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Frequently Asked Questions

Why does my business in the UAE need an audit ? Is it mandatory ?

This is a fundamental question for many businesses operating in the UAE. The need for an audit stems from both regulatory requirements and significant commercial benefits. An audit is not just a compliance exercise; it's a valuable tool for business health and credibility.

Regulatory & Legal Mandates:
● Mainland Companies: The UAE Commercial Companies Law (Federal Decree-Law No. 32 of 2021) requires Limited Liability Companies (LLCs) and Public/Private Joint Stock Companies to appoint an independent auditor and have their annual accounts audited.

● Free Zone Authorities: Most free zones in the UAE (such as DMCC, JAFZA, ADGM, DIFC, and others) mandate that companies registered under their jurisdiction submit annual audited financial statements as a condition for license renewal. Failure to comply can result in penalties or non-renewal of the trade license.

● UAE Corporate Tax: With the implementation of UAE Corporate Tax, having audited financial statements is crucial. While the law may not explicitly mandate an audit for every single taxpayer, the Federal Tax Authority (FTA) can request audited financials to verify the accuracy of a tax return. Audited statements provide the strongest possible evidence to support your tax position and minimize the risk of disputes.

Commercial & Strategic Benefits:
● Access to Finance: Banks and financial institutions almost always require several years of audited financial statements before approving business loans, credit facilities, or other forms of financing.

● Investor Confidence: If you plan to attract investors, sell your business, or enter into a partnership, audited accounts provide a transparent and credible view of your company's financial performance and position, building trust and facilitating negotiations.

● Internal Controls & Risk Management: An audit provides an independent assessment of your internal control systems, highlighting weaknesses and offering recommendations for improvement. This helps prevent fraud, reduce errors, and enhance operational efficiency.

What is the difference between auditing and accounting ?

While often used interchangeably, accounting and auditing are distinct but related functions. Understanding the difference is key to managing your company's finances effectively.

Think of it this way: Accounting is the process of creating the financial story, while auditing is the process of verifying that the story is true and fair.

Accounting:
● Function: The day-to-day recording, classifying, and summarizing of financial transactions (e.g., sales, purchases, payments).
● Output: The creation of financial statements, including the Balance Sheet, Income Statement (P&L), and Cash Flow Statement.
● Timing: A continuous, ongoing process throughout the financial year.
● Performed by: An in-house accountant or an outsourced accounting firm. The accountant is part of the management or works directly for them.

Auditing:
● Function: The independent examination and verification of the financial statements prepared by the accountant/management.
● Output: An independent auditor's report, which expresses an opinion on whether the financial statements present a "true and fair view" of the company's financial position and are free from material misstatement.
● Timing: A periodic process, typically conducted annually after the financial year-end.
● Performed by: A licensed, external, and independent auditor or audit firm like us who is not involved in the creation of the records they are auditing.
In summary, your accountant prepares the books. We, as your auditors, check them to provide assurance to shareholders, banks, regulators, and other stakeholders.

How does the UAE Corporate Tax affect my business and its audit requirements ?

The introduction of UAE Corporate Tax (CT) effective from June 2023 is the most significant recent change to the nation's business landscape. It directly impacts financial reporting and elevates the importance of having audited accounts.

Key Aspects of UAE Corporate Tax:
● A standard statutory tax rate of 9% applies to taxable income exceeding AED 375,000.
● Taxable income is the accounting net profit of a business, adjusted for certain provisions as specified in the CT Law.
● All businesses subject to CT must register with the Federal Tax Authority (FTA) and file an annual CT return.

The Link Between Corporate Tax and Auditing:
The Corporate Tax Law requires businesses to prepare and maintain financial statements based on internationally accepted accounting standards, such as IFRS. While the law states that audited financial statements may be requested by the FTA, it is the best practice and the most reliable way to ensure compliance.

Why Audited Financials are Essential for CT:
Audited statements serve as thedefinitive proof of your declared income and expenses. They provide a robust defense during a potential tax audit by the FTA, demonstrating that your figures have been independently verified. This significantly reduces the risk of penalties arising from incorrect tax calculations or unsubstantiated claims.

Our tax and audit teams work together to ensure your financial statements are not only compliant with IFRS but are also optimized for your Corporate Tax position, ensuring you meet your obligations accurately and efficiently.

What are ESR, UBO, and AML, and how do they impact my company ?

ESR, UBO, and AML are critical compliance pillars in the UAE, designed to enhance transparency and align the country with global standards against harmful tax practices and financial crime. Compliance is mandatory, and non-compliance carries significant penalties.

ESR (Economic Substance Regulations):
● What it is: A regulation requiring UAE companies that conduct certain "Relevant Activities" (e.g., banking, insurance, investment fund management, holding company business, distribution and service center business) to demonstrate actual economic substance (i.e., real operational presence) in the UAE.
● Your Obligation: You must assess if your business conducts a Relevant Activity, meet the specific economic substance tests if it does, and file an annual ESR Notification and Report.
● How We Help: We can help you assess your activities, ensure you meet the substance requirements, and manage your annual ESR filings.

UBO (Ultimate Beneficial Owner):
● What it is: A regulation requiring companies to identify, verify, and maintain a register of their Ultimate Beneficial Owners—the individual(s) who ultimately own or control the company. The goal is to prevent the misuse of corporate structures for illicit purposes.
● Your Obligation: You must create and maintain an accurate UBO register and submit this information to the relevant authorities.
● How We Help: Our advisory team guides you through the process of identifying your UBOs and ensuring your records are compliant with the regulations.

