Conducting an audit can be a very complex and time-intensive task and this is the reason not many entrepreneur and businessmen want to initiate the process of an audit in their company. Nevertheless, every business should conduct an audit at regular intervals. This would reveal the loopholes and malpractices, if any, being followed in the company and allow the management of the company to take corrective actions for the same.
According to the Commercial Companies Law, each and every company in the mainland UAE require an audit and have to keep a record of all the financial data of the company for up to 5 years. In the free zones, companies classified as Free Zone Companies (FZCO) and the companies classified as Free Zone Establishments (FZE) are required to have a complete financial audit.
Let us understand more about what an audit is and what are the necessary documents that should be kept ready in case of an audit.
An audit is the thorough check of all the books of accounts, financial transactions of a company, statutory records, etc. The aim of an audit is to figure out whether the financial books present the correct and accurate picture of the present condition of the company. An audit also allows getting knowledge about and performing a thorough check of all the activities being conducted in the company and take remedial measures in case of any wrong or illegal activity is found out.
Auditing acts as a safeguard against any kind of malpractice being conducted in the company as all the books of accounts are checked methodically and at regular durations. It also provides a helping hand to the stakeholders and the potential investors and allows them to take decisions which would suit their requirements.
Documents to Be Kept Prepared
When a company would be ready to get themselves audited by a third party, the third party would provide the company with a starting date and the requirement of the audit team. The requirements usually consist of a list of documents which, if prepared beforehand, could result in the quick and early ending of the complete audit process.
Let’s have a look at the documents that may be required during an audit.
1. Reports on the Payroll
The payroll reports are very important from the point of audit as the number of employees in a company can cause a significant increase in the duration of the audit. The analysis of the payroll report will help the auditor to understand the current situation of the company and accordingly the auditor would suggest to either hire more employees or lay back a few of them.
2. List of All the Bank Accounts Used
All the bank accounts of the company need to be listed and the necessary documents of each of the accounts need to be presented to the auditor. This would greatly simplify the work of the auditor as he will not have to gather the necessary documents during the audit.
3. List and Evidence of all the Transactions
The company which is being audited should mention all the transactions conducted in the set duration and should also provide all the invoices and bills for the purchases made. An auditor will require the invoices to find out what was the total spending of the company in the duration and whether the amount is matching with the amount in the books of accounts.
4. The General Ledger
The ledger contains the details of all the transactions made during a specific period of time. This is necessary for an auditor so that he can tally the total amount with the total mentioned in the books of accounts.
Nowadays, instead of preparing the ledger manually most of the companies use accounting software which would automatically convert the input data into the required financial. Accounting software will greatly increase the accuracy of a company and would reduce the time taken to produce a ledger.
5. Trial Balance of the Company
Trial balance helps in properly organising the different transactions of the company and can help the auditor to trace back the history of any particular transaction. The trial balance can also be prepared using accounting software.
6. Copies of all legal documents
To collect and verify company’s legal documents in an important part of audit. Legal documents include License, memorandum and articles of association, share certificates, certificate of incorporation, tax registration certificate (TRN) etc.
Getting confirmations from bank, customers, suppliers, lenders etc are very crucial documents auditor must collect in an audit. Normally auditor will chose the sample and also provide confirmation formats to be circulated to different parties to obtain confirmations. It is the responsibility of the Companies to make sure that auditor receives maximum confirmations.
This include schedules like asset register, depreciation, prepayments, accrual etc. prepared by the company as part of accounting.
9. Loan Documents
A company may acquire debts during the process of running the company. By providing the proper documents regarding a loan, a lot of time which would have been used up in the audit process will be saved.
This is not a complete and definitive list of the documents that are required during an audit. Some of the other document that might be required by the auditor may include bank statements, the previous audit report, minutes of board meetings conducted, etc.
Conducting an audit of a company may be a very time taking and hectic task for an entrepreneur. If you are looking for an audit firm in Dubai which would take care of all your audit-related problems and would provide you with solutions which are customised according to your company, you should definitely look into availing the services of “JAXA Chartered Accountants”.
JAXA is one of the DAFZA approved auditors and is considered as one of the most reputed auditors in Dubai. Along with Audit service, they also provide a diverse range of services such as Accounting and Auditing services, TAX services, VAT services, Cash flow and Forecasting services etc. For more details on the services we provide do contact us – we would be happy to help.