements and effectively ensuring compliance with audit regulations and standards. Top Audit Firms in UAE help businesses to meet audit requirements and compliance, which ensure the accuracy of financial information and avert fines and penalties for noncompliance.
Audit Regulations in the UAE
UAE Commercial Companies Law
Audit procedures and standards in the UAE are primarily governed by the Federal Decree-Law no. (32) of 2021on Commercial Companies, which mandates that all companies, including Joint Liability Companies, Limited Partnership Companies, Limited Liability Companies, Public Joint Stock Companies, and Private Joint Stock Company, must undergo financial audits on a yearly basis. UAE Commercial Companies Law sets the basis for audit requirements in the UAE, highlighting the significance of fairness, accuracy, and transparency in financial reporting.
International Financial Reporting Standards (IFRS)
The UAE has adopted International Financial Reporting Standards (IFRS). These global standards ensure that financial reports are consistent and comparable, across industries and countries bringing the UAE in line with best practices.
International Accounting Standards (IAS)
International Accounting Standards (IAS) refer to a set of accounting principles and guidelines established by the International Accounting Standards Board (IASB). These standards provide a framework for preparing and presenting statements in a comparable manner across various countries and industries. IAS has mostly been replaced by International Financial Reporting Standards (IFRS) which now serve as the regulatory framework.
Generally Accepted Accounting Principles (GAAP)
Generally Accepted Accounting Principles (GAAP) are recognized accounting standards, principles and procedures used in preparing and presenting financial statements. These principles establish a framework that ensures consistency and comparability in reporting with other companies and industries. While GAAP remains a reference point in the financial community it also serves as the foundation, for International Financial Reporting Standards (IFRS).
Audit Procedures in the UAE
- Planning and Risk Assessment: Audit firms in UAE conduct planning and risk assessment before commencing an audit. This involves understanding the client’s business, industry, and potential risks associated with reporting. Based on this information auditors design audit procedures tailored to the needs of their business activities.
- Internal Control Evaluation: Assessing internal controls is an audit requirement in UAE. It helps identify any weaknesses or vulnerabilities that could potentially cause misstatements. As a result of audit procedures, it is often recommended to make improvements, in the internal control system.
- Substantive Testing: Substantive testing involves gathering evidence to support the relevant income and disclosures in the financial statements. This can include testing account balances, transactions, and other financial statement components to ensure their accuracy and completeness.
- Analytical Procedures: Audit firms in UAE often use analytical procedures to evaluate the plausibility of financial data. These procedures involve comparing recent financial information with earlier information and industry standards, helping auditors identify potential discrepancies.
- Verification of Assets and Liabilities: Audit firms in UAE verify the existence, ownership, and valuation of assets and liabilities reported in the financial statements. For instance, they may physically inspect tangible assets, review contracts, and confirm balances with third parties.
- Review of Related-Party Transactions: In the UAE there is a focus, on disclosing and evaluating related party transactions. Audit firms in UAE carefully examine these transactions to detect any conflicts of interest and ensure that they are properly disclosed in the statements.
- Audit Documentation: Maintaining all the supporting documentation related to the financial condition and the company’s state of affairs is an audit requirement in the UAE. Auditors have an obligation to keep records of their audit work including the evidence gathered, their conclusions, and any recommendations provided to the client.
Significance of Audit Procedures and Standards in the UAE
- Investor Confidence: Adhering to audit procedures and standards enhances investor confidence in the dynamic business market of the UAE. Companies that undergo auditing processes are more likely to be trusted by investors resulting in increased investments flowing into the country.
- Financial Stability: By promoting transparency and accuracy in reporting, audit procedures and standards contribute significantly to financial stability in the UAE. This is vital for a sustainable business environment and ensuring continued growth.
- Legal Compliance: Complying with audit requirements in the UAE is mandatory under the regulatory framework. Companies that fail to conduct audits run the risk of facing penalties and legal consequences including suspension of their business activities.
- Improved Governance: Effective audit procedures and standards play a role in supporting corporate governance practices. They promote credibility and accountability among company executives, as well as board members.
Seek the Expert Services of Top Audit Firms in UAE
To effectively comply with audit regulations, procedures, and standards in the UAE, businesses are advised to avail of the expert services of Top Audit Firms in the UAE. Trusted Audit Firms in the UAE are committed to helping businesses ensure transparency in financial reporting and avert fines and penalties for noncompliance. Thus, contact us today and we shall be glad to assist you.
Kasun Liyanage is an Audit Manager with over 7 years of experience dealing with diversified corporate clients. He not only manages the team’s work schedule but also is an expert in handling audit areas such as external audits and fraud investigation, Internal control benchmarking and best practices and well as preparation of financial statements and IFRS compliance.