AML (Anti-Money Laundering):
● What it is: Refers to the UAE's Anti-Money Laundering and Combating the Financing of Terrorism (AML/CFT) laws. Designated Non-Financial Businesses and Professions (DNFBPs), including auditors, real estate agents, and dealers in precious metals, have specific obligations.
● Your Obligation: If your business is a DNFBP, you must register with the goAML system, conduct customer due diligence, and report suspicious transactions. Even if not a DNFBP, all businesses should have basic controls to avoid facilitating financial crime.
● How We Help: As auditors, we are a DNFBP and can advise you on your own AML obligations, helping you implement a robust compliance framework.

What documents do I need to prepare for an annual audit ?

A smooth and efficient audit process begins with good preparation. Having the necessary documents and records ready allows our team to conduct the audit effectively and minimizes disruption to your daily operations. While the specific list can vary based on your business, the following is a general checklist of key documents:

Core Financial Documents:
● Final Trial Balance for the audit period.
● Complete General Ledger and all subsidiary ledgers (accounts receivable, accounts payable, fixed assets).
● Financial Statements from the previous audited year (for comparison).
● Bank statements for all company accounts for the entire financial year, along with bank reconciliation statements.

Transactional & Operational Records:
● A sample of sales invoices, purchase invoices, and expense receipts.
● Copies of major contracts, agreements, and leases (e.g., rental agreements, loan agreements, client contracts).
● A detailed fixed asset register, including additions and disposals during the year. Inventory records, including valuation reports and results of physical stock counts.
● Payroll records, employee contracts, and WPS (Wage Protection System) statements.

Legal & Statutory Documents:
● Updated Trade License, Certificate of Incorporation, and Commercial Registration.
● Memorandum of Association (MOA) and Articles of Association (AOA).
● VAT and Corporate Tax registration certificates and all filed returns for the period.
● ESR and UBO filings, if applicable.

Our engagement team will provide you with a detailed and customized "Prepared by Client" (PBC) list at the start of the audit process.

How much does an audit cost in the UAE ?

The cost of an audit is not a one-size-fits-all figure. It is tailored to the specific circumstances of each company. Our goal is to provide a fair and transparent fee that reflects the value and assurance we deliver. The primary factors that influence the audit fee include:

● Company Size and Transaction Volume: A larger company with thousands of monthly transactions will naturally require more audit hours than a small business with minimal activity.
● Complexity of Operations: Businesses with multiple branches, international transactions, complex financial instruments, or intricate group structures require more specialized and in-depth audit procedures.
● Industry-Specific Risks: Certain industries, like financial services or construction, have inherent risks and specific regulatory requirements that can impact the scope of the audit.
● Quality of Internal Bookkeeping: A company with well-organized, accurate, and complete accounting records will have a more efficient and therefore less costly audit. If records are disorganized or incomplete, more time is needed for verification and reconciliation.
● Scope of Engagement: The fee depends on whether the engagement is purely for a statutory audit or if it includes other services like tax advisory, internal control review, or IFRS conversion.

To provide you with an accurate quote, we conduct an initial consultation to understand your business and requirements. This allows us to scope the engagement properly and propose a competitive fee. Contact us for a no-obligation proposal.

We are a small business/SME. Do you offer services tailored to our needs ?

Absolutely. We recognize that Small and Medium-sized Enterprises (SMEs) are the backbone of the UAE economy. While you may not have the resources of a large corporation, your need for professional financial guidance is just as critical, if not more so. Our services are scalable and designed to support businesses at every stage of their growth.

Services for SMEs beyond Auditing:
● Outsourced Accounting & Bookkeeping: We can act as your entire finance department, handling everything from daily bookkeeping to monthly management reports. This frees you up to focus on running your business, confident that your finances are in expert hands.
● VAT & Corporate Tax Services: We ensure you are compliant with all FTA regulations, from registration and return filing to advising on tax-efficient strategies. We help you navigate the complexities of VAT and the new Corporate Tax regime.
● CFO Services: For businesses that need high-level financial strategy but cannot yet afford a full-time Chief Financial Officer, our outsourced CFO services provide expert guidance on budgeting, forecasting, cash flow management, and strategic planning.
● Business Setup & Advisory: We assist entrepreneurs with choosing the right legal structure (mainland, free zone, or offshore), company formation, and navigating the initial setup procedures.

Our approach with SMEs is to be more than just an auditor; we aim to be a long-term strategic partner, providing the insights and support you need to achieve sustainable growth.

What is the audit process like with your firm? What can I expect ?

We believe in a collaborative, transparent, and no-surprises audit process. Our methodology is designed to be thorough yet efficient, ensuring we meet regulatory standards while providing you with valuable business insights. Here is a typical overview of our audit journey with a client:

1. Initial Consultation & Engagement: We start with a meeting to understand your business, objectives, and specific requirements. Based on this, we submit a detailed proposal and an engagement letter that clearly outlines the scope, timeline, and fees.

2. Planning & Risk Assessment: This is the most critical phase. Our team develops a deep understanding of your business environment, operations, and internal controls. We identify key risk areas to focus our audit efforts where they matter most. We also agree on a detailed timetable with your team.

3. Fieldwork (Execution): Our auditors conduct the substantive testing and evidence gathering. This may be done remotely, at your premises, or a hybrid of both. We test transactions, verify balances, and review documentation. We maintain open communication with your team throughout this phase to address queries promptly.

4. Review & Communication: As the fieldwork concludes, our senior team members and partners review the audit findings. We will discuss any significant issues, potential adjustments, or internal control weaknesses with your management in a draft "management letter" before finalizing our report.

5. Final Reporting & Opinion: Upon agreement on any adjustments and finalization of the financial statements, we issue our formal, signed Independent Auditor's Report along with the audited financial statements. We also provide the final management letter with our recommendations.

6. Post-Audit Support: Our relationship doesn't end with the report. We remain available to discuss the audit findings and help you implement the recommended improvements for the year ahead.

Have more questions or need a personalized consultation ?

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