Under United Arab Emirates (UAE) Federal Law No (2) of 2015 or Commercial Companies Law, all limited liability companies (LLCs) and joint-stock companies are mandated to appoint auditing firms in Dubai or the UAE to audit company accounts every fiscal year.
Companies in free zones across the UAE, however, will be subjected to the requirements of the respective free zones. International Free Zone Authority (IFZA) is one of the jurisdictions that don’t require businesses to submit annual audited financial statements. Dubai Multi Commodity Centre (DMCC) and Jebel Ali Free Trade Zone (JAFZA), on the other hand, are some of the free zones that require companies in filing annual audited reports.
Audit Requirements in UAE
Audit firms in Dubai, including DMCC approved auditors and JAFZA approved auditors, require a set of documents prior to an audit engagement. To check if your company is already “audit-ready,” it is advised to have the following documents ready by the year-end:
- Comparative trial balance – year-end balances from the previous year and current year
- Complete list of Board Members for the current year
- Copy of minutes from Board of Directors meeting for the year that is under audit for the scheduled date of fieldwork
- Copies of company budgets
- A detailed memorandum regarding outstanding legal issues that the auditors in Dubai have to be aware of (must include name, address, and other details of any attorneys who provided the company legal services within the year)
- A short memo on any change performed on operations of the company from the previous year, such as any grants received or are no longer applicable to the business, and any increase or reduction in operations
- Copies of bank statements and bank reconciliations during the year
- Copies of any collateralization agreements or collateral statements (if applicable)
- Schedule containing details of investment activities such as purchases, sales, and income, for the year-end
- Original and copies of annual investment statements
For Accounts Receivable:
- Analysis of company’s ‘allowance for doubtful accts.’
- A/R ageing schedule for accounts receivable reconciled to the trial balance
- A list of deposits three months following the year-end
For Prepaid Items:
- A schedule of the prepaid balances
- Supporting documents e.g. copies of invoices, checks, and insurance policies
For Capital Assets:
- A summary of capital assets and asset depreciation
- List of additions or disposal of the fixed assets with supporting documents e.g. check copy, bill of sale and/or invoice
For Accounts Payable:
- List of all the company’s accounts payable for the year-end (aged A/P is acceptable) with the check number and date of payment. Note: an audit firm in Dubai will review any open invoice.
- Schedule of the checks written within the year of audit fieldwork
For Accrued Salaries Payable or Payroll Liabilities:
- Accrued payroll schedule for the year-end
- Any correspondence with the Dubai Labor Department, including notices of penalties (if applicable)
- Schedules reconciling the gross pay on the trial balance
- Schedule of employee accrued leave, including the name, pay rate, and the ending accrued leave days for the year-end
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For Long-Term Liabilities:
- Original and copies of amortization schedules
- Original and copies of debt agreements
- Schedule of outstanding debts and notes payable for the year-end
For Net Assets:
- A schedule reconciling the net position balance of the company on audited financials to equity accounts in the trial balance
- Copy of the newly implemented policies and procedures within the year
- Copies of legal contracts, agreements, leases, and all other official documents
Pursuant to UAE Commercial Companies Law Article 245, an audit firm in Dubai shall issue an audit report on accounts that were audited. For companies that appoint more than one approved auditor, all the auditors are to distribute duties and prepare separate audit reports in relation to assigned tasks. The auditors must also prepare a single report for tasks in which they are liable jointly. The combined report has to bear all necessary information of the auditors, including names and signatures.
Audit reports must specifically highlight if accounts are in accordance with provisions of UAE Commercial Companies Law and if accounts depict a company’s true financial position.
Mandatory or not, all companies operating in the UAE are encouraged to get financial statements audited as a business practice. Auditing firms in Dubai can help meet statutory requirements, support in the identification of opportunities for profit generation, and aid in achieving business objectives. Our auditors, in particular, do more than look after routing and statutory accounting and financial operations. At Audit Firms in Dubai, you can also count on our brilliant experts to utilize their extensive advisory experience in monitoring your business and providing proactive advice which can impact the company’s bottom line.
Our personal and partner-led audit services in UAE are tailored to the needs of your business. Contact us today to address all of your audit concerns!
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